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EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION - HARRISON VICKERS & WATERMAN INCf10q033115_ex31z1.htm
EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATION - HARRISON VICKERS & WATERMAN INCf10q033115_ex32z2.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION - HARRISON VICKERS & WATERMAN INCf10q033115_ex32z1.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATION - HARRISON VICKERS & WATERMAN INCf10q033115_ex31z2.htm


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


(Mark One)


  X      QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the nine month period ended March 31, 2015


OR


          TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________


Commission File Number 333-162072


HARRISON VICKERS AND WATERMAN INC.

(Exact name of registrant as specified in its charter)


Nevada

 

26-2883037

(State or jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)


712 U.S. Highway 1,

Suite 200

North Palm Beach, FL 33408

Address of registrant’s principal executive offices

 

(561) 227-2727

Registrant’s telephone number including


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

Yes  X   No       .


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

Yes  X   No       


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


Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

Smaller reporting company

  X .


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

Yes       No  X   .


As of May 13, 2015, there were 126,337,367 shares of common stock, $0.001 par value, of the registrant issued and outstanding.





 

 

 

Page

PART I. – FINANCIAL INFORMATION:

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

 

 

 

 

Consolidated Balance Sheets at March 31, 2015 and June 30, 2014

 

4

 

 

 

 

 

Consolidated Statements of Operations for the Nine Months Ended March 31, 2015 and 2014

 

5

 

 

 

 

 

Consolidated Statement of Changes in Stockholders’ Deficit for the period June 30, 2012 through  the Interim Period Ended March 31, 2015 (unaudited)

 

6

 

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2015 and 2014

 

7

 

 

 

 

 

Notes to Interim Financial Statements

 

8

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosure about Mark Risk

 

26

 

 

 

 

Item 4.

Controls and Procedures

 

26

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

27

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

 

Item 3.

Defaults upon Senior Securities

 

27

 

 

 

 

Item 4.

Mine Safety Disclosures

 

27

 

 

 

 

Item 5.

Other Information

 

27

 

 

 

 

Item 6.

Exhibits

 

27

 

 

 

 

SIGNATURES

 

29




2




Harrison Vickers and Waterman Inc.


March 31, 2015 and 2014


Index to the consolidated financial statements


Contents

Page(s)

 

 

Consolidated Balance Sheets at March 31, 2015 (unaudited) and June 30, 2014

4

 

 

Consolidated Statements of Operations for the Three Months and Nine Months Ended March 31, 2015 and 2013 (unaudited)

5

 

 

Consolidated Statements of Operations for the Nine Months Ended March 31, 2015 and 2013 (unaudited)

5

 

 

Consolidated Statement of Stockholders’ Deficit for the Period  June 30, 2012 Through March 31, 2015 (unaudited)

6

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2015 and 2014 (unaudited)

7

 

 

Notes to the Consolidated Financial Statements (unaudited)

8




3




Harrison Vickers and Waterman Inc.

Consolidated Balance Sheets


 

 

March 31, 2015

 

June 30, 2014

 

 

(Unaudited)

 

 

 ASSETS

 

 

 

 

 CURRENT ASSETS:

 

 

 

 

 

 Cash

$

-

$

361

 

 Real estate loans receivable

 

950,000

 

1,470,000

 

 

 

 

 

 

 

 

 

 Total Current Assets

 

950,000

 

1,470,361

 

 

 

 

 

 

 

 

 

 Total Assets

$

950,000

$

1,470,361

 

 

 

 

 

 

 

 LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 CURRENT LIABILITIES:

 

 

 

 

 

 Accrued expenses

$

48,686

$

109,437

 

 Promissory note payable

 

950,000

 

1,470,000

 

 Due to investor

 

-

 

36,628

 

 Notes payable - investor

 

28,844

 

28,844

 

 Convertible notes payable - investor, net of discount

 

53,686

 

-

 

 Derivative liability

 

42,823

 

-

 

 

 

 

 

 

 

 

 

 Total Current Liabilities

 

1,124,039

 

1,644,909

 

 

 

 

 

 

 

 

 

 Total Liabilities

 

1,124,039

 

1,644,909

 

 

 

 

 

 

 

 STOCKHOLDERS' DEFICIT:

 

 

 

 

 

Preferred stock par value $0.0001: 1,000,000 shares authorized; 100,000 shares designated as Series A 8% Convertible Preferred Stock Series A 8% Convertible preferred stock par value $0.0001: stated value $1,000 per share; 95,000 shares issued and outstanding,

 

10

 

10

 

Common stock par value $0.0001: 2,000,000,000 shares authorized; 126,337,367  and 124,337,367 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively

 

12,634

 

12,434

 

Additional paid-in capital

 

422,785

 

417,785

 

Accumulated deficit

 

(609,468)

 

(604,777)

 

 

 

 

 

 

 

 

 

 Total Stockholders' Deficit

 

(174,039)

 

(174,548)

 

 

 

 

 

 

 

 

 

 Total Liabilities and Stockholders' Deficit

$

950,000

$

1,470,361


See accompanying notes to the consolidated financial statements.




4




Harrison Vickers and Waterman Inc.

Consolidated Statements of Operations


 

 

 

 

 

For the Three Months

Ended

March 31, 2015

 

For the Three Months

Ended

March 31, 2014

 

For the Nine Months

Ended

March 31, 2015

 

For the Nine Months

Ended

March 31,2014

 

 

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 REVENUE

 

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Interest income

 

 

 

45,833

 

 

43,496

 

 

134,033

 

 

104,730

 

 Interest expense

 

 

 

(45,833)

 

 

(43,496)

 

 

(134,033)

 

 

(104,730)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 NET REVENUE

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 

 

5,000

 

 

3,750

 

 

39,500

 

 

7,750

 

Compensation - officer

 

(175,000)

 

 

-

 

 

(100,000)

 

 

208,788

 

Management fees

 

 

 

-

 

 

-

 

 

-

 

 

145,879

 

Consulting fees

 

 

 

-

 

 

-

 

 

-

 

 

72,474

 

General and administrative expenses

 

652

 

 

1,372

 

 

27,547

 

 

7,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total operating expenses

 

 

(169,348)

 

 

5,122

 

 

(32,953)

 

 

442,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 INCOME (LOSS) FROM OPERATIONS

 

169,348

 

 

(5,122)

 

 

32,953

 

 

(442,191)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 Interest expense

 

 

 

(11,761)

 

 

(606)

 

 

(24,721)

 

 

(975)

 

 Derivative Expense

 

 

 

(1,289)

 

 

-

 

 

(19,814)

 

 

-

Change in Fair Market Value of Derivative liability

 

5,783

 

 

-

 

 

9,491

 

 

-

 Gain (loss) on conversion of debt

 

(2,600)

 

 

-

 

 

(2,600)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other income (expense), net

 

(9,867)

 

 

(606)

 

 

(37,644)

 

 

(975)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAX PROVISION

 

159,481

 

 

(5,728)

 

 

(4,691)

 

 

(443,166)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 INCOME TAX PROVISION

 

-

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 NET INCOME (LOSS)

 

 

$

159,481

 

$

(5,728)

 

$

(4,691)

 

$

(443,166)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS (LOSS) PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 - basic and diluted

 

 

$

0.00

 

$

(0.00)

 

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 - basic and diluted

 

124,470,700

 

 

124,986,367

 

 

124,381,163

 

 

499,770,075


See accompanying notes to the consolidated financial statements.



5




Harrison Vickers and Waterman Inc.

Consolidated Statement of Stockholders' Deficit

For the Period June 30, 2012 Through March 31, 2015

(Unaudited)


 

 

 

 

 Series A Preferred Stock Par Value $0.0001

 

 Common Stock Par

Value $0.0001

 

 

 

 

 

 

 

 

Number of Shares

 

Amount

 

Number

of

Shares

 

Amount

 

Additional

paid-in

Capital

 

Accumulated

Deficit

 

Total

Stockholders’

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2012

 

-

 

$

-

 

1,634,993,250

 

$

163,499

 

$

(159,649)

 

$

(35,085)

 

$

(31,235)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss

 

-

 

 

-

 

-

 

 

-

 

 

-

 

 

(5,315)

 

 

(5,315)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, June 30, 2013

 

-

 

 

-

 

1,634,993,250

 

 

163,499

 

 

(159,649)

 

 

(40,400)

 

 

(36,550)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of common shares

 

-

 

 

-

 

(1,610,006,750)

 

 

(161,000)

 

 

161,000

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares for compensation

 

-

 

 

-

 

99,999,867

 

 

10,000

 

 

(8,621)

 

 

-

 

 

1,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Preferred Stock for compensation

 

95,000

 

 

10

 

-

 

 

-

 

 

424,990

 

 

-

 

 

425,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares returned to Treasury

 

-

 

 

-

 

(649,000)

 

 

(65)

 

 

65

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss

 

-

 

 

-

 

-

 

 

-

 

 

-

 

 

(564,377)

 

 

(564,377)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, June 30, 2014

 

95,000

 

 

10

 

124,337,367

 

 

12,434

 

 

417,785

 

 

(604,777)

 

 

(174,548)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued upon conversion of debt

 

-

 

 

-

 

2,000,000

 

 

200

 

 

5,000

 

 

-

 

 

5,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss

 

-

 

 

-

 

-

 

 

-

 

 

-

 

 

(4,691)

 

 

(4,691)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, March 31, 2015

 

95,000

 

$

10

 

126,337,367

 

$

12,634

 

$

422,785

 

$

(609,468)

 

$

(174,039)


See accompanying notes to the consolidated financial statements.



6




Harrison Vickers and Waterman Inc.

Consolidated Statements of Cash Flows


 

 

 

 

For the Nine Months

 

For the Nine Months

 

 

 

 

Ended

 

Ended

 

 

 

 

March 31, 2015

 

March 31, 2014

 

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 Net loss

$

(4,691)

$

(443,166)

 

 

 

 

 

 

 

 Adjustments to reconcile net loss to net cash provided by (used in) operating activities

 

 

 

 

 

 Common stock issued for compensation

 

-

 

1,379

 

 Series A Preferred Stock issued for compensation

 

-

 

425,000

 

 Amortization of Discount on Notes Payable

 

19,658

 

-

 

 Derivative Expense

 

19,814

 

-

 

 Change in Fair Market Value of Derivative liability

 

(9,491)

 

-

 

 Gain (loss) on conversion of debt

 

2,600

 

-

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 Real estate loans

 

520,000

 

330,000

 

 

 Accrued expenses  

 

(60,751)

 

(855)

 

 

 

 

 

 

 

 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

487,139

 

312,358

 

 

 

 

 

 

 

 NET CASH USED IN INVESTING ACTIVITIES

 

-

 

-

 

 

 

 

 

 

 

 CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 Amounts received from related party

 

-

 

2,001

 

  Issuance of notes payable -investor

 

32,500

 

13,064

 

   Payment on secured promissory note

 

(520,000)

 

(330,000)

 

 

 

 

 

 

 

 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

(487,500)

 

(314,935)

 

 

 

 

 

 

 

 NET CHANGE IN CASH

 

(361)

 

(2,577)

 

 

 

 

 

 

 

 Cash at beginning of reporting period

 

361

 

2,706

 

 

 

 

 

 

 

 Cash at end of reporting period

$

-

$

129

 

 

 

 

 

 

 

 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

 

 

 

 

 

 Interest paid

$

-

$

-

 

 Income tax paid

$

-

$

-

 

 

 

 

 

 

 

 NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 Purchase of real estate loans for debt, net

$

-

$

1,800,000


See accompanying notes to the consolidated financial statements.



7




Harrison Vickers and Waterman Inc.

March 31, 2015 and 2014

Notes to the Consolidated Financial Statements

(Unaudited)


Note 1 - Organization and Operations


The Company, under the name Sharp Performance Associates LLC was organized as a Limited Liability Company on September 5, 2008 under the laws of the State of Nevada. The LLC provides consulting services to the sales and marketing sectors of the automotive industry.


Material Definitive Agreement


Effective September 6, 2013 the Company entered into a Securities Purchase Agreement (the “Agreement”) with Harrison Vickers and Waterman, LLC (“Harrison Vickers”).  Pursuant to the Agreement the Company agreed to purchase from Harrison Vickers certain assets held by Harrison Vickers in the form of real estate loans (the “Loans”).  The purchase price was paid by the Company via the issuance of a secured promissory note in the principal amount of $1,800,000 (the “Note”) due March 31, 2015.  Currently the Company is in discussions to extend the maturity of the Note. See Note 4 for more detail.


The Note is secured by a Pledge Agreement (the “Pledge Agreement”) entered into between the Company and Harrison Vickers, whereby the proceeds of the Loans are pledged as security for the repayment of the Note.


Effective September 6, 2013 the Company entered into a Securities Purchase Agreement (the “HVW Agreement”) with HVW Holdings LLC (“HVW”).  Pursuant to the Agreement the Company agreed to sell to HVW an aggregate of 308,166 shares of the Company’s Common Stock and 32,300 shares of preferred stock of the Company which pursuant to the terms thereof will be convertible into 32,300,000 shares of the Company’s common stock.  The consideration under the HVW Agreement was certain services to be rendered by HVW to the Company pursuant to a management agreement (the “Management Agreement”) entered into between the Company and HVW on September 6, 2013. Some of the material terms of the HVW Agreement include: (i) that Robert J. Sharp, the Chief Executive Officer and Board Member of the Company retire 4,961,500 shares of common stock of the Company owned by Mr. Sharp, (ii) the Company will submit to a vote of its shareholders a forward split of the Company’s common stock equal to 324.5 for 1, (iii) the Company will appoint up to three persons nominated by HVW to the board of directors of the Company to serve until the next annual meeting of shareholders of the Company, (iv) the Company will issue shares of a to be created series of preferred stock (8% annual dividend, anti-dilution rights for 24 months, each share convertible into 1,000 shares of common stock) to each of HVW (32,300), Mr. Sharp (46,500) and an Institutional Investor (16,200).


The material terms of the Management Agreement include: (i) HVW will provide certain business, financial and advisory services to the Company; (ii) HVW will receive a management fee of two percent (2%) per annum of average gross assets, (iii) HVW will also receive twenty percent (20%) of the revenues received by the Company derived from the services under the Management Agreement.


Certificate of Amendment of the Articles of Incorporations


On October 24, 2013 the Company filed a Certificate of Amendment to amend its Articles of Incorporation (the “Actions”) to: (i) change the name of the Company to Harrison Vickers & Waterman Inc. (the “Company”); (ii) increase the number of shares of authorized common stock of the Corporation from 74,000,000 to 2,000,000,000 shares; and (iii) effect a forward stock split of our common stock at a ratio determined by our Board of Directors of 324.5 for 1.


All shares and per share amounts in the consolidated financial statements have been adjusted to give retroactive effect to the Stock Split and the change in authorized stock.



8




Change in Business Model


On April 21, 2015, the Company entered into a Purchase Agreement (the “Purchase Agreement”), with the three original shareholders of Attitude Beer Holding Co., a Delaware corporation (“ABH”), namely, Attitude Drinks, Inc., a Delaware corporation (“Attitude Drinks”), Alpha Capital Anstalt, a company organized under the laws of Liechtenstein (“Alpha”) and Tarpon Bay Partners LLC, a Florida limited liability company (“Tarpon Bay”), pursuant to which the shareholders sold to the Company all of the outstanding shares of stock of ABH and ABH thereupon became a wholly owned subsidiary of the Company. In consideration for the purchase of the shares of common stock of ABH, the Company issued: (i) to Attitude Drinks, 51 shares of a newly created Series B Preferred Stock of the Company (the “Series B Preferred Stock”) and a seven year warrant (the “B Warrant”) to purchase 5,000,000 shares of the Company’s common stock, par value $.0001 per share (the “Common Stock”), at an exercise price of $0.075 per share (subject to customary anti-dilution adjustments); (ii) to Alpha, a secured convertible note due April 20, 2017 (the “Secured Convertible Note”) in the principal amount of $1,619,375 a seven year warrant (the “Alpha Warrant”), to purchase 1,295,500,500, shares of Common Stock at an exercise price of $0.0025 per share (subject to customary anti-dilution adjustments), and an additional investment right (“AIR”) to purchase up to $3,750,000 in additional notes (the “AIR Note”) and corresponding warrants (“the “AIR Warrant”); and (iii) to Tarpon, a Secured Convertible Note in the principal amount of $554,791.67, a seven year warrant (the “Tarpon Warrant”) to purchase 443,833,333 shares of Common Stock at an exercise price of $0.0025 per share (subject to customary anti-dilution adjustments), and an AIR to purchase up to $1,250,000 in additional notes and corresponding AIR Warrants.  In addition, Alpha acquired 32,300 shares of the Company’s Series A Preferred Stock (convertible into 32,300,000 shares of the Company’s Common Stock) from HVW Holdings LLC (an entity of which Mr. James Giordano, the Company’s prior Chief Executive Officer and Chairman of the Board, is the managing member), subject to the terms of a Purchase Agreement (the “Series A Purchase Agreement”). Attitude Drinks purchased 87,990,000 shares of Common Stock from HVW Holdings LLC at a price of $65,000, subject to the terms of a Purchase Agreement (the “Common Stock Purchase Agreement”).

 

In December 2014, ABH entered into a joint venture with New England World of Beer and together opened a 4,000 sq. foot tavern in West Hartford, Connecticut that sells a selection of over 500 craft and imported beers along with tavern food and other spirits and cocktails. New England World of Beer holds franchise rights for all of Connecticut and Massachusetts. Similar taverns are currently open in 20 states, namely AL, AZ, CO, CT, FL, GA, IL, LA, MD, MI, NC, NJ, NY, OH, SC, TN, TX, VA, WA and WI.


See our Form 8-K filed April 27, 2015 incorporated by reference in this document for more detail.


Note 2 - Significant and Critical Accounting Policies and Practices


The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application.  Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.


Basis of Presentation – Unaudited Interim Financial Information


The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. The unaudited interim consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended June 30, 2014 and notes thereto contained in the information filed as part of the Company’s Annual Report on Form 10-K filed with the SEC on October 9, 2014.


Fiscal Year End


The Company elected June 30th as its fiscal year end date upon its formation.


Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).



9




Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimate(s) and assumption(s) affecting the financial statements were:


(i)

Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.


(ii)

Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the fact that the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.


(iii)

Estimates and assumptions used in valuation of derivative liability and equity instruments: Management estimates the expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value derivative liabilities, share options and similar instruments.


Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.


Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.


Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.


Actual results could differ from those estimates.


Principles of Consolidation


The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification ("ASC") to determine whether and how to consolidate another entity.  Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.  Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.  The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.


The Company's consolidated subsidiaries and/or entities are as follows:


Name of consolidated subsidiary or entity

State or other jurisdiction of incorporation or organization

Date of incorporation or formation (date of acquisition, if applicable)

Attributable interest

Sharp Performance Associates LLC

The State of Nevada

September 5, 2008

100%


The consolidated financial statements of the Company include all accounts of the Company and its wholly owned subsidiary, LLC.

All intercompany balances and transactions have been eliminated.



10




Fair Value of Financial Instruments


The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:


Level 1

 

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

 

 

Level 2

 

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

 

 

Level 3

 

Pricing inputs that are generally observable inputs and not corroborated by market data.


Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.


The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.


The carrying amounts of the Company’s financial assets and liabilities, such as cash, real estate loans receivable and accrued expenses approximate their fair values because of the short maturity of these instruments.


Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.


Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis


Level 3 Financial Liabilities – Derivative Warrant Liabilities


The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability at every reporting period and recognizes gains or losses in the consolidated statements of operations and comprehensive income (loss) that are attributable to the change in the fair value of the derivative warrant liability.


Cash Equivalents


The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.


Derivative Instruments


The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Paragraph 810-10-05-4 of the Codification and Paragraph 815-40-25 of the Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.


In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.



11




The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.


Related Parties


The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.


Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.


The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the consolidated financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.


Commitment and Contingencies


The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.


If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.  If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.


Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  


Revenue Recognition


The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.



12




Deferred Tax Assets and Income Tax Provision


The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those 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 the Statements of Operations in the period that includes the enactment date.


The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.


The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.


Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.


Tax years that remain subject to examination by major tax jurisdictions


The Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15.


Earnings per Share

 

Earnings Per Share ("EPS") is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share.  EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period.  Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income.  The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.



13




Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder.  The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs  260-10-45-35 through 45-36 and  260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23).  Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS.   Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period.  (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.


There were no potentially outstanding dilutive common shares for the reporting period ended March 31, 2015 or 2014.


Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.


Subsequent Events


The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the consolidated financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its consolidated financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.


Recently Issued Accounting Pronouncements


In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).


In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.


When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.



14




If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):


a.

Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)


b.

 Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations


c.

 Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.


If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:


a.

Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern


b.

Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations


c.

Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.


The amendments are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.


Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.


Note 3 – Going Concern


The Company has elected to adopt early application of Accounting Standards Update No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).


The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.


The Company is attempting to further implement its business plan and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations.  While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.


The consolidated financial statements do not include any adjustments related to the recoverability and classification of reported asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.



15




Note 4 – Real Estate Loans Receivable and Related Promissory Note Payable


Effective September 6, 2013 the Company entered into a Securities Purchase Agreement (the “Agreement”) with Harrison Vickers and Waterman, LLC (“Harrison Vickers”).  Pursuant to the Agreement the Company agreed to purchase from Harrison Vickers certain assets held by Harrison Vickers in the form of real estate loans (the “Loans”).  The purchase price was paid by the Company via the issuance of a secured promissory note in the principal amount of $1,800,000 (the “Note”) due March 31, 2015.  Currently, the Company is in discussions to extend the maturity of the Note.


Four loans, $1,800,000 in aggregate, were purchased with one loan of $180,000 being collected during the interim period ending December 31, 2013.  The remaining three loans of $520,000, $550,000 and $550,000 were issued on April 2, 2013, May 15, 2013 and July 15, 2013, respectively. They all bear interest at 12% per annum and are due one year from the date of issuance. The loans are secured by a first lien.


The Note is secured by a Pledge Agreement (the “Pledge Agreement”) entered into between the Company and Harrison Vickers, whereby the proceeds of the Loans are pledged as security for the repayment of the Note.


During the interim period ended December 31, 2013, the Company received payment on and paid down $330,000 of the Loans.


The $550,000 loan was reduced to $400,000 during the year ended June 30, 2014 with a corresponding reduction in the promissory note payable. The balance of $400,000 is being disputed by the property owner but the Company is fully insured by Title Insurance for this amount.


On February 10, 2015, the note for $520,000 was fully repaid.


The current balance outstanding is $950,000.


 

 

March 31, 2015

 

June 30, 2014

Balance Outstanding

$

950,000

$

1,470,000


Note 5 –Notes Payable - Investor


Notes payable – investor is as follows:


 

 

March 31,

2015

 

June 30,

2014

On October 9, 2013, the Company issued a promissory note in the principal amount of $2,750 with a 10% Original Issuance Discount ("OID") for $2,500 with an investor.  The note matured on June 30, 2014 and bears interest at ten percent per annum, compounded monthly. The note is currently in default.

$

2,938

$

2,938

 

 

 

 

 

On October 23, 2013, the Company issued a promissory note in the principal amount of $5,500 with a 10% Original Issuance Discount ("OID") for $5,000 with an investor.  The Note matured on June 30, 2014 and bears interest at ten percent per annum, compounded monthly. The note is currently in default.

 

5,527

 

5,527

 

 

 

 

 

On January 31, 2014, the Company issued a promissory note in the principal amount of $5,500 with a 10% Original Issuance Discount ("OID") for $5,000 with an investor.  The Note matured on January 31, 2015 and bears interest at ten percent per annum, compounded monthly. The note is currently in default.

 

5,212

 

5,212

 

 

 

 

 

On May 15, 2014, the Company issued a promissory note in the principal amount of $11,000 with a 10% Original Issuance Discount ("OID") for $10,000 with an investor.  The Note matured on November 15, 2014 and bears interest at ten percent per annum, compounded monthly. The note is currently in default.

 

10,125

 

10,125

 

 

 

 

 

On May 30, 2014, the Company issued a promissory note in the principal amount of $5,500 with a 10% Original Issuance Discount ("OID") for $5,000 with an investor.  The Note matured on March 31, 2015 and bears interest at ten percent per annum, compounded monthly. The note is currently in default.

 

5,042

 

5,042

 

 

 

 

 

 

$

28,844

$

28,844


Subsequent to the balance sheet date, theses notes were all changed to convertible debt. See Subsequent Events, Note 11 for more detail.



16




Note 6 –Convertible Notes Payable - Investor


Convertible notes payable consisted of the following:


 

March 31, 2015

 

June 30, 2014

Since inception, the Company had received advances from its former Chairman and Chief Executive Officer, Robert J Sharp, for working capital purposes. Mr. Sharp advanced the Company $36,628. On September 1, 2013, Mr. Sharp assigned his rights to the advances to an investor. On January 2, 2015, the Company and the Investor agreed to adjust amounts

due to the investor in the following fashion:  The Note


(a)

became immediately convertible; 

(b)

converts into common stock at a 50% discount from the lowest closing bid price for the prior thirty trading days;

(c)

 bears interest at a rate of 10% per year.


On March 25, 2015, the investor converted $2,600 worth of debt into 2,000,000 shares.

 $

 34,028

 

 $

 -


On October 1, 2014, the Company issued a promissory note in consideration for $25,000 received from an investor.  The Note matures on June 30, 2015 and bears interest at ten percent per annum. The investor is entitled at his option to convert all or any lesser portion of the amounts due from the Company for additional shares. The conversion price is an amount equal to fifty percent (50%) of the lowest closing bid price in the thirty days prior to the day that the Investor requests conversion. Because this conversion feature is variable, management has concluded that the feature cannot be indexed solely to the Company’s own stock and therefore is precluded from equity classification.  As a result, the feature must be accounted for as a derivative liability.

 

25,000

 

 

-

 

 

 

 

 

 

On October 24, 2014, the Company issued a promissory note in consideration for $5,000 received from an investor.  The Note matures on July 31, 2015 and bears interest at ten percent per annum. The investor is entitled at his option to converting all or any lesser portion of the amounts due from the Company for additional shares. The conversion price is an amount equal to fifty percent (50%) of the lowest closing bid price in the thirty days prior to the day that the Investor requests conversion.  Because this conversion feature is variable, management has concluded that the feature cannot be indexed solely to the Company’s own stock and therefore is precluded from equity classification.  As a result, the feature must be accounted for as a derivative liability.

 

5,000

 

 

-


On March 15, 2015, the Company issued a promissory note in consideration for $2,500 received from an investor.  The Note matures on July 31, 2015 and bears interest at ten percent per annum. The investor is entitled at his option to converting all or any lesser portion of the amounts due from the Company for additional shares. The conversion price is an amount equal to fifty percent (50%) of the lowest closing bid price in the thirty days prior to the day that the Investor requests conversion.  Because this conversion feature is variable, management has concluded that the feature cannot be indexed solely to the Company’s own stock and therefore is precluded from equity classification.  As a result, the feature must be accounted for as a derivative liability

 

2,500

 

 

-

 

 

 

 

 

 

Face amount

 

66,528

 

 

-

 

 

 

 

 

 

Discount representing the derivative liability on conversion features up to the principal amount

 

(32,500)

 

 

(-)

 

 

 

 

 

 

Accumulated amortization of discount of convertible notes payable

 

19,658

 

 

-

 

 

 

 

 

 

Convertible notes payable, net

$

53,686

 

$

-




17




Note 7 – Derivative Financial Instruments


The Company’s derivative financial instruments are embedded derivatives associated with the Company’s convertible debentures. The Company’s convertible debentures issued to an institutional investor are hybrid instruments which contain an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4.  The embedded derivative feature includes the conversion feature attached to certain Notes. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability has been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.


The compound embedded derivatives within the notes have been valued using a layered discounted probability-weighted cash flow approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Company’s statements of operations as “change in the fair value of derivative instrument”.


Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis


Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheets:


 

 

 

 

Fair Value Measurement Using

 

 

Carrying Value

 

Level 1

 

Level 2

 

Level 3

 

Total

Derivative liabilities on conversion feature

 

$

42,823

 

 

 

$

-

 

 

 

$

-

 

 

$

42,823

 

 

 

$

42,823

 

Total derivative liabilities

 

$

42,823

 

 

 

$

-

 

 

 

$

-

 

 

$

42,823

 

 

 

$

42,823

 


Summary of the Changes in Fair Value of Level 3 Financial Liabilities


The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the fiscal year ended June 30, 2015:


 

Fair Value Measurement Using Level 3 Inputs

 

Derivative liability

 

Total

Balance, June 30, 2014 

 

$

-

 

 

 

$

-

 

Purchases, issuances and settlements

 

 

32,500

 

 

 

 

32,500

 

Total gains or losses (realized/unrealized)

 

 

 

 

 

 

 

 

 

Included in net (income) loss

 

 

10,323

 

 

 

 

10,323

 

Included in other comprehensive income

 

 

-

 

 

 

 

-

 

Transfers in and/or out of Level 3

 

 

-

 

 

 

 

-

 

Balance, March 31, 2015 

 

$

42,823

 

 

 

$

42,823

 




18




Note 8 – Due to Investor


Since inception, the Company had received advances from its former Chairman and Chief Executive Officer, Robert J Sharp, for working capital purposes.


On September 1, 2013, Mr. Sharp assigned his rights to the advances, then totaling $36,628 to an investor. These amounts remained non-interest bearing and due on demand until January 2, 2015.


On January 2, 2015, the Company and the investor agreed to adjust these items in the following fashion:


(a) The note became immediately convertible into common stock at a 50% discount form the lowest closing bid price for the prior thirty trading days.


(b) the note bears interest at a rate of 10% per year.


Since the Note is now convertible, commencing with the quarter ended March 31, 2015, it is now part of convertible debt.


 

 

March 31, 2015

 

June 30, 2014

Balance Due to Investor

$

-

$

36,628

 

Note 9 – Commitments and Contingencies


Management Agreement


Effective September 6, 2013 the Company entered into a management agreement (the “Management Agreement”) between the Company and HVW.


The material terms of the Management Agreement include: (i) HVW will provide certain business, financial and advisory services to the Company; (ii) HVW will receive a management fee of two percent (2%) per annum of average gross assets, and (iii) HVW will also receive twenty percent (20%) of the revenues received by the Company derived from the services under the Management Agreement. The management fee has been waived for the year ended June 30, 2014 and the interim period ended March 31, 2015.  Pursuant to the change in business model described in Note 1 in the Notes to the Financial Statements, Organization and Operation, these fees have been waived in perpetuity.


Note 10 – Stockholders’ Deficit


Shares Authorized


Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Seventy Five Million (75,000,000) shares of which One Million (1,000,000) shares are Preferred Stock, par value $0.0001 per share, and Seventy Four Million (74,000,000) shares are Common Stock, par value $0.0001 per share.


On October 24, 2013 the Company filed a Certificate of Amendment to amend its Articles of Incorporation (the “Actions”) to: (i) change the name of the Company to Harrison Vickers & Waterman Inc.; (ii) increase the number of shares of authorized common stock of the Corporation from 74,000,000 to 2,000,000,000 shares; and (iii) effectuate a forward stock split of our common stock at a ratio determined by our Board of Directors of 324.5 for 1.


All shares and per share amounts in the consolidated financial statements have been adjusted to give retroactive effect to the Stock Split and the change in authorized stock.


Series A 8% Convertible Preferred Stock


On September 17, 2013 the Company filed the Series A 8% Convertible Preferred Stock Certificate of Designation with the Secretary of State of Nevada (the “Certificate of Designation”) authorizing 100,000 shares of Series A Convertible Preferred Stock, and establishing the rights, preferences, privileges and obligations thereof.



19




As set forth in the Certificate of Designation, the holders of Series A Preferred Stock are entitled to receive, when and as declared by the Board of Directors out of funds legally available therefore, and the Company accrues, quarterly in arrears on December 31, December 31, March 31, and June 30 of each year, cumulative dividends on the Series A Preferred Stock at the rate per share equal to eight percent (8%) per annum on the Stated Value, payable in common stock valued at the closing trade price per share on the last trading day of the calendar quarter.  Through the current period, the holders of the Series A Preferred have deferred these dividends.  There is no guarantee that this will be done going forward.  The Series A Preferred Stock shall not have the right to vote on any matter that may from time to time be submitted to the Company’s shareholders for a vote, either by written consent or by proxy.   So long as any shares of Series A Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the affirmative vote of the Requisite Holders, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock, (b) alter or amend this Certificate of Designation, (c) amend its certificate of incorporation, bylaws or other charter documents so as to affect adversely any rights of any Holders of the Series A Preferred Stock, (d) increase the authorized or designated number of shares of Series A Preferred Stock, (e) issue any additional shares of Series A Preferred Stock (including the reissuance of any shares of Series A Preferred Stock converted for Common Stock) or (f) enter into any agreement with respect to the foregoing. Each share of Series A Preferred Stock shall be convertible into 1,000 shares of Common Stock.  For a period of 24 months from the Issuance Date, if the Company issues shares of common stock (or securities, including any derivative securities, containing the right to purchase, exercise or convert into shares of common stock) (the “Dilution Shares”) such that the outstanding number of shares of common stock on a fully diluted basis shall be greater than 214,000,000 shares (inclusive of conversions of Series A Preferred Stock at the Conversion Ratio immediately above), then the Conversion Ratio for the Series A Preferred Stock then outstanding and unconverted as of the date the Dilution Shares are issued shall be adjusted to equal the Conversion Ratio multiplied by a fraction, the numerator of which shall be the number of shares outstanding on a fully diluted basis after the issuance of the Dilution Shares, and the denominator shall be 214,000,000.   The Company shall not effect any conversion of the Series A Preferred Stock, to the extent that, after giving effect to the conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of 9.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series A Preferred Stock.


Effective September 6, 2013 the Company entered into a Securities Purchase Agreement (the “HVW Agreement”) with HVW Holdings LLC (“HVW”).  Pursuant to the Agreement the Company agreed to sell to HVW an aggregate 32,300 shares of its Series A, 8% Convertible Preferred Stock which pursuant to the terms thereof will be convertible into 32,300,000 shares of the Company’s common stock.  The consideration under the HVW Agreement was certain services to be rendered by HVW to the Company pursuant to a management agreement (the “Management Agreement”) entered into between the Company and HVW on September 6, 2013.


In addition, the Company issued 46,500 shares of its Series A, 8% Convertible Preferred Stock to its former president, Robert Sharp and 16,200 shares to an investor.


The 95,000 shares issued of the Series A, 8% Convertible Preferred Stock were valued at $425,000 in aggregate, $208,206, $144,500 and $72,474 of which were booked as compensation – officer, management fees and consulting fees, respectively.


On November 4, 2013, the owners of the Series A Preferred Stock agreed that the conversion ratio, as defined in the Certificate of Designation, will not change in the event of forward-split or reverse-split for a period of six months from issuance.


To date, the holders of the Series A have deferred the accrual of dividends.


Common Stock


Effective September 6, 2013 the Company entered into a Securities Purchase Agreement (the “HVW Agreement”) with HVW Holdings LLC (“HVW”).  Pursuant to the Agreement the Company agreed to sell to HVW an aggregate of 308,166 shares of the Company’s Common Stock.  The consideration under the HVW Agreement was certain services to be rendered by HVW to the Company pursuant to a management agreement (the “Management Agreement”) entered into between the Company and HVW on September 6, 2013. Some of the material terms of the HVW Agreement include: (i) that Robert J. Sharp, the Chief Executive Officer and Board Member of the Company retire 4,961,500 shares of common stock of the Company owned by Mr. Sharp, and the Company will appoint up to three persons nominated by HVW to the board of directors of the Company to serve until the next annual meeting of shareholders of the Company.


The common stock issued was valued at its fair market value of $1,379.


The material terms of the Management Agreement include: (i) HVW will provide certain business, financial and advisory services to the Company; (ii) HVW will receive a management fee of two percent (2%) per annum of average gross assets, (iii) HVW will also receive twenty percent (20%) of the revenues received by the Company derived from the services under the Management Agreement.



20




Equity Incentive Plan


On October 24, 2013, the Company created the 2013 Equity Incentive Plan (the “Plan.”)  The aggregate number of shares of Common stock that may be issued under the Plan shall not exceed five million (5,000,000) shares.  


Note 11 – Subsequent Events


The Company has evaluated all events that occurred after the balance sheet date through the date when the consolidated financial statements were issued to determine if they must be reported.  The Management of the Company determined that the following was a significant event.


Change in Business Model


On April 21, 2015, the Company entered into the Purchase Agreement  with ABH, Alpha and Tarpon Bay, pursuant to which the shareholders sold to the Company all of the outstanding shares of stock of ABH and ABH thereupon became a wholly owned subsidiary of the Company. In consideration for the purchase of the shares of common stock of ABH, the Company issued: (i) to Attitude Drinks, 51 shares of Series B Preferred Stock and the B Warrant to purchase 5,000,000  Common Stock, at an exercise price of $0.075 per share (subject to customary anti-dilution adjustments); (ii) to Alpha, the Secured Convertible Note in the principal amount of $1,619,375, the Alpha Warrant, to purchase 1,295,500,500, shares of Common Stock at an exercise price of $0.0025 per share (subject to customary anti-dilution adjustments), and an AIR to purchase up to $3,750,000 in the AIR Note and the AIR Warrant; and (iii) to Tarpon, a Secured Convertible Note in the principal amount of $554,791.67, the Tarpon Warrant to purchase 443,833,333 shares of Common Stock at an exercise price of $0.0025 per share (subject to customary anti-dilution adjustments), and an AIR to purchase up to $1,250,000 in additional notes and corresponding AIR Warrants.  In addition, Alpha acquired 32,300 shares of the Company’s Series A Preferred Stock (convertible into 32,300,000 shares of the Company’s Common Stock) from HVW Holdings LLC (an entity of which Mr. James Giordano, the Company’s prior Chief Executive Officer and Chairman of the Board, is the managing member), subject to the terms of a Purchase Agreement (the “Series A Purchase Agreement”). Attitude Drinks purchased 87,990,000 shares of Common Stock from HVW Holdings LLC at a price of $65,000, subject to the terms of a Purchase Agreement (the “Common Stock Purchase Agreement”).

 

In December 2014, ABH entered into a joint venture with New England World of Beer and together opened a 4,000 sq. foot tavern in West Hartford, Connecticut that sells a selection of over 500 craft and imported beers along with tavern food and other spirits and cocktails. New England World of Beer holds franchise rights for all of Connecticut and Massachusetts. Similar taverns are currently open in 20 states, namely AL, AZ, CO, CT, FL, GA, IL, LA, MD, MI, NC, NJ, NY, OH, SC, TN, TX, VA, WA and WI.


See our Form 8-K filed April 27, 2015 for more detail.


Issuance of Debt


On April 27, 2015, the Company issued a promissory note in consideration for $13,250 received from an investor.  The Note matures on December 31, 2016 and bears interest at ten percent per annum. The investor is entitled at his option to converting all or any lesser portion of the amounts due from the Company for additional shares. The conversion price is an amount equal to fifty percent (50%) of the lowest closing bid price in the thirty days prior to the day that the Investor requests conversion, or $.0025, whichever is lower.  Because this conversion feature is variable, management has concluded that the feature cannot be indexed solely to the Company’s own stock and therefore is precluded from equity classification.  As a result, the feature must be accounted for as a derivative liability.


Renegotiation of debt


On April 27, 2015, the Company renegotiated all of its outstanding indebtedness with creditors with the exception of the promissory note referenced above.  Maturity dates of all debt were extended to April 1, 2017 and all debt is now convertible. The conversion price is an amount equal to fifty percent (50%) of the lowest closing bid price in the thirty days prior to the day that the Investor requests conversion, or $.0025, whichever is lower.



21




Appointment of Chief Financial Officer


On May 13, 2015, Tommy Kee, age 66, was appointed as our Chief Executive Officer.  Mr. Kee has served as the Chief Executive Officer of Attitude Drinks Inc. since November, 2007.  Mr. Kee was previously the Chief Accounting Officer of Bravo! Brands, Inc.  He graduated with an MBA from the University of Memphis and a BS degree in accounting from the University of Tennessee.  Before joining us, he served for several years as CFO for Allied Interstate, Inc. in the West Palm Beach area.  Prior to that, Mr. Kee served as CFO and Treasurer for Hearx Ltd. a West Palm Beach, Florida public company.  He also served 18 years as International Controller and Financial Director with the Holiday Inns Inc. organization in Memphis and Orlando.  Mr. Kee gave his letter of resignation as CFO, effective July 10, 2009 but rejoined the Company in April, 2010.


There are no family relationships between Mr. Kee and any director, executive officer or person nominated or chosen by the Company to become as director or executive officer of the Company and there have been no transactions involving Mr. Kee that would require disclosure under Item 404(a) of Regulation S-K other than his service as an executive officer of Attitude Drinks Inc.



22




ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with our financial statements and the notes thereto which appear elsewhere in this report. The results shown herein are not necessarily indicative of the results to be expected for any future periods.


This discussion contains forward-looking statements, based on current expectations. All statements regarding future events, our future financial performance and operating results, our business strategy and our financing plans are forward-looking statements and involve risks and uncertainties. In many cases, you can identify forward-looking statements by terminology, such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. These statements are only predictions. Known and unknown risks, uncertainties and other factors could cause our actual results and the timing of events to differ materially from those projected in any forward-looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, those set forth in our Annual Report on Form 10-K for the year ended June 30, 2014 and in this report.


General


Recent Developments


On April 21, 2015, we commenced operation in a second line of business when we acquired all of the outstanding shares of stock of Attitude Beer Holding Co., a Delaware corporation (“ABH”) from its the three original shareholders Attitude Drinks, Inc., a Delaware corporation (“Attitude Drinks”), Alpha Capital Anstalt, a company organized under the laws of Liechtenstein (“Alpha”) and Tarpon Bay Partners LLC, a Florida limited liability company (“Tarpon Bay”). In consideration for the purchase of the shares of common stock of ABH, we issued: (i) to Attitude Drinks, 51 shares of a newly created Series B Preferred Stock of the and a seven year warrant (the “B Warrant”) to purchase 5,000,000 shares of the Company’s common stock, par value $.0001 per share (the “Common Stock”), at an exercise price of $0.075 per share (subject to customary anti-dilution adjustments); (ii) to Alpha, a secured convertible note due April 20, 2017 in the principal amount of $1,619,375 a seven year warrant, to purchase 1,295,500,500, shares of Common Stock at an exercise price of $0.0025 per share (subject to customary anti-dilution adjustments), and an additional investment right (“AIR”) to purchase up to $3,750,000 in additional notes and corresponding warrants (“the “AIR Warrant”); and (iii) to Tarpon, a Secured Convertible Note in the principal amount of $554,791.67, a seven year warrant to purchase 443,833,333 shares of Common Stock at an exercise price of $0.0025 per share (subject to customary anti-dilution adjustments), and an AIR to purchase up to $1,250,000 in additional notes and corresponding AIR Warrants.  In addition, Alpha acquired 32,300 shares of our Series A Preferred Stock (convertible into 32,300,000 shares of the  Common Stock) from HVW Holdings LLC (an entity of which Mr. James Giordano, our prior Chief Executive Officer and Chairman of the Board, is the managing member), subject to the terms of a Purchase Agreement. Attitude Drinks purchased 87,990,000 shares of Common Stock from HVW Holdings LLC at a price of $65,000, subject to the terms of a Purchase Agreement.


In December 2014, ABH entered into a joint venture with New England World of Beer and together opened a 4,000 sq. foot tavern in West Hartford, Connecticut that sells a selection of over 500 craft and imported beers along with tavern food and other spirits and cocktails. New England World of Beer holds franchise rights for all of Connecticut and Massachusetts. Similar taverns are currently open in 20 states, namely AL, AZ, CO, CT, FL, GA, IL, LA, MD, MI, NC, NJ, NY, OH, SC, TN, TX, VA, WA and WI.


Our Company


Since September 2013 until recently, we were primarily engaged in the business of making commercial secured real estate loans. Our business model until the ABH acquisition was solely focused upon making commercial secured real estate loans under advantageous and risk averse terms. We provide alternative funding solutions to borrowers who may not qualify with conventional lenders or may require faster turnaround. Typical terms for loans are as follows: a) terms are generally for one year but may be extended to three years; b) interest rates are above market and adjustable upward; c) loans are interest only; d) loan to value (“LTV”) below 60%; e) loan secured by a first lien; f) all expenses, costs and fees incurred are paid for by the borrower. The Company anticipates additional opportunities through loan default, foreclosure, selected development, ownership and property management. We continue our current business model in addition to our new business model. Our business model for real estate loans is making commercial secured real estate loans under advantageous and risk averse terms. We provide alternative funding solutions to borrowers who may not qualify with conventional lenders or may require faster turnaround. Typical terms for loans are as follows: a) terms are generally for one year but may be extended to three years; b) interest rates are above market and adjustable upward; c) loans are interest only; d) loan to value (“LTV”) below 60%; e) loan secured by a first lien; f) all expenses, costs and fees incurred are paid for by the borrower. The Company anticipates additional opportunities through loan default, foreclosure, selected development, ownership and property management.



23




We believe the returns we shall get are more than commensurate with the risks offered by the short-term nature of the loans, above market interest rates and low loan to value (“LTV”) of our loans. We may charge above average interest rates due to our efficiency in providing loans and our knowledge in conducting due diligence accurately and timely.


On April 21, 2015, we commenced operations in a second line of business, the ownership of taverns that serve craft and imported beer along with food and other spirits.  ABH currently owns in a joint venture, an interest in one World of Beer tavern located in  Stamford, Connecticut and just started construction of a second World of Beer Tavern in Milford, Connecticut. World of Beer began as a neighborhood tavern and has grown to 70 locations in 18 states. WOB has grown to 70 locations in 18 states.


In December 2014, ABH entered into a joint venture with New England World of Beer and together opened a 4,000 sq. foot tavern in West Hartford, Connecticut that sells a selection of over 500 craft and imported beers along with tavern food and other spirits and cocktails. New England World of Beer holds franchise rights for all of Connecticut and Massachusetts. Similar taverns are currently open in 20 states, namely AL, AZ, CO, CT, FL, GA, IL, LA, MD, MI, NC, NJ, NY, OH, SC, TN, TX, VA, WA and WI.


History and Other Information


We were incorporated on June 5, 2008, under the laws of the State of Nevada. On that date, we acquired 100% of the ownership interest in Sharp Performance Associates, LLC and the rights to the GT-33 customization package from the sole owner Robert J Sharp. We issued Mr. Sharp 5,000,000 shares in consideration for this acquisition. On September 6, 2013, we changed our business model from that of a service provider for the automobile industry to a service provider in the mortgage industry when we acquired from Harrison Vickers and Waterman LLC (“Harrison Vickers”) certain real estate loans in the amount of $1,800,000. We issued a secured promissory note as consideration for the loans. The Note is due on March 31, 2015. During the first six months of the fiscal year, $330,000 of the real estate loans were repaid with interest. With the proceeds, we repaid Harrison Vickers for that portion of the secured promissory note. The remaining balance of the loans and the secured promissory note at the balance sheet date was $1,470,000. Also, on September 6, 201, we entered into a Securities Purchase Agreement (the “HVW Agreement”) with HVW Holdings LLC (“HVW”). Pursuant to the Agreement we agreed to sell to HVW an aggregate of 308,166 shares of the Common Stock and 32,300 shares of our preferred stock which pursuant to the terms thereof will be convertible into 32,300,000 shares of our common stock. The consideration under the HVW Agreement was certain services to be rendered by HVW to us pursuant to a management agreement (the “Management Agreement”) entered into between us and HVW on September 6, 2013. On April 21, 2015, we added a second line of business, the beer tavern business with the addition of ABH.


Our principal executive office is located at 712 U.S. Highway 1, Suite 200, North Palm Beach, FL 33408. Our telephone number is (561) 227-2727. Our fiscal year end is June 30 th


Results of Operations for the Three Months Ended March 31, 2015 As Compared to March 31, 2014


Commensurate with the change in business model described, under “General” above, the Company generated $45,833 in gross revenues for the three months ended March 31, 2015. These are revenues associated with the purchase of real estate loans. These revenues were offset by interest expense in the same amount. During the period ended March 31, 2014, these loans balances were slightly higher for the entire period and as such only $43,496 in revenues were generated, which were offset by interest expense in the same amount.


Professional fees increased $1,250 for the three month period ended March 31, 2015 versus March 31, 2014, primarily due to increased accounting fees.


Compensation-officer decreased $175,000 due to the reversal of all prior accruals of Mr. Giordano’s salary. As part of the new business model, Mr. Giordano, upon resigning from the Company, agreed to forfeit any claims on his salary. Mr. Giordano’s resignation is detailed in our Form 8-K filed on April 27, 2015. Please see that filing for more detail.


General and administrative decreased increased $720 due to reduced accruals principally due to an investor awareness campaign which cost $15,000 plus payments and accruals for SEC filing and transfer agent fees.



24




Results of Operations for the Nine Months Ended March 31, 2015 As Compared to March 31, 2014


Commensurate with the change in business model described, under “General” above, the Company generated $134,033 in gross revenues for the nine months ended March 31, 2015. These are revenues associated with the purchase of real estate loans. These revenues were offset by interest expense in the same amount. During the nine month period ended March 31, 2014, these loans were outstanding only for a portion of the first quarter and as such only $104,730 in revenues were generated, which were offset by interest expense in the same amount.


Professional fees increased $31,750 for the nine month period ended March 31, 2015 versus March 31, 2014, primarily due to increased legal fees.


Compensation-officer decreased $308,788 due to the issuance to our former Chairman and Chief Executive Officer of Series A Preferred Stock in the prior period for services rendered of $208,788, and $100,000 due to the reversal of all prior accruals of Mr. Giordano’s salary. As part of the new business model, Mr. Giordano, upon resigning from the Company, agreed to forfeit any claims on his salary. Mr. Giordano’s resignation is detailed in our Form 8-K filed on April 27, 2015. Please see that filing for more detail.


Management fees decreased $145,879 due to the commencement of operations under the new business model in the prior period through the issuance of Series A Preferred stock.


Consulting fees decreased $72,474 due to the establishment of a consulting agreement with an advisory firm in the prior period through the issuance of Series A Preferred stock. Consulting matters to be addressed are fund raising, financial reporting and general corporate matters.


General and administrative expenses increased $20,247 principally due to an investor awareness campaign which cost $15,000 plus payments and accruals for SEC filing and transfer agent fees.


Liquidity and Capital Resources


Our cash balance at March 31, 2015 was $-0-, a decrease of $361 from $361 at June 30, 2014.


We have limited capital resources, as, among other things, we are a development stage company with a limited operating history. We have generated limited revenues to date and may not be able to generate sufficient revenues to become profitable in the future.


The report of our independent registered public accounting firm on our financial statements for the fiscal year ended June 30, 2014 contains an explanatory paragraph regarding our ability to continue as a going concern based on our history of net losses since our inception.


We do not believe that we have sufficient funds on hand to fully implement our business operations or to meet our cash obligations for the next 12-month period. As a result, we may need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock or debt financing. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through issuance of debt to meet our obligations over the next 12 months. We do not have any arrangements in place for any future equity financing.


We do not currently own any significant plant or equipment that we will seek to sell in the near future. We do not anticipate the need to hire employees over the next 12 months with the possible exception of secretarial support should our business grow and necessitate such expenditure. We believe the services provided by our sole officer and director are sufficient at this time. We believe that our operations are currently on a small scale and are manageable by one individual.


Off-Balance Sheet Arrangements


We have no off-balance sheet arrangements.



25




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)). Based upon that evaluation, our principal executive officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.


Inherent Limitations of Internal Controls


Our Chief Executive Officer and Chief Financial Officer does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


Changes in Internal Control over Financial Reporting


There were no changes in our internal control over financial reporting during our most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II.


ITEM 1. LEGAL PROCEEDINGS


There are no pending, nor to our knowledge, threatened legal proceedings against us.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


None during the current period except those reported on Note 6 to the financial statements.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


There were no defaults upon securities


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable


ITEM 5. OTHER INFORMATION


Appointment of Chief Financial Officer


On May 13, 2015, Tommy Kee, age 66, was appointed as our Chief Executive Officer.  Mr. Kee has served as the Chief Executive Officer of Attitude Drinks Inc. since November, 2007.  Mr. Kee was previously the Chief Accounting Officer of Bravo! Brands, Inc.  He graduated with an MBA from the University of Memphis and a BS degree in accounting from the University of Tennessee.  Before joining us, he served for several years as CFO for Allied Interstate, Inc. in the West Palm Beach area.  Prior to that, Mr. Kee served as CFO and Treasurer for Hearx Ltd. a West Palm Beach, Florida public company.  He also served 18 years as International Controller and Financial Director with the Holiday Inns Inc. organization in Memphis and Orlando.  Mr. Kee gave his letter of resignation as CFO, effective July 10, 2009 but rejoined the Company in April, 2010.


There are no family relationships between Mr. Kee and any director, executive officer or person nominated or chosen by the Company to become as director or executive officer of the Company and there have been no transactions involving Mr. Kee that would require disclosure under Item 404(a) of Regulation S-K other than his service as an executive officer of Attitude Drinks Inc.


ITEM 6. EXHIBIT INDEX


Exhibit

 

 

Number

 

Description

 

 

 

3.1


 

Certificate of Designations of Series A Convertible Preferred Stock (Incorporated by reference as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on September 18, 2013)

 

 

 

3.2


 

Certificate of Designations of Series B Convertible Preferred Stock (Incorporated by reference as Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

4.1

 

A Warrant issued to Alpha Capital Anstalt (Incorporated by reference as Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

4.2

 

A Warrant issued to Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

4.3

 

B Warrant issued to Attitude Drinks, Inc. (Incorporated by reference as Exhibit 4.3 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

4.4


 

Secured Convertible Note due 2017 issued to Alpha Capital Anstalt (Incorporated by reference as Exhibit 4.4 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)



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4.5


 

Secured Convertible Note due 2017 issued to Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 4.5 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

4.6

 

Additional Investment Right issued to Alpha Capital Anstalt (Incorporated by reference as Exhibit 4.6 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

4.7


 

Additional Investment Right issued to Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 4.7 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

10.1


 

Asset Purchase Agreement dated as of April 21, 2015 between Harrison Vickers and Waterman Inc., and Attitude Drinks, Inc., Alpha Capital Anstalt and Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

10.2



 

Stock Pledge Agreement dated as of April 21, 2015 by and between Attitude Drinks, Inc. and Tarpon Bay Partners LLC as collateral agent on behalf Alpha Capital Anstalt and Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

10.3



 

Security Agreement dated as of April 21, 2015 among Harrison Vickers and Waterman Inc., each subsidiary of Harrison Vickers and Waterman Inc. and Tarpon Bay Partners LLC as collateral agent (Incorporated by reference as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

10.4


 

Guaranty dated as of April 21, 2015 entered into by Attitude Beer Holding Co., for the benefit of Alpha Capital Anstalt and Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

10.5


 

Guaranty dated as of April 21, 2015 entered into by Attitude Drinks, Inc., for the benefit of Alpha Capital Anstalt and Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

10.6


 

Exchange Agreement dated as of April 21, 2015 by and among Attitude Beer Holding Co, Attitude Drinks, Inc. and Alpha Capital Anstalt and Tarpon Bay Partners LLC (Incorporated by reference as Exhibit 10.6 to the Company’s Current Report on Form 8-K (File No. 333-162072) filed with the Securities and Exchange Commission on April 27, 2015)

 

 

 

31.1

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act

31.2

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act

32.1

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act

32.2

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document




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SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: May 13, 2015

HARRISON VICKERS AND WATERMAN INC.

 

 

 

By: /s/ Roy Warren      

 

Name:  Roy Warren

 

Title:  CEO, Chief Executive Officer (Principal Executive Officer)




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