0001213900-18-008859.txt : 20180706 0001213900-18-008859.hdr.sgml : 20180706 20180706191451 ACCESSION NUMBER: 0001213900-18-008859 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20180706 DATE AS OF CHANGE: 20180706 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPHASE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000825322 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 222287503 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30202 FILM NUMBER: 18943181 BUSINESS ADDRESS: STREET 1: 777 PASSAIC AVENUE, SUITE 375 CITY: CLIFTON STATE: NJ ZIP: 07012 BUSINESS PHONE: 973-256-3737 MAIL ADDRESS: STREET 1: 777 PASSAIC AVENUE, SUITE 375 CITY: CLIFTON STATE: NJ ZIP: 07012 FORMER COMPANY: FORMER CONFORMED NAME: TECMA LABORATORIES INC DATE OF NAME CHANGE: 19980915 10-Q 1 f10q0917_mphasetechno.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

FOR THE QUARTER ENDED SEPTEMBER 30, 2017

 

COMMISSION FILE NO. 000-30202

 

FORM 10-Q

 

mPhase Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

NEW JERSEY   22-2287503
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)

 

688 New Dorp Lane

Staten Island, New York,

  10306-4933
(Address of principal executive offices)   (Zip Code)

 

973-256-3737

ISSUER’S TELEPHONE NUMBER

 

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 SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORT), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

 

YES ☐          NO ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT’S CLASSES OF COMMON STOCK AS OF JULY 2, 2018 IS 16,860,514,423 SHARES, ALL OF ONE CLASS OF $.001 PAR VALUE COMMON STOCK. 

 

 

 

 

 

mPHASE TECHNOLOGIES, INC.

 

INDEX

 

    PAGE
PART I FINANCIAL INFORMATION  
Item 1 Condensed Consolidated Balance Sheets -  September 30, 2017 (Unaudited) and June 30, 2017 1
  Unaudited Condensed Consolidated Statements of Operations-Three Months Ended September 30, 2017 and 2016 2
  Unaudited Condensed Consolidated Statements of Cash Flow-Three Months Ended September 30, 2017 and 2016 3
  Notes to Unaudited Condensed Consolidated Financial Statements 4 - 15
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3 Quantitative and Qualitative Disclosures about Market Risk 21
Item 4 Controls and Procedures 21
PART II OTHER INFORMATION  
Item 1. Legal Proceedings 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 25
Item 4. (Removed and Reserved) 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 26
Signature Page 27

   

i

 

mPHASE TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

 

   September 30,
2017
   June 30,
2017
 
   (Unaudited)     
ASSETS        
CURRENT ASSETS        
Cash  $594   $4,163 
Assets of discontinued operations   4,277    4,527 
TOTAL CURRENT ASSETS   4,871    8,690 
           
Property and equipment, net   -    683 
Other assets   800    800 
           
TOTAL ASSETS  $5,671   $10,173 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
CURRENT LIABILITIES          
Accounts payable  $444,453   $442,746 
Accrued expenses   563,381    894,930 
Due to related parties   217,545    217,045 
Notes payable, Officers'   679,604    658,311 
Notes payable, Director & Investor   127,472    123,609 
Current Portion, Long term convertible debentures   940,338    1,615,266 
Liabilities of discontinued operations   569,808    567,209 
TOTAL CURRENT LIABILITIES   3,542,601    4,519,116 
           
STOCKHOLDERS' DEFICIT          
Common stock, par value $.001, 18,000,000,000 shares authorized, 17,864,713,048 and 17,764,713,048 shares issued and outstanding at September 30, 2017 (unaudited) & June 30, 2017, respectively   17,864,712    17,764,712 
Additional paid in capital   189,653,834    189,718,941 
Accumulated deficit   (211,055,476)   (211,992,596)
TOTAL STOCKHOLDERS' DEFICIT   (3,536,930)   (4,508,943)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $5,671   $10,173 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 1 

 

  

mPHASE TECHNOLOGIES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

   For the Three Months Ended 
   September 30, 2017   September 30, 2016 
REVENUES  $-   $- 
           
COSTS AND EXPENSES          
           
General and administrative   34,803    63,754 
           
Depreciation and amortization   683    737 
           
TOTAL COSTS AND EXPENSES   35,486    64,491 
           
OPERATING LOSS   (35,486)   (64,491)
           
OTHER INCOME (EXPENSE)          
Interest (Expense)   (62,889)   (76,274)
Gain on debt extinguishments   1,051,594    - 
           
TOTAL OTHER INCOME (EXPENSE)   988,705    (76,274)
           
Income (Loss) From Continuing Operations, before Income Taxes   953,219    (140,765)
           
(Loss) From Discontinued Operations   (16,098)   (30,921)
           
Income Taxes   -    - 
           
Net Income (Loss)  $937,120   $(171,686)
           
Basic & Diluted Net loss per share:          
Income (Loss) per share From Continuing Operations  $0.00   $(0.00)
(Loss) per share From Discontinued Operations  $(0.00)  $(0.00)
Net Income (Loss) per share  $0.00   $(0.00)
Weighted Average Number of Shares Outstanding;          
Basic   17,769,060,874    17,929,573,192 
Diluted   18,000,000,000    17,929,573,192 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 2 

 

 

mPHASE TECHNOLOGIES, INC.

 Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   For the Three Months Ended 
   September 30,
2017
   September 30,
2016
 
Cash Flow From Operating Activities:        
Net Income (Loss) from continuing operations  $953,219   $(140,765)
Net Income (Loss) from discontinued operations   (16,098)   (30,921)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   683    737 
(Gain) on debt extinguishment   (1,051,594)   -
(Gain) on sale of patent   -    (12,500)
Other non-cash charges for beneficial conversion interest expense   30,393    30,393 
Amortization of loan discount, finance company   2,600    2,700 
Changes in assets and liabilities:          
Accounts receivable   -    55 
Inventories   -    20,074 
Prepaid expenses and other current assets   250    - 
Accounts payable & accrued expenses   58,761    75,451 
Due to/from related parties          
Microphase & Eagle   500    - 
Officers   -    54,000 
Net cash used in operating activities   (21,286)   (776)
           
Cash Flow Used in Investing Activities:          
Purchase of fixed assets   -    - 
Net Cash used in investing activities   -    - 
           
Cash Flow from Financing Activities:          
Proceeds from issuance of common stock, net of finders fees   4,500    - 
Proceeds of demand note   2,000    - 
Repayment to Finance Company   -    (3,600)
Proceeds from notes payable related parties   11,300    8,504 
Repayment of notes payable related parties   (83)   (52)
Net cash provided by financing activities  $17,717   $4,852 
           
Net increase (decrease) in cash   (3,569)   4,076 
           
CASH AND CASH EQUIVALENTS, beginning of period   4,163    4,717 
CASH AND CASH EQUIVALENTS, end of period  $594   $8,793 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 3 

 

 

mPHASE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(UNAUDITED)

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS

 

mPhase Technologies, Inc. (the “Company”) was organized on October 2, 1996 and is presently focused on restructuring its debt obligations to be in a position to capitalize on its existing intellectual property portfolio and endeavor to further develop new “smart surface” products through the sciences of microfluidics, micro-electromechanical systems (MEMS) and nanotechnology. The Company plans to restructure its business through some combination of raising additional capital, strategic partnerships and or mergers & acquisitions.

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ending September 30, 2017 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the year ended June 30, 2017.

 

GOING CONCERN

 

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. 

 

Through September 30, 2017, the Company had incurred (a) cumulative losses totaling ($211,055,476) and (b) a stockholders’ deficit of ($3,536,930). During the three months ended September 30, 2017, the Company had $(21,286) net cash used in operating activities. At September 30, 2017, the Company had $599 of cash to fund short-term working capital requirements. In addition, the Company relies on the continuation of funding through private placements of its common stock. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this quarterly report. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company’s ability to continue as a going concern and its future success is dependent upon its ability to raise capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) allow the successful wide scale development, deployment and marketing of its smart surface products. There can be no assurance the necessary debt or equity financing will be available, or if so, on terms acceptable to the Company.

 

INVENTORY- Discontinued Operations

 

The Company uses the First In First Out method (FIFO) to account for inventory which is carried at lower of cost and net realizable value. As of June 30, 2017, inventory consisted primarily of its various Jump products including the Jump and the mini Jump, and our remaining flashlight inventory, and was valued at $3,477. As of September 30, 2017, inventory consisted primarily of the Company’s line of Jump products including the new Jump Plus, and our remaining flashlight inventory, and was valued at $3,477. The Company’s Board of Directors, in a meeting on June 25, 2016, determined it was in the best interest of the Company to discontinue its entire line of Jump products in the 1st quarter of fiscal year 2017 owing to increased competition and decreasing margins. Appropriate reserves have been taken as of June 30, 2017 and September 30, 2017, to assure that the cost of such inventory does not exceed the expected net realizable value.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include net realizable value of inventories, estimated value of stock-based compensation and changes in and the ending fair value of derivative liability. Actual results could differ from those estimates.

 

 4 

 

 

CHANGE IN ACCOUNTING ESTIMATE FOR THE VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

 

Changes in fair value of derivative liabilities results from the changes in the fair value due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The increase in fair value of derivative liabilities recognized effective June 30, 2016 is due to a change in accounting estimate related to the accounting for derivative liabilities. Due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, in addition to limited shares available for conversions for such instruments as amended, the convertible notes were determined to have no basis for applying a derivative liability to the conversion of these notes. As a result, the Company recorded a change in accounting estimate which resulted in a gain on change in derivative liability of approximately $200,000 effective June 30, 2016.

 

As of September 30, 2017, due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, and limited shares available for conversions for for outstanding convertible securities, l there is no basis for applying a derivative liability to the conversion of these notes.

 

LOSS PER COMMON SHARE, BASIC AND DILUTED

 

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net loss adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company had no warrants to purchase shares of its common stock and no options to purchase shares of its common stock outstanding at September 30, 2017.

  

At September 30, 2017 the Company has convertible securities held by third parties that are immediately convertible into 765,339,500 shares of common stock.. Under the terms of the Forbearance Agreement, as amended, with John Fife (arrangement #4), Fife may acquire a total of 10,350,062,518 shares of the Company’s common stock based upon the conversion terms; if the forbearance agreement discussed in Note 3 is settled entirely in stock. In addition, the Company has convertible notes plus accrued interest thereon held by officers of the Company, subject to availability, convertible into approximately 1,699,010,000, immediately, if available.

 

The following table illustrates debts convertible into shares of the Company’s Common Stock at September 30, 2017:

 

   Note Principle   Accrued Interest   Total   Shares Convertible 
               immediately   over full term, if available* 
Arrangement #1 - JMJ Financial, Inc  $109,000   $59,158   $168,158    42,039,500    42,039,500 
Arrangement #2 - St. George Investments/Fife Forbearance Obligation   828,005    -    828,005    625,000,000    10,350,062,500 
Arrangement #3 - MH Investment trust II   3,333    2,565    5,898    98,300,000    98,300,000 
Total Convertible Notes payable   940,338    61,723    1,002,061    765,339,500    10,490,402,000 
Notes Payable- Officers*   679,604    -    679,604    -    1,699,010,000 
Total  $1,619,942   $61,723   $1,681,665    765,339,500    12,189,412,000 

 

* convertible if shares available

 

 5 

 

 

DISCONTINUED OPERATIONS

 

The Company has classified the operating results and associated assets and liabilities from its Jump line of products, which ceased having material sales in the first quarter of Fiscal 2017, as Discontinued Operations in the Consolidated Financial Statements for the Fiscal Years ended June 30, 2017 and 2016.

 

The Assets and Liabilities associated with discontinued operations included in our Consolidated Balance Sheet were as follows:

 

   September 30, 2017   June 30, 2017 
   (Unaudited)     
ASSETS  Total   Discontinued   Continuing   Total   Discontinued   Continuing 
CURRENT ASSETS                        
Cash  $594   $-   $594   $4,163   $-   $4,163 
Accounts receivable, net   -    -    -    -    -    - 
Inventory, net   3,477    3,477    -    3,477    3,477    - 
Prepaid and other current assets   800    800    -    1,050    1,050    - 
TOTAL CURRENT ASSETS   4,871    4,277    4,871    8,690    4,527    8,690 
                               
Property and equipment, net   -    -    -    683    -    683 
Other assets   800    -    800    800    -    800 
TOTAL ASSETS  $5,671   $4,277   $5,671   $10,173   $4,527   $10,173 
                               
LIABILITIES                              
CURRENT LIABILITIES                              
Accounts payable  $841,531   $397,078   $444,453   $839,824   $397,078   $442,746 
Accrued expenses   705,576    142,195    563,381    1,037,125    142,195    894,930 
Due to related parties   217,545    -    217,545    217,045    -    217,045 
Notes payable, Officers’   679,604    -    679,604    658,311    -    658,311 
Notes payable, Director & Investor   127,472    -    127,472    123,609    -    123,609 
Note Payable, Finance Company   30,535    30,535    -    27,936    27,936    - 
Current Portion, Long term convertible debentures   940,338    -    940,338    1,615,266    -    1,615,266 
TOTAL LIABILITIES  $3,542,601   $569,808   $2,972,793   $4,519,116   $567,209   $3,951,907 

 

 6 

 

 

DISCONTINUED OPERATIONS - (Continued)

 

Revenue and Expense Recognition for Discontinued Operations

 

The Company has recognized revenue on its JUMP products when the products were shipped, and title passed to the customer.  

 

The results of discontinued operations include specifically identified and allocated common overhead expenses.

 

The Revenues and expenses associated with discontinued operations included in our Consolidated Statements of operations were as follows:

 

   For the Three Months Ended 
   September 30,
2017
   September 30,
2016
 
   Discontinued   Discontinued 
REVENUES  $-   $19,892 
           
COSTS AND EXPENSES          
           
Cost of Sales   -    20,075 
           
Research and Development   -    38 
           
Selling and Marketing   1,424    8,193 
           
General and administrative   4,301    22,880 
           
TOTAL COSTS AND EXPENSES   5,725    51,186 
           
OPERATING LOSS   (5,725)   (31,294)
           
OTHER INCOME (EXPENSE)          
Interest (Expense)   (10,373)   (12,127)
Other income (Expense)   -    12,500 
           
TOTAL OTHER INCOME (EXPENSE)   (10,373)   373 
           
Loss From Discontinued Operations  $(16,098)  $(30,921)

  

 7 

 

 

2. SUPPLEMENTAL CASH FLOW INFORMATION

 

   For the Three Months Ended 
   September 30,   September 30, 
   2017   2016 
Statement of Operation Information:        
Interest paid (net interest income)  $968   $20,683 
           
Non-Cash Investing and Financing Activities:          
Conversion of $9,460 convertible debt and $5,540 accrued interest to common stock in 2016  $-   $15,000 
Amortization of loan discount  $2,600   $2,700 

  

3. EQUITY TRANSACTIONS, NOTES PAYABLE AND CONVERTIBLE DEBT

 

Private Placements

 

During the three months ended September 30, 2017, the Company issued 100,000,000 shares of its common stock in connection with private placements pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended, raising gross proceeds of $5,000 and incurring finder’s fees of $500. The proceeds were used by the Company as working capital.

 

During the three months ended September 30, 2016, the Company did not issue any shares of stock in private placements.

 

Stock Based Compensation

 

During the three months ended September 30, 2017, the Company did not issue any common stock, warrants or options to employees or officers.

 

During the three months ended September 30, 2016, the Company did not issue any common stock, warrants or options to employees or officers.

 

Other Short-Term Notes 

 

Note Payable, Director

 

A Director of the Company loaned the Company $90,000 in the fourth quarter of fiscal year ended June 30, 2015 and additionally advanced the Company $60,000 and received $40,000 in repayments during the fiscal year ended June 30, 2016, which together with $5,486 of accrued interest for FYE 2016 and $7,123 of accrued interest for FYE 2017 resulted in $122,609 outstanding at June 30, 2017 During the three months ended September 30, 2017 and 2016 the Company recorded $1,863 and $1,755 of accrued interest and $124,472 was outstanding at September 30, 2017.

  

Other Note payable

 

During the fourth quarter fiscal 2017 an unaffiliated shareholder advanced the Company $1,000. At June 30, 2017 $1,000 remained outstanding under this note.  During the quarter ended September 30, 2017 this shareholder advanced the Company $2,000. At September 30, 2017 $3,000 remained outstanding under this note.

 

 8 

 

  

Note Payable, Finance Company- Discontinued Operations

 

The Company Borrowed approximately $66,000 from a finance company under two advances commencing January 2016, with scheduled repayments of approximately $87,500 originally due through July 2016, incurring $36,193 of finance charges which were included in interest expense during the fiscal year ended June 30, 2016. At June 30, 2016, 27,210 remained outstanding under this note. During the FYE June 30, 2017 we made $12,300 of repayments which included $2,103 of principal and $10,197 of finance charges which are included in interest expense for the period. At June 30, 2017, $27,936 remained outstanding under this note.

 

During the three months ended September 30, 2017 and 2016 we incurred $2,600 and $2,700 of finance charges under this note, l and at September 30, 2017, $30,535 remained outstanding.

 

Long Term Convertible Debentures / Debt Discount

 

The Company had three separate convertible debt arrangements with independent investors that were in effect at various times during the fiscal year ended June 30, 2017, all three of which were still active as of September 30, 2017.

 

During the three months ended September 30,2017 no conversions were made under any Convertible Debentures.

 

During the three months ended September 30, 2016, the Company incurred the conversion of $15,000 of Convertible Debt, which consisted of $5,540 principal and $9,460 accrued interest thereon relating to the forbearance agreement, into 187,500,000 shares of the Company’s Common stock.

   

The following table summarizes notes payable under convertible debt and debenture agreements as of:

 

   September 30,   June 30, 
   2017 
   (unaudited)     
Arrangement #1 - JMJ Financial, Inc  $109,000   $802,060 
Arrangement #2 - St. George Investments/Fife Forbearance Obligation   828,005    809,873 
Arrangement #3 - MH Investment trust II   3,333    3,333 
Total notes payable   940,338    1,615,266 
Convertible Notes payable-short term portion  $940,338   $1,615,266 

 

Included in accrued expenses is $61,723 and $413,271 of interest accrued on these notes at September 30, 2017 (unaudited) and June 30, 2017, respectively.

 

These transactions are intended to provide liquidity and capital to the Company and are summarized below.

 

Arrangement #1 (JMJ Financial, Inc.)

 

The Company entered into a convertible note on November 17, 2009, in which the Company received a total of $186,000 of proceeds in connection with a new financing agreement with JMJ Financial. This transaction consists of the following: 1) a convertible note in the amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of September 23, 2012 and (2) a secured promissory note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of September 23, 2012 due from the holder of the convertible note, of which the Company received a total of $150,000 of proceeds in connection with the second promissory note under this agreement. At June 30, 2012 this convertible note had $372,060 outstanding which was combined with the April 5, 2010 arrangement with JMJ Financial, Inc. JMJ Financial sold this Note to River North Equity LLC.

 

On December 15, 2009 the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the amount of $1,500,000 plus a one-time interest factor of 12% ($180,000) and a maturity date of December15, 2012 and (2) a secured promissory note in the amount of $1,400,000 plus a one-time interest rate factor of 13.2% ($180,000) and a maturity date of December 15, 2012 due from the holder of the convertible note. To date the Company has received a total of $300,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The Company and the holder entered into a Forbearance Agreement amendment, as amended, and funding and conversions have not occurred since April 2011. As of June 30, 2012, this convertible note had $321,000 outstanding which was combined with the April 5, 2010 arrangement with JMJ Financial, Inc. JMJ Financial also sold this Note to River North Equity LLC.

 

 9 

 

 

On April 5, 2010, the Company entered into a financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the principal amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of December 15, 2012, and (2) a secured promissory note from the holder of the convertible note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of December 15, 2012. To date the Company has received a total of $100,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The remaining $1,144,000 of cash to be received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the holder. As of June 30, 2012, this convertible note had $109,000 outstanding which was combined with the November 17, 2009 and December 15, 2009 arrangements with JMJ Financial, Inc., for a total of $802,060 for convertible notes. The Company has no promissory notes receivable from JMJ as of June 30, 2012.

 

In April of 2017, the Company received a judgment from the Federal District Court of Northern Illinois Eastern Division in its favor dismissing a claim by River North Equity which effectively negated two notes River North Equity purchased from JMJ Financial. At June 30, 2017 the amount recorded in Current Liabilities for the two notes and accrued interest thereon subject to the River North Equity claim was $1,046,416. Such amount is included in the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial which totaled $1,212,940 on that date. River North failed to appeal the Judgement by July 17, 2017 and the Judgement become final. As a result of this proceeding the Company recorded the cancellation of the two notes assigned to River North from JMJ Financial for a total of $693,060 of principal and $358,534 accrued interest thereon. This resulted in a $1,051,594 gain from the cancellation of debt during the three months ended September 30, 2017.

 

As of September 30, 2017, and as of June 30, 2017, the aggregate remaining amount of convertible securities held by JMJ could be converted into 42,039,500 and 303,234,810 common shares at the conversion floor price of $.004.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $5,813 and $22,550 interest on this agreement.

 

At September 30, 2017 the amount recorded in Current Liabilities for convertible note plus accrued interest thereon previously issued to JMJ Financial was $109,000 and $59,158, respectively. At June 30, 2017 the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial was $802,060 and $410,879, respectively.

   

Arrangement #2 (John Fife dba St. George Investors)/Fife Forbearance

 

The Company entered into an amended agreement on June 1, 2012, when principle of $557,500 accrued interest of $66,338 and $95,611 of contractual charges for previous notes with John Fife totaled $719,449; whereby, the Company agreed to make payments of principle and interest of $33,238 per month commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then no conversions into the Company’s common stock would be available to the holder.

 

On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George Investments LLC and assigned to John Fife. The notice included alleged defaults with respect to payments owed by the Company under the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed according to the notice is approximately $902,279.

 

On December 15, 2014, a Memorandum Opinion and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”) for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed. The Company commenced settlement negotiations with the Plaintiff after we explored options including an appeal of the Judgment which the Company concluded would have a low probability of success.

 

Effective February 10, 2015, the Company entered into a Forbearance Agreement with the Holder. The agreement provides that the Holder would forego his right to enforce its remedies pursuant to the Judgment, which include demand for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, (after accounting for a payment of $15,000 the Company paid, under the terms of the agreement).

 

The terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts; $30,000.00 per month on each of the following dates: March 15, 2015.

 

April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full.

 

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The Forbearance agreement required the Company to place, and the Company had done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments. The original agreement also provided that the Company file a Proxy statement before June 1, 2015 should additional shares be needed for the conversion reserve. The Company has not filed such a proxy statement due to cost prohibitions. The Company had not issued any stock for conversions since entering into the forbearance agreement and during the year ended June 30, 2015 and has made cash payments repaying $69,081 of principle and $41,019 of interest under the agreement. The value of the forbearance debt obligation on June 30, 2015 was $902,253. 

 

As of August 11, 2015 the Company entered into an Amendment No. 1 with Fife to the Forbearance Agreement rescheduling the monthly payment schedules.

 

As of January 19, 2016 the Company entered into a Second Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments.

 

During the three months ended September 30, 20176 the Company repaid $9,460 of principle and $5,540 of interest under the agreement, with non-cash conversions of 187,500,000 shares of the Company’s common stock valued at $15,000. . The value of the forbearance debt obligation on June 30, 2017 was $809,873.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $18,132 and $16,633 interest on this agreement. The value of the forbearance debt obligation on September 30, 2017 was $828,005.

 

As of June 30, 2017 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,123,399,750 shares of our common stock should the entire obligation be converted.

 

On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, if repaid within revised payment period, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011. (See Note 5 and Note 8)

 

As of September 30, 2017 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. 

  

Arrangement #3 (MH Investment trust II)

 

On August 26, 2014, the Company issued to the MH Investment Trust, a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 in which the Company received $40,000 in gross proceeds on September 1, 2014. The instrument is in the principal amount of $40,000 and matured on May 1, 2015. Interest only was payable at the rate of 12% per annum by the Company to the holder until maturity. The instrument is convertible into the Company’s common stock at 60% of the volume weighted average price of the stock based upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the proceeds of the financing used by the Company as working capital.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $173 and $154 interest on this agreement.

 

At September 30, 2017 the note balance was $3,333 and accrued interest of $2,565, at 12%, remained due under this agreement. At June 30, 2017 the note balance was $3,333 and accrued interest of $2,392, at 12%; remained due under this agreement. Based upon the price of the Company’s common stock on September 30, 2017 and June 30, 2017 this Note is convertible into approximately 98,300,000 and 95,412,167 shares of common stock, respectively.

 

Retired shares

 

Effective June 26, 2016, November 25, 2016 and June 26, 2017, Karen Durando, the wife of Ron Durando, returned 299,569,203, 800,000,000 and 295,430,797, for a total of 1,395,000,000 shares of common stock of the Company.

 

Such shares were previously issued common stock of the Company. The return of common stock was to provide the Company with sufficient authorized but unissued shares of stock to enable the Company to have additional authorized shares of its common stock to complete present private placements to provide operating capital for the Company.

 

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4. COMMITMENTS

 

The Company had leased a warehouse and limited office space in Norwalk, Connecticut, commencing in April of 2015 with a monthly rental of $2,200 per month. The Company vacated the Norwalk premise in April 2016 and the Company moved its warehouse contents, primarily inventory and associated shipping materials of its mPower battery products into the Clifton premise. The Company has $22,000 of unpaid rent in accounts payable discontinued operations at September 30, 2017.

  

5. CONTINGENCIES

 

The Company had been in litigation with John Fife with respect to a Convertible Note originally issued on September 13, 2011 in the principal amount of $557,000. Fife sought damages on a Motion for Summary Judgment in the amount in excess of $1,300,000 attorney’s fees. On December 15, 2014 the federal district court in the North East District of Illinois found in favor of Fife on a motion for Summary Judgment. The Company has entered into a Forbearance Agreement with Fife as a result of negotiations to settle such Judgment.

 

The value of the forbearance obligation on September 30, 2017 is $828,005 (See Note 3), all of which are included in current liabilities at that date. The value of the judgment totaled approximately $1.6 million as of December 31, 2014 and bears a punitive interest rate of 16% and would become payable in full (1.325 million) if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which payments through June 30, 2017 totaled $275,000. As of June 30, 2016, 812,500,000 shares from this reserve have been issued to satisfy the conversion provisions of the Forbearance Agreement. During the year ended June 30, 2017 187,500,000 shares were issued from this reserve and no amounts remain under the reserve agreement with our transfer agent. The Company is in arrears on the agreement and has negotiated a settlement for approximately $360,000 in cash payments. The Company is in arrears on this settlement. (See Note 3)

 

As of September 30, 2017, this forbearance obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares immediately for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. Subsequent to September 30, 2017 this Forbearance Agreement with Fife has been amended several times; the most recent providing for settlement amounts less than the aggregate of liabilities recorded in the financial statements. (See Note 3) 

 

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6. FAIR VALUE MEASUREMENTS

 

Effective July 1, 2008, we adopted Accounting Standards Codification (“ASC”) 820-10-20, Fair Value Measurements , which provides a framework for measuring fair value under GAAP. ASC 820-10-20 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10-20 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820-10-20 also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels. Financial assets and liabilities valued using level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and liabilities valued using level 2 inputs are based primarily on quoted prices for similar assets or liabilities in active or inactive markets. For certain long-term debt, the fair value was based on present value techniques using inputs derived principally or corroborated from market data. Financial assets and liabilities using level 3 inputs were primarily valued using management’s assumptions about the assumptions market participants would utilize in pricing the asset or liability. Valuation techniques utilized to determine fair value are consistently applied.

 

The table below presents reconciliation for liabilities measured at fair value on a recurring basis at September 30, 2017 and 2016. At September 30,2017 the Company’s common stock is subject to limited trading and availability of shares for conversions is nominal. We therefore believe there is no basis for applying a derivative liability to the conversion feature of the Notes.

 

    Fair Value Measurements Using Significant  
    Unobservable Inputs (Level 3)  
    Derivative Liability  
    September 30,     September 30,  
    2017     2016  
Balance, Beginning of Period   $      -     $ -  
Increase (Decrease) in Derivative and associated liabilities     -                -  
Debt discounts     -       -  
Balance, Ending   $ -     $ -  

 

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

 

Some of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables.

 

We have determined that it is not practical to estimate the fair value of our notes payable because of their unique nature and the costs that would be incurred to obtain an independent valuation. We do not have comparable outstanding debt on which to base an estimated current borrowing rate or other discount rate for purposes of estimating the fair value of the notes payable and we have not been able to develop a valuation model that can be applied consistently in a cost-efficient manner. These factors all contribute to the impracticability of estimating the fair value of the notes payable. At September 30, 2017, the carrying value of the notes payable and accrued interest for convertible agreements and officers’ notes was approximately $1,681,665. The JMJ convertible notes, which were originally due at various times through December 31, 2012, yield an interest rate of 12%, the Fife Forbearance obligation is 9%. Refer to Note 3 of these unaudited condensed consolidated financial statements for more information about the Company’s notes payable as of September 30, 2017. 

 

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7. RELATED PARTY TRANSACTIONS

  

MICROPHASE CORPORATION

 

During a portion of the fiscal year ended June 30, 2016, the Company leased office space from Microphase at its Norwalk location. Rental expense charged by Microphase was $4,500 from July 1, 2015 through June 30, 2016. Microphase provided certain research and development services and shares administrative personnel from time to time. Mr. Necdet Ergul retired as the chairman of the board of mPhase in Nov 2007. Mr. Ergul and his family had owned a controlling interest and he is a director of Microphase Corporation. Mr. Durando was a strategic employee of Microphase Corporation from January 2, 2015 through May 31, of 2017.On February 9, 2015 Mr. Durando assigned all his interests in the Capital Stock of Microphase to the RCKJ Trust as the Grantor. On June 2, 2017 the RCKJ Trust, the holder of Durando’s prior interest in Microphase, and the Ergul Family Limited partnership, the holder of Ergul’s prior interest in Microphase, each exchanged all their respective shares of stock in Microphase in exchange for shares of stock in Digital Power Corporation, a publicly-held company then listed on the New York Stock exchange.

 

During the three months ended September 30, 2017 and 2016, $0 and $2,250 have been charged for rent and $0 and $0 have been charged for other expenses, respectively, to the Company by Microphase. As a result of the foregoing transactions, as of September 30, 2017 and June 30, 2017, the Company owed $32,545 to Microphase.

 

OTHER RELATED PARTIES

 

On September 30, 2017, Mr. Biderman, an outside Director’s affiliated firms of Palladium Capital Advisors and Eagle Strategic Advisers were owed unpaid finders’ fees in the aggregate amount of $186,000, which is included in due to related parties. Also Mr. Biderman loaned the Company $90,000 in the fourth quarter of the fiscal year ended June 30, 2015 and additionally, he advanced the Company $20,000 in the fiscal year ended June 30, 2016, net of repayments, together with $7,123 and $5,486 of accrued interest for fiscal years 2017 and 2016 that resulted in $122,609 outstanding at June 30, 2017.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $1,863 and $1,755 of accrued interest on this loan and $124,472 was outstanding at September 30, 2017.

 

During the three months ended September 30, 2017 and 2016, Mr. Biderman’s firm charged finders’ fees of $500 and $0.

 

During the three months ended September 30, 2017 and 2016, the Company recorded $0 and $0 of fees to the wife of the Company’s President, for product marketing services.  

 

Transactions with Officers

 

At various points during past fiscal years Messrs. Durando, Dotoli and Smiley provided bridge loans to the Company evidenced by individual promissory notes and deferred compensation so as to provide working capital to the Company.

 

During the three months ended September 30, 2017 and 2016, $10,076 and $9,082 have been charged for interest on loans from officers.

 

At September 30, 2017 the aggregate principal amount of the officers’ loans together with accrue interest totaled $679,604. At June 30, 2017 the officers’ loans together with accrue interest totaled $658,311.

 

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8. SUBSEQUENT EVENTS

 

  Subsequent to September 30, 2017, Messrs. Durando, and  Smiley  loaned the Company approximately $38,100 and $20,000,  to provide general working capital to commence the filings necessary to bring the Company’s financial statements and required periodic  reports pursuant to section 13 or 15(d) of the securities exchange act of 1934 current. $10,000 of Mr. Smiley's loan is convertible into shares of the Company's common stock at $.00005, if available, for a period of one year.

 

  From October 1, 2017 through the date hereof, the Company issued 1,700,000,000 shares of its common stock in private placements pursuant to Section 4(a)(2) of the Securities Act of 1933  raising gross proceeds aggregate of $85,000 all of which was used for working capital and general corporate purposes.
     
  On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011. On February 16, 2018 the Company and John Fife entered into an Amendment to a Judgment Settlement Agreement dated August 18, 2017 modifying the repayment schedule of a Convertible Debenture of the Company originally issued on September 13, 2011. The Company is in arrears on the revised settlement terms of a February 16, 2018 Amendment to such Agreement and does not believe it can settle such liability until after becoming current in its SEC filings. The revised agreement can be settled as soon as September 15, 2018 for $265,000 if paid in full, or up to $390,000 if paid in 24 monthly installments through September 2020. This would result in approximately a $600,000 gain if paid under the revised settlement terms.
     
  ●  Subsequent to September 30, 2017, effective October 19, 2017 Mr. Smiley returned 1,367,226,459 to the Company.  Effective December 31, 2017 Patricia Dotoli, the wife of, Gus Dotoli, returned 1,336,972,075 shares of common stock to the Company.

 

  On December 28, 2017 the Company entered into a non-binding letter of intent with Scepter Commodities, LLC for the proposed acquisition by Scepter of 80% of the fully-diluted shares of the Company on a reverse split basis.

 

  On  December 1, 2017 the Company announced in a Form 8k filing that as part of an over recapitalization of the Company that, subject to filing with the Secretary of State of New Jersey of an Amendment to its Certificate of Incorporation increasing it authorized shares of common stock to 72 billion shares, the Board of Directors has approved the granting of a total of 5,750,000,000 shares of common stock to Officers, Directors and an Accounting Consultant of the Company. It is necessary for the Company to complete the filing of 4 years of back state and federal income tax returns with the Department of Revenue of New Jersey in order to amend its Certificate of Incorporation. In addition, the Board of Directors approved the issuance of 16,000,000,000 shares to Officers and Directors and the Company’s accounting Consultant in exchange for aggregate indebtedness and fees owed to such persons in the approximate amount of $1,600,000.

 

  On April 3, 2018, April 27, 2018, May 30, 2018 and June 21, 2018 the Company and Scepter entered into Amendment No. 2, 3 ,4 & 5 to a Letter of Intent with Scepter Commodities LLC extending the time frame for the Company to become current in its SEC filings to April 30, 2018, May 31, 2018, June 15, 2018, and until July 15, 2018, respectively.

 

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

 

The following is management’s discussion and analysis of certain significant factors which have affected mPhase’s financial position and should be read in conjunction with the accompanying financial statements, financial data, and the related notes.

 

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

 

Some of the statements contained in or incorporated by reference in this Form 10-Q discuss the Company’s plans and strategies for its business or state other forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “plan,” “intend,” “should,” “seek,” “will,” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. These forward-looking statements include, among others, statements concerning the Company’s expectations regarding its working capital requirements, gross margin, results of operations, business, growth prospects, competition and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Any forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to risks and uncertainties that could cause actual results to differ materially from those results expressed in or implied by the statements contained herein.

 

RESULTS OF OPERATIONS OVERVIEW

 

mPhase Technologies, Inc. (OTC Pink Sheets: XDSL.OB) is a development company focused on the development of innovative power cells and related products through the science of microfluidics, microelectromechanical systems (MEMS) and nano- technology. mPhase is primarily focused on commercializing its first nanotechnology-enabled product for military and commercial applications - the Smart NanoBattery providing Power On CommandTM. Our new patented and patent-pending battery technology, based on the phenomenon of electrowetting, offers a unique way to store energy and manage power that could revolutionize the battery industry. Features of the Smart NanoBattery include potentially infinite shelf life, environmentally friendly design, fast ramp to power, programmable control, and direct integration with microelectronic devices.

 

The platform technology behind the Smart NanoBattery is a porous nanostructured material used to repel and precisely control the flow of liquids. The material has a Smart Surface that can potentially be designed as a reserve battery for heart pacemakers and other medical devices.

 

One version of the lithium battery based on a breakable separator was developed for an emergency reserve flashlight application.

 

Due to very limited financial resources, the Company has not been able to fund research and development of the SmartNanao battery during the quarter ended September 30, 2017.

 

Discontinuance of Jump Starter Products during Fiscal Year 2016

 

In June, 2016 the Company conditionally sold a patent covering a portion of its Jump product line for $25,000, in two installments each for $12,500, recording other income in its discontinued operations of that amount in the year ended June 30, 2016 and June 30, 2017.

 

Commencing in April of 2016, the Company began discontinuing its line of Jump Starter products due to increased competition and declining margins. The Company continues the wind-down of its remaining inventory of such products, estimated to have values of $3,477 & $3,477 as of September 30, 2017 & June 30, 2017 (See Note 1 under the caption “Discontinued Operations”).

 

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FINANCIAL OVERVIEW

 

Revenues. Revenue, if any, has primarily been attributable to sales of its Jump and Mini Jump Products. Owing to increased competition, contracting margins and the inability to fund volume purchases of inventory at favorable prices, the Company decided to discontinue its line of Jump Starter products.

 

Cost of revenues. Cost associated with revenues are comprised primarily of the cost to purchase out-sourced developed and manufactured products internationally and having them private labeled under the mPower brand name. These costs may be reduced assuming the Company moves forward with the commercialization and distribution of its automotive battery jump starter product and other potential products associated with its mechanically-activated reserve battery in large volumes.

 

Research and development. Research and development expenses have consisted principally of direct labor and payments made to various outside vendors including Porsche Design Studio and cost reduction vendors of the Porsche Designed products outside of the United States in connection with the Company’s Automotive Battery Jump Starter products. The Company is continuing to seek SBIR grants and take advantage of other U.S. government financial programs to fund continued research and development of its Smart Nano Battery.

 

General and administrative. General and administrative expenses consist primarily of salaries and related expenses for personnel engaged in sales of its automotive jump starter product line and legal and accounting personnel. In addition the Company from time to time will use outside consultants. Certain administrative activities are outsourced.

 

Non-cash compensation charges. The Company makes extensive use of stock, stock options and warrants as a form of compensation to employees, directors and outside consultants.

 

Other Income (Expense). Included in Other Expense are non-recurring items related to the change in the value of derivative securities and amortization as related debt discount. Such amounts will fluctuate significantly and should not be considered as recurring or in any way indicative of operating results. In addition, it has been the Company’s policy to record as an expense the cost of re-pricing securities (Reparation Cost) to raise capital.

 

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THREE MONTHS ENDED SEPTEMBER 30, 2017 VS. SEPTEMBER 30, 2016

 

Continuing Operations

 

General and Administrative Expenses. General and administrative expenses charged to continuing operations were $34,803 for the three months ended September 30, 2017 compared to $63,754 for the three months ended September 30, 2016, a decrease of $28,951. In May of 2017 the Company suspended the salaries of the three officers of the Company. As a result in the three months ended September 30, 2017, saving approximately $50,000 The Company did incur accounting and administrative expenses, primarily for office space and professional fees in the current year that were an increase of over $20,000 from the prior year.

 

Other Income and Expense. Interest expense charged to continuing operations was $76,274 in Q1 2016 as compared to $62,889, a decrease of $13,385 due to smaller liability balances. The first quarter of fiscal year 2017 the Company included a non-cash gain in the current operation on debt extinguishments of $1,051,594 attributed to continuing operations, This resulted from the resolution of litigation with River North Equities, discussed in Note 3, compared to $0 in the prior relative period.

 

Net loss. mPhase recorded net income of $953,219 from continuing operations for the period ended September 30, 2017, less a $30,921 loss from discontinued operations, resulting in net income of $937,120 for the current year as compared to a net loss of $171,686 in the prior relative period, which consisted of a $140,765 loss from continuing operations and a $30,921 loss from discontinued operations for the three months ended September 30, 2016. The current period income is solely attributed to the gain on debt extinguishment discussed above.

 

The Company had income per common share of $0.00 in 2017 as compared to a loss per common share $(0.00) in 2016, based upon weighted average common shares outstanding of 17,769,060,874 and 17,929,573,192 during the periods ending September 30 2017 and, 2016, respectively. 

 

Discontinued Operations

 

Revenues. Total revenues for the three months ended September 30, 2017 decreased to $0 from $19,892 in September 30, 2016. The revenue decrease for the current period was derived solely from discontinuation of sales of the mPower Jump products.

 

Cost of sales. Cost of sales decreased to $0 for the three months ended September 30, 2017 from $20,075 in September 30, 2016. This decrease is directly attributable to the discontinuation of sales of our mPower Jump products.

 

Research and Development. Research and development expenses were $0 for the three months ended September 30, 2017 as compared to $38 for the three months ended September 30, 2016, an decrease of $38. Such values are attributable to the wind-down of the Company’s efforts to develop its Jump Products and its limited resources to fund continued research and development of the SmartNanobattery.

 

Selling and Marketing Expenses. Selling and marketing expenses were $1,424 for the three months ended September 30, 2017 compared to $8,193 for the three months ended September 30, 2016, a decrease of $6,769. The decrease is attributable to the wind-down of the Company’s efforts to service customers of its line of Jump Products.

 

General and Administrative Expenses. General and administrative expenses charged to discontinued operations were $4,301 for the three months ended September 30, 2017 compared to $22,880 for the three months ended Septembe30, 2016, a decrease of $ 18,576. The Company had no salaries of the three officers of the Company in three months ended September 30, 2017, as compared to $15,000 in the period ended September 30, 2016. The Company also cut $3,579 of other administrative expenses, primarily for office space and professional fees in for the quarter ended September 30, 2017 as compared to the quarter ended September 30, 2016.

 

Other Income and Expense.  Interest expense charged to discontinued operations was $10,373 in the three months ended September 30, 2017 as compared to $12,127 in the same three months last year, a decrease of $1,754 due to lower liability balances. During the quarter ended September 30, 2017 other income from discontinued operations included $12,500 from the conditional sale of a patent.

 

Net loss from Discontinued Operations. mPhase recorded a net loss from discontinued operations of $16,098 for the three months ended September 30, 2017 as compared to $30,921 for the three months ended September 30, 2016.

 

This represents a loss from discontinued operations per common share of ($0.00) in 2017 as compared to $(0.00) in 2016, based upon weighted average common shares outstanding of 17,769,060,874 and 17,929,573,192 during the periods ending September 30, 2017 and 2016, respectively.

 

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Critical Accounting Policies

 

The Company’s critical accounting policies are as follows:

 

Convertible Instruments - The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815.

 

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments in accordance with EITF 00-19. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional (as that term is described).

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with the provisions of ASC 470 20 “Debt with Conversion Options” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

The Company believes the certain conversion features embedded in convertible notes payable are not clearly and closely related to the economic characteristics of the Company’s stock price. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation is most appropriate for the instrument (e.g., Black Scholes), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate.

   

MATERIAL RELATED PARTY TRANSACTIONS

 

MICROPHASE CORPORATION

  

During a portion of the fiscal year ended June 30, 2016, the Company leased office space from Microphase at its Norwalk location. Rental expense charged by Microphase was $4,500 from July 1, 2015 through June 30, 2016. Microphase provided certain research and development services and shares administrative personnel from time to time. Mr. Necdet Ergul retired as the chairman of the board of mPhase in Nov 2007. Mr. Ergul and his family had owned a controlling interest and he is a director of Microphase Corporation. Mr. Durando was a strategic employee of Microphase Corporation from January 2, 2015 through May 31, of 2017, prior to that he had been an officer since May 1, 1995 and director since March 31, 2010.On February 9, 2015 Mr. Durando assigned all his interests in the Capital Stock of Microphase to the RCKJ Trust as the Grantor. On June 2, 2017 the RCKJ Trust, the holder of Durando’s prior interest in Microphase, and the Ergul Family Limited partnership, the holder of Ergul’s prior interest in Microphase each exchanged all (its) their shares of stock in Microphase in exchange for shares of stock in Digital Power Corporation, a publicly-held company then listed on the New York Stock exchange. 

 

During the three months ended September 30, 2017 and 2016, $0 and $0 have been charged for rent and $0 and $0 have been charged for other expenses, respectively, to the Company by Microphase. As a result of the foregoing transactions, as of September 30, 2017 and June 30, 2017, the Company owed $32,545 to Microphase.

 

OTHER RELATED PARTIES

 

A director of the Company was employed, until September 30, 2003, by our former investment-banking firm Lipper & Company. On September 30, 2017, Mr. Biderman, an outside Director’s affiliated firms of Palladium Capital Advisors and Eagle Strategic Advisers were owed unpaid finders’ fees in the aggregate amount of $186,000, which is included in amounts due to related parties. Also Mr. Biderman loaned the Company $90,000 in the fourth quarter of the fiscal year ended June 30, 2015 and additionally, he advanced the Company $20,000 in the fiscal year ended June 30, 2016, net of repayments, together with $7,123 and $5,486 of accrued interest for fiscal years 2017 and 2016 resulted in $122,609 outstanding at June 30, 2017.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $1,863 and $1,755 of accrued interest on this loan and $124,472 was outstanding at September 30, 2017.

 

During the three months ended September 30, 2017 and 2016, Mr. Biderman’s firm charged finders’ fees of $500 and $0.

 

During the three months ended September 30, 2017 and 2016, the Company recorded $0 and $0 of fees to the wife of the Company’s President, for product marketing services. 

 

 19 

 

 

Transactions with Officers

 

At various points during past fiscal years Messrs, Durando, Dotoli and Smiley provided bridge loans to the Company evidenced by individual promissory notes and deferred compensation so as to provide working capital to the Company. All of the notes are payable on demand.

  

During the three months ended September 30, 2017 and 2016, $10,076 and $9,082 have been charged for interest on loans from officers.

 

At September 30, 2017 the aggregate principal amount of the officers’ loans together with accrue interest totaled $679,604. At June 30, 2017 the officers’ loans together with accrue interest totaled $658,311.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company has incurred cumulative losses of ($211,055,476) and a working capital deficit of ($3,537,730) as of September 30, 2017. The auditors’ report for the fiscal year ended June 30, 2017 includes the statement that “there is substantial doubt of the Company’s ability to continue as a going concern”. As of September 30, 2017, the Company had a negative net worth of ($3,536,930) compared to a negative net worth of ($4,508,943) as of June 30, 2017 as a result of the non recurring gain on debt extinguishments.

 

During the three months ended September 30, 2017, the Company issued 100,000,000 shares of its common stock in connection with private placements pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, raising gross proceeds of $5,000 and incurring finder’s fees of $500. The proceeds were used by the Company as working capital. During the same quarter the officers advanced approximately $11,200 to the Company to fund limited operating activity.

 

During the three months ended September 30, 2016, the Company did not issue any common stock in private placements. During the same quarter the officers deferred $54,000 of salary and advanced approximately $8,500 to the Company to fund limited operating activity.

 

While the Company believes that private placements of its common stock to be issued from time to time will fund short term capital needs it will soon need to seek shareholder approval to increase its authorized shares of common stock.

 

The Company does not expect to derive any material revenue from its nanotechnology product development until after a deployment and custom tailoring of its Smart Nanobattery. This is not expected to occur in the foreseeable future owing to its current financial condition which does not allow further work to complete the product, if possible, when and if the Company can recapitalize.

 

 20 

 

 

MANAGEMENT’S PLANS AND CURRENT STATUS

 

The Company is curtailing its efforts with respect to selling its line of automotive jump starter products owing to increased competition resulting in poor margins as a result of commodity pricing of such products. The Company is seeking alternative products for development but does not foresee a definitive path to revenues to replace the winding down of its line of automotive jump products. The Company has faced significant challenges in funding sufficient inventory of such products to compete successfully with larger competitors selling such product.

 

The Company is considering strategic alternatives to best monetize its remaining patent portfolio restructuring and revising its debt obligations and Capital structure. The Company and the note holder for arrangements 1, JMJ Financial, had been renegotiating the settlement of these agreements; At June 30, 2017 the amount recorded in Current Liabilities for the two notes and accrued interest thereon subject to the River North Equity claim was $1,046,416. Such amount is included in the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial which totaled $1,212,940 on that date. River North Equity LLC which had purchased notes previously issued to JMJ Financial failed to appeal a Judgement in favor of the Company negating such Notes by July 17, 2017 and the Judgement become final. As a result of this proceeding the Company recorded the cancellation of the two notes assigned to River North from JMJ Financial for a total of $693,060 of principal and $358,534 accrued interest thereon. This resulted in a $1,051,594 gain from the cancellation of debt during the three months ended September 30, 2017. The Company, subsequent to the River North Equity and judicial action denying enforcement of such Notes, has been negotiating a settlement for the remaining $109,000 of principle and $59,158 of accrued interest thereon due to JMJ.

 

On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011. At September 30, 2017 we had recorded $828,2005 for the value of the forbearance debt obligation. as amended.

 

The Company’s ability to continue as a going concern and its future success is dependent upon its ability to raise capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) allow the successful wide scale development, deployment and marketing of its products. There can be no assurance the necessary debt or equity financing will be available, or if so, on terms acceptable to the Company.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is not exposed to changes in interest rates as the Company has no debt arrangements and no investments in certain held-to-maturity securities. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of any financial instruments at September 30, 2017.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

 

The Company did identify control deficiencies regarding its present accounting structure:

 

Lack of segregation of duties and control procedures that would include multiple levels of supervision and review have both been limited due to the reduced level of accounting staff and the Company’s lack of funding.

 

The Company remediated these deficiencies by increasing the role of an external contract controller.

 

There was a change in our internal control over financial reporting during the quarter ended September 30, 2017, which included the laying off the Company’s accounting manager, which the Company remediated by the increased involvement of an external contract controller. The result of the changes in our internal control over financial reporting and the Company’s remediation steps to address the change, the Company believes it has made the necessary adjustments so that there were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 21 

 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

On February 2, 2015 the Securities and Exchange Commission upheld the denial of a corporate action by the Financial Industry Regulatory Authority (FINRA) in connection with the Company’s seeking to reverse split its common stock pursuant to FINRA Rule 6490 (see Securities Exchange Act of 1934 Release No 7418 Admin Proc File No. 3-15130 of February 2, 2015). The action was found as deficient by FINRA on the basis that two corporate officers and directors of the Company had previously entered into a Consent Decree with the SEC in October of 2007 by them when they were previously officers of another company named Packetport.com. 

 

On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George Investments LLC and assigned to John Fife. The Triggering Events include alleged defaults with respect to payments owed by the Company under the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed according to the notice is approximately $902,279. A lawsuit was commenced in late November in the Federal District Court, Northern District of Illinois Eastern Division by Fife against the Company alleging breach of contract and other actions in connection with the 8% Convertible Note.

 

On December 15, 2014, a Memorandum Opinion and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”) for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed.

 

Effective February 10, 2015, the Company entered into a Forbearance Agreement with John Fife. The agreement provides that theFife would forego his right to enforce its remedies pursuant to the judgment, which include demand for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, and after accounting for a payment of $15,000 the Company paid, under the terms of the agreement. The terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts ; $30,000.00 per month on each of the following dates: March 15, 2015, April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full. The Company has been able to meet its monthly payment obligations through September 2015.

 

As of August 11, 2015 the Company entered into an Amendment No. 1 with Fife to the Forbearance Agreement rescheduling the monthly payment schedules (see Form 8K filed with the SEC on August 2, 2015).

 

As of January 19, 2016 the Company entered into a Second Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments. The Amendment was filed with the SEC on Form 8k on January 22, 2016.

 

As of May 12, 2016 the Company entered into a Third Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments. The Amendment was filed with the SEC on Form 8k on May 23, 2016.

 

On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360, 000, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011.

 

 22 

 

 

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

 

All proceeds received from the following financings were used by the Company for working capital needs.

 

Private Placements

 

During the three months ended September 30, 2017, the Company issued 100,000,000 shares of its common stock in connection with private placements pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, raising gross proceeds of $5,000 and incurring finder’s fees of $500.

 

Stock Based Compensation

 

None.

 

Conversion of Debt Securities None.

 

Long Term Convertible Debentures / Debt Discount

 

The Company had three separate convertible debt arrangements with independent investors that were in effect at various times during the fiscal year ended June 30, 2017, all three of which were still active as of September 30, 2017.

 

During the three months ended September 30, 2017 no conversions were made under any Convertible Debentures.

  

These transactions are intended to provide liquidity and capital to the Company and are summarized below.

 

Arrangement #1 (JMJ Financial, Inc.)

 

The Company entered into a convertible note on November 17, 2009, in which the Company received a total of $186,000 of proceeds in connection with a new financing agreement with JMJ Financial. This transaction consists of the following: 1) a convertible note in the amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of September 23, 2012 and (2) a secured promissory note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of September 23, 2012 due from the holder of the convertible note, of which the Company received a total of $150,000 of proceeds in connection with the second promissory note under this agreement. At June 30, 2012 this convertible note had $372,060 outstanding which was combined with the April 5, 2010 arrangement with JMJ Financial, Inc. JMJ Financial sold this Note to River North Equity LLC

 

On December 15, 2009 the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the amount of $1,500,000 plus a one-time interest factor of 12% ($180,000) and a maturity date of December15, 2012 and (2) a secured promissory note in the amount of $1,400,000 plus a one-time interest rate factor of 13.2% ($180,000) and a maturity date of December 15, 2012 due from the holder of the convertible note. To date the Company has received a total of $300,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The Company and the holder entered into a Forbearance Agreement amendment, as amended, and funding and conversions have not occurred since April 2011. As of June 30, 2012, this convertible note had $321,000 outstanding which was combined with the April 5, 2010 arrangement with JMJ Financial, Inc. JMJ Financial also sold this Note to River North Equity LLC.

 

On April 5, 2010, the Company entered into a financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the principal amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of December 15, 2012, and (2) a secured promissory note from the holder of the convertible note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of December 15, 2012. To date the Company has received a total of $100,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The remaining $1,144,000 of cash to be received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the holder. As of June 30, 2012, this convertible note had $109,000 outstanding which was combined with the November 17, 2009 and December 15, 2009 arrangements with JMJ Financial, Inc., for a total of $802,060 for convertible notes. The Company has no promissory notes receivable from JMJ as of June 30, 2012.

 

In April of 2017, the Company received a judgment from the Federal District Court of Northern Illinois Eastern Division in its favor dismissing a claim by River North Equity which effectively negated two notes River North Equity purchased from JMJ Financial. At June 30, 2017 the amount recorded in Current Liabilities for the two notes and accrued interest thereon subject to the River North Equity claim was $1,046,416. Such amount is included in the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial which totaled $1,212,940 on that date. River North failed to appeal the Judgement by July 17, 2017 and the Judgement become final. As a result of this proceeding the Company recorded the cancellation of the two notes assigned to River North from JMJ Financial for a total of $693,060 of principal and $358,534 accrued interest thereon. This resulted in a $1,051,594 gain from the cancellation of debt during the three months ended September 30, 2017.

 

 23 

 

 

As of September 30, 2017, and as of June 30, 2017, the aggregate remaining amount of convertible securities held by JMJ could be converted into 42,039,500 and 303,234,810 common shares at the conversion floor price of $. 004.

 

The Company has not made any payments of the $37,018 monthly installment payments commencing October 1, 2012 and the holder has continued to accrue interest on the outstanding balance.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $5,813 and $22,550 interest on this agreement.

 

At September 30, 2017 the amount recorded in Current Liabilities for convertible note plus accrued interest thereon previously issued to JMJ Financial was $109,000 and $59,158, respectively. At June 30, 2017 the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial was $802,060 and $410,879, respectively.

   

Arrangement #2 (John Fife dba St. George Investors)/Fife Forbearance

 

The Company entered into an amended agreement on June 1, 2012, when principle of $557,500 accrued interest of $66,338 and $95,611 of contractual charges for previous notes with John Fife totaled $719,449; whereby, the Company agreed to make payments of principle and interest of $33,238 per month commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then no conversions into the Company’s common stock would be available to the holder.

 

On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George Investments LLC and assigned to John Fife. The notice included alleged defaults with respect to payments owed by the Company under the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed according to the notice is approximately $902,279.

 

On December 15, 2014, a Memorandum Opinion and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”) for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed. The Company commenced settlement negotiations with the Plaintiff after we explored options including an appeal of the Judgment which the Company concluded would have a low probability of success.

 

Effective February 10, 2015, the Company entered into a Forbearance Agreement with the Holder. The agreement provides that the Holder would forego his right to enforce its remedies pursuant to the Judgment, which include demand for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, (after accounting for a payment of $15,000 the Company paid, under the terms of the agreement).

 

The terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts; $30,000.00 per month on each of the following dates: March 15, 2015.

 

April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full.

 

The Forbearance agreement required the Company to place, and the Company had done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments. The original agreement also provided that the Company file a Proxy statement before June 1, 2015 should additional shares be needed for the conversion reserve. The Company has not filed such a proxy statement due to cost prohibitions. The Company had not issued any stock for conversions since entering into the forbearance agreement and during the year ended June 30, 2015 and has made cash payments repaying $69,081 of principle and $41,019 of interest under the agreement. The value of the forbearance debt obligation on June 30, 2015 was $902,253. 

 

As of August 11, 2015 the Company entered into an Amendment No. 1 with Fife to the Forbearance Agreement rescheduling the monthly payment schedules.

 

 24 

 

 

As of January 19, 2016 the Company entered into a Second Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments.

 

During the three months ended September 30, 20176 the Company repaid $9,460 of principle and $5,540 of interest under the agreement, with non-cash conversions of 187,500,000 shares of the Company’s common stock valued at $15,000. . The value of the forbearance debt obligation on June 30, 2017 was $809,873.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $18,132 and $16,633 interest on this agreement. The value of the forbearance debt obligation on September 30, 2017 was $828,005.

 

As of June 30, 2017 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,123,399,750 shares of our common stock should the entire obligation be converted.

 

On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360, 000, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011.

 

As of September 30, 2017 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. 

  

Arrangement #3 (MH Investment trust II)

 

On August 26, 2014, the Company issued to the MH Investment Trust, a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 in which the Company received $40,000 in gross proceeds on September 1, 2014. The instrument is in the principal amount of $40,000 and matured on May 1, 2015. Interest only was payable at the rate of 12% per annum by the Company to the holder until maturity. The instrument is convertible into the Company’s common stock at 60% of the volume weighted average price of the stock based upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the above financing have been used by the Company as working capital.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $173 and $154 interest on this agreement.

 

At September 30, 2017 the note balance was $3,333 and accrued interest of $2,565, at 12%, remained due under this agreement. At June 30, 2017 the note balance was $3,333 and accrued interest of $2,392, at 12%; remained due under this agreement. Based upon the price of the Company’s common stock on September 30, 2017 and June 30, 2017 this Note is convertible into approximately 98,300,000 and 95,412,167 shares of common stock, respectively.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. (REMOVED AND RESERVED)

 

 

ITEM 5. OTHER INFORMATION

 

None.

 

 25 

 

 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   

EXHIBITS    
     
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.
     
32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
     
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

 

101.INS   XBRL Instance Document*
101.SCH   XBRL Taxonomy Extension Schema Document*
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB   XBRL Taxonomy Extension Label Linkbase Document*
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document*

 

* filed herewith.

 

 26 

 

 

SIGNATURES

 

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  mPHASE TECHNOLOGIES, INC.
     
Dated: July 6, 2018 By: /s/ Martin S. Smiley
   

Martin S. Smiley

EVP, CFO and General Counsel

  

 

27

 

 

EX-31.1 2 f10q0917ex31-1_mphasetech.htm CERTIFICATION

Exhibit 31.1

  

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

  

I, Ronald A. Durando, certify that:

  

1. I have reviewed this Quarterly report on Form 10Q of mPhase Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 6, 2018  
   
/s/ Ronald A. Durando  
Ronald A. Durando  
President and CEO  

 

 

EX-31.2 3 f10q0917ex31-2_mphasetech.htm CERTIFICATION

 Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

 

I, Martin Smiley, certify that:

 

1. I have reviewed this Quarterly report on Form 10Q of mPhase Technologies, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

  

  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

  

  a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 6, 2018  
   
/s/ Martin Smiley  
Martin Smiley  

 

 

EX-32.1 4 f10q0917ex32-1_mphasetech.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

  

In connection with the Quarterly Report of mPhase Technologies, Inc., a New Jersey corporation (the “Company”), on Form 10Q for the quarter ended September 30, 2017 as filed with the Securities and Exchange Commission (the “Report”), I, Ronald A. Durando, Chief Executive Officer of the Company certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

 

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Ronald A. Durando  
Ronald A. Durando  
Chief Executive Officer  
   
July 6, 2018  

 

 

EX-32.2 5 f10q0917ex32-2_mphasetech.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

  

In connection with the Quarterly Report of mPhase Technologies, Inc., a New Jersey corporation (the “Company”), on Form 10Q for the quarter ended September 30, 2017 as filed with the Securities and Exchange Commission (the “Report”), I, Martin Smiley, Chief Financial Officer of the Company certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

 

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Martin Smiley  
Martin Smiley  
Chief Financial Officer  
   
July 6, 2018  

 

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Subsequent to September 30, 2017 this Forbearance Agreement with Fife has been amended several times; the most recent providing for settlement amounts less than the aggregate of liabilities recorded in the financial statements. 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Fife sought damages on a Motion for Summary Judgment in the amount in excess of $1,300,000 attorney&#8217;s fees. On December 15, 2014 the federal district court in the North East District of Illinois found in favor of Fife on a motion for Summary Judgment. 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The value of the judgment totaled approximately $1.6 million as of December 31, 2014 and bears a punitive interest rate of 16% and would become payable in full (1.325 million) if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which payments through June 30, 2017 totaled $275,000. As of June 30, 2016, 812,500,000 shares from this reserve have been issued to satisfy the conversion provisions of the Forbearance Agreement. During the year ended June 30, 2017 187,500,000 shares were issued from this reserve and no amounts remain under the reserve agreement with our transfer agent. The Company is in arrears on the agreement and has negotiated a settlement for approximately $360,000 in cash payments. 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text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: right; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: right; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: right; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; 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text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: right; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: right; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: right; text-indent: 0px; padding-left: 0px;">&#160;</td><td style="text-align: left; text-indent: 0px; padding-left: 0px;">&#160;</td></tr><tr style="vertical-align: bottom; 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(i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. Convertible securities held by third parties that are immediately convertible into 765,339,500 shares of common stock.. Under the terms of the Forbearance Agreement, as amended, with John Fife (arrangement #4), Fife may acquire a total of 10,350,062,518 shares of the Company's common stock based upon the conversion terms; if the forbearance agreement discussed in Note 3 is settled entirely in stock. In addition, the Company has convertible notes plus accrued interest thereon held by officers of the Company, subject to availability, convertible into approximately 1,699,010,000, immediately, if available. 599 20683 968 15000 15000 5540 1615266 802060 809873 3333 940338 109000 828005 3333 1615266 940338 100000000 40000 5000 500 1000000000 187500000 812500000 187500000 3 66338 413271 61723 41464 40000 12300 95412167 98300000 66000 36193 87500 2700 10197 2600 27210 122609 27936 1000 124472 30535 3000 5486 1755 9460 2392 7123 2565 1863 1000 60000 2000 802060 557500 5540 693060 2103 0.004 0.004 186000 300000 100000 1100000 1200000 1400000 1500000 1100000 1200000 40000 0.1320 0.12 0.132 0.12 0.1320 0.12 0.08 0.12 0.08 0.16 0.16 0.12 144000 144000 180000 180000 144000 144000 22550 5813 2012-09-23 2012-09-23 2012-12-15 2012-12-15 2012-12-15 2012-12-15 2015-05-01 The instrument is convertible into the Company's common stock at 60% of the volume weighted average price of the stock based upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the trading price exceeds $.0020 for the five days before such conversion. 9082 10076 303234810 42039500 1144000 372060 109000 321000 3333 3333 150000 37018 15000 358534 410879 59158 1051594 1046416 1212940 P10D 719449 95611 33238 1600000 902279 1003943 809873 828005 69081 9460 41019 154 5540 173 557000 1600000 1600000 The Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, if repaid within revised payment period, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011. The unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts; $30,000.00 per month on each of the following dates: March 15, 2015. April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full. 902253 200000 187500000 16633 18132 0.12 0.12 299569203 800000000 295430797 1395000000 2200 22000 1300000 828005 10350062518 Would become payable in full (1.325 million) if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which payments through June 30, 2017 totaled $275,000. (i) up to 625,000,000 shares immediately for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. Subsequent to September 30, 2017 this Forbearance Agreement with Fife has been amended several times; the most recent providing for settlement amounts less than the aggregate of liabilities recorded in the financial statements. (See Note 3) 360000 1681665 Through December 31, 2012 0.09 2250 0 4500 0 0 5486 1755 7123 658311 1863 679604 186000 32545 32545 0 500 0 0 122609 124472 10000 360000 1367226459 1336972075 0.80 The Company that, subject to filing with the Secretary of State of New Jersey of an Amendment to its Certificate of Incorporation increasing it authorized shares of common stock to 72 billion shares, the Board of Directors has approved the granting of a total of 5,750,000,000 shares of common stock to Officers, Directors and an Accounting Consultant of the Company. It is necessary for the Company to complete the filing of 4 years of back state and federal income tax returns with the Department of Revenue of New Jersey in order to amend its Certificate of Incorporation. In addition, the Board of Directors approved the issuance of 16,000,000,000 shares to Officers and Directors and the Company's accounting Consultant in exchange for aggregate indebtedness and fees owed to such persons in the approximate amount of $1,600,000. P1Y 0.00005 The revised agreement can be settled as soon as September 15, 2018 for $265,000 if paid in full, or up to $390,000 if paid in 24 monthly installments through September 2020. This would result in approximately a $600,000 gain if paid under the revised settlement terms. convertible if shares available EX-101.SCH 7 xdsl-20170930.xsd XBRL SCHEMA FILE 001 - Document - Document and Entity Information link:presentationLink link:definitionLink link:calculationLink 002 - Statement - Condensed Consolidated Balance Sheets link:presentationLink link:definitionLink link:calculationLink 003 - Statement - Condensed Consolidated Balance Sheets (Parenthetical) link:presentationLink link:definitionLink link:calculationLink 004 - Statement - Condensed Consolidated Statements of Operations (Unaudited) link:presentationLink link:definitionLink link:calculationLink 005 - Statement - Condensed Consolidated Statements of Cash Flows (Unaudited) link:presentationLink link:definitionLink link:calculationLink 006 - Disclosure - Basis of Presentation and Summary of Significant Accounting Policies link:presentationLink link:definitionLink link:calculationLink 007 - Disclosure - Supplemental Cash Flow Information link:presentationLink link:definitionLink link:calculationLink 008 - 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Document and Entity Information - shares
3 Months Ended
Sep. 30, 2017
Jul. 02, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name MPHASE TECHNOLOGIES INC  
Entity Central Index Key 0000825322  
Trading Symbol XDSL  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Document Type 10-Q  
Document Period End Date Sep. 30, 2017  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   16,860,514,423
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Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2017
Jun. 30, 2017
CURRENT ASSETS    
Cash $ 594 $ 4,163
Assets of discontinued operations 4,277 4,527
TOTAL CURRENT ASSETS 4,871 8,690
Property and equipment, net 683
Other assets 800 800
TOTAL ASSETS 5,671 10,173
CURRENT LIABILITIES    
Accounts payable 444,453 442,746
Accrued expenses 563,381 894,930
Due to related parties 217,545 217,045
Notes payable, Officers' 679,604 658,311
Notes payable, Director & Investor 127,472 123,609
Current Portion, Long term convertible debentures 940,338 1,615,266
Liabilities of discontinued operations 569,808 567,209
TOTAL CURRENT LIABILITIES 3,542,601 4,519,116
STOCKHOLDERS' DEFICIT    
Common stock, par value $.001, 18,000,000,000 shares authorized, 17,864,713,048 and 17,764,713,048 shares issued and outstanding at September 30, 2017 (unaudited) & June 30, 2017, respectively 17,864,712 17,764,712
Additional paid in capital 189,653,834 189,718,941
Accumulated deficit (211,055,476) (211,992,596)
TOTAL STOCKHOLDERS' DEFICIT (3,536,930) (4,508,943)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 5,671 $ 10,173
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2017
Jun. 30, 2017
Balance Sheets [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 18,000,000,000 18,000,000,000
Common stock, shares issued 17,864,713,048 17,764,713,048
Common stock, shares outstanding 17,864,713,048 17,764,713,048
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Statements of Operations [Abstract]    
REVENUES
COSTS AND EXPENSES    
General and administrative 34,803 63,754
Depreciation and amortization 683 737
TOTAL COSTS AND EXPENSES 35,486 64,491
OPERATING LOSS (35,486) (64,491)
OTHER INCOME (EXPENSE)    
Interest (Expense) (62,889) (76,274)
Gain on debt extinguishments 1,051,594
TOTAL OTHER INCOME (EXPENSE) 988,705 (76,274)
Income (Loss) From Continuing Operations, before Income Taxes 953,219 (140,765)
(Loss) From Discontinued Operations (16,098) (30,921)
Income Taxes
Net Income (Loss) $ 937,120 $ (171,686)
Basic & Diluted Net loss per share:    
Income (Loss) per share From Continuing Operations $ 0.00 $ (0.00)
(Loss) per share From Discontinued Operations (0.00) (0.00)
Net Income (Loss) per share $ 0.00 $ (0.00)
Weighted Average Number of Shares Outstanding;    
Basic 17,769,060,874 17,929,573,192
Diluted 18,000,000,000 17,929,573,192
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash Flow From Operating Activities:    
Net Income (Loss) from continuing operations $ 953,219 $ (140,765)
Net Income (Loss) from discontinued operations (16,098) (30,921)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 683 737
(Gain) on debt extinguishment (1,051,594)
(Gain) on sale of patent (12,500)
Other non-cash charges for beneficial conversion interest expense 30,393 30,393
Amortization of loan discount, finance company 2,600 2,700
Changes in assets and liabilities:    
Accounts receivable 55
Inventories 20,074
Prepaid expenses and other current assets 250
Accounts payable & accrued expenses 58,761 75,451
Due to/from related parties    
Microphase & Eagle 500
Officers 54,000
Net cash used in operating activities (21,286) (776)
Cash Flow Used in Investing Activities:    
Purchase of fixed assets
Net Cash used in investing activities
Cash Flow from Financing Activities:    
Proceeds from issuance of common stock, net of finders fees 4,500
Proceeds of demand note 2,000
Repayment to Finance Company (3,600)
Proceeds from notes payable related parties 11,300 8,504
Repayment of notes payable related parties (83) (52)
Net cash provided by financing activities 17,717 4,852
Net increase (decrease) in cash (3,569) 4,076
CASH AND CASH EQUIVALENTS, beginning of period 4,163 4,717
CASH AND CASH EQUIVALENTS, end of period $ 594 $ 8,793
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Basis of Presentation and Summary of Significant Accounting Policies
3 Months Ended
Sep. 30, 2017
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]  
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS

 

mPhase Technologies, Inc. (the “Company”) was organized on October 2, 1996 and is presently focused on restructuring its debt obligations to be in a position to capitalize on its existing intellectual property portfolio and endeavor to further develop new “smart surface” products through the sciences of microfluidics, micro-electromechanical systems (MEMS) and nanotechnology. The Company plans to restructure its business through some combination of raising additional capital, strategic partnerships and or mergers & acquisitions.

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ending September 30, 2017 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the year ended June 30, 2017.

 

GOING CONCERN

 

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. 

 

Through September 30, 2017, the Company had incurred (a) cumulative losses totaling ($211,055,476) and (b) a stockholders’ deficit of ($3,536,930). During the three months ended September 30, 2017, the Company had $(21,286) net cash used in operating activities. At September 30, 2017, the Company had $599 of cash to fund short-term working capital requirements. In addition, the Company relies on the continuation of funding through private placements of its common stock. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this quarterly report. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company’s ability to continue as a going concern and its future success is dependent upon its ability to raise capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) allow the successful wide scale development, deployment and marketing of its smart surface products. There can be no assurance the necessary debt or equity financing will be available, or if so, on terms acceptable to the Company.

 

INVENTORY- Discontinued Operations

 

The Company uses the First In First Out method (FIFO) to account for inventory which is carried at lower of cost and net realizable value. As of June 30, 2017, inventory consisted primarily of its various Jump products including the Jump and the mini Jump, and our remaining flashlight inventory, and was valued at $3,477. As of September 30, 2017, inventory consisted primarily of the Company’s line of Jump products including the new Jump Plus, and our remaining flashlight inventory, and was valued at $3,477. The Company’s Board of Directors, in a meeting on June 25, 2016, determined it was in the best interest of the Company to discontinue its entire line of Jump products in the 1st quarter of fiscal year 2017 owing to increased competition and decreasing margins. Appropriate reserves have been taken as of June 30, 2017 and September 30, 2017, to assure that the cost of such inventory does not exceed the expected net realizable value.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include net realizable value of inventories, estimated value of stock-based compensation and changes in and the ending fair value of derivative liability. Actual results could differ from those estimates.

 

CHANGE IN ACCOUNTING ESTIMATE FOR THE VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

 

Changes in fair value of derivative liabilities results from the changes in the fair value due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The increase in fair value of derivative liabilities recognized effective June 30, 2016 is due to a change in accounting estimate related to the accounting for derivative liabilities. Due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, in addition to limited shares available for conversions for such instruments as amended, the convertible notes were determined to have no basis for applying a derivative liability to the conversion of these notes. As a result, the Company recorded a change in accounting estimate which resulted in a gain on change in derivative liability of approximately $200,000 effective June 30, 2016.

 

As of September 30, 2017, due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, and limited shares available for conversions for for outstanding convertible securities, l there is no basis for applying a derivative liability to the conversion of these notes.

 

LOSS PER COMMON SHARE, BASIC AND DILUTED

 

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net loss adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company had no warrants to purchase shares of its common stock and no options to purchase shares of its common stock outstanding at September 30, 2017.

  

At September 30, 2017 the Company has convertible securities held by third parties that are immediately convertible into 765,339,500 shares of common stock.. Under the terms of the Forbearance Agreement, as amended, with John Fife (arrangement #4), Fife may acquire a total of 10,350,062,518 shares of the Company’s common stock based upon the conversion terms; if the forbearance agreement discussed in Note 3 is settled entirely in stock. In addition, the Company has convertible notes plus accrued interest thereon held by officers of the Company, subject to availability, convertible into approximately 1,699,010,000, immediately, if available.

 

The following table illustrates debts convertible into shares of the Company’s Common Stock at September 30, 2017:

 

    Note Principle     Accrued Interest     Total     Shares Convertible  
                      immediately     over full term, if available*  
Arrangement #1 - JMJ Financial, Inc   $ 109,000     $ 59,158     $ 168,158       42,039,500       42,039,500  
Arrangement #2 - St. George Investments/Fife Forbearance Obligation     828,005       -       828,005       625,000,000       10,350,062,500  
Arrangement #3 - MH Investment trust II     3,333       2,565       5,898       98,300,000       98,300,000  
Total Convertible Notes payable     940,338       61,723       1,002,061       765,339,500       10,490,402,000  
Notes Payable- Officers*     679,604       -       679,604       -       1,699,010,000  
Total   $ 1,619,942     $ 61,723     $ 1,681,665       765,339,500       12,189,412,000  

 

* convertible if shares available


DISCONTINUED OPERATIONS

 

The Company has classified the operating results and associated assets and liabilities from its Jump line of products, which ceased having material sales in the first quarter of Fiscal 2017, as Discontinued Operations in the Consolidated Financial Statements for the Fiscal Years ended June 30, 2017 and 2016.

 

The Assets and Liabilities associated with discontinued operations included in our Consolidated Balance Sheet were as follows:

 

    September 30, 2017     June 30, 2017  
    (Unaudited)        
ASSETS   Total     Discontinued     Continuing     Total     Discontinued     Continuing  
CURRENT ASSETS                                    
Cash   $ 594     $ -     $ 594     $ 4,163     $ -     $ 4,163  
Accounts receivable, net     -       -       -       -       -       -  
Inventory, net     3,477       3,477       -       3,477       3,477       -  
Prepaid and other current assets     800       800       -       1,050       1,050       -  
TOTAL CURRENT ASSETS     4,871       4,277       4,871       8,690       4,527       8,690  
                                                 
Property and equipment, net     -       -       -       683       -       683  
Other assets     800       -       800       800       -       800  
TOTAL ASSETS   $ 5,671     $ 4,277     $ 5,671     $ 10,173     $ 4,527     $ 10,173  
                                                 
LIABILITIES                                                
CURRENT LIABILITIES                                                
Accounts payable   $ 841,531     $ 397,078     $ 444,453     $ 839,824     $ 397,078     $ 442,746  
Accrued expenses     705,576       142,195       563,381       1,037,125       142,195       894,930  
Due to related parties     217,545       -       217,545       217,045       -       217,045  
Notes payable, Officers’     679,604       -       679,604       658,311       -       658,311  
Notes payable, Director & Investor     127,472       -       127,472       123,609       -       123,609  
Note Payable, Finance Company     30,535       30,535       -       27,936       27,936       -  
Current Portion, Long term convertible debentures     940,338       -       940,338       1,615,266       -       1,615,266  
TOTAL LIABILITIES   $ 3,542,601     $ 569,808     $ 2,972,793     $ 4,519,116     $ 567,209     $ 3,951,907  

 

Revenue and Expense Recognition for Discontinued Operations

 

The Company has recognized revenue on its JUMP products when the products were shipped, and title passed to the customer.  

 

The results of discontinued operations include specifically identified and allocated common overhead expenses.

 

The Revenues and expenses associated with discontinued operations included in our Consolidated Statements of operations were as follows:

 

    For the Three Months Ended  
    September 30,
2017
    September 30,
2016
 
    Discontinued     Discontinued  
REVENUES   $ -     $ 19,892  
                 
COSTS AND EXPENSES                
                 
Cost of Sales     -       20,075  
                 
Research and Development     -       38  
                 
Selling and Marketing     1,424       8,193  
                 
General and administrative     4,301       22,880  
                 
TOTAL COSTS AND EXPENSES     5,725       51,186  
                 
OPERATING LOSS     (5,725 )     (31,294 )
                 
OTHER INCOME (EXPENSE)                
Interest (Expense)     (10,373 )     (12,127 )
Other income (Expense)     -       12,500  
                 
TOTAL OTHER INCOME (EXPENSE)     (10,373 )     373  
                 
Loss From Discontinued Operations   $ (16,098 )   $ (30,921 )
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Supplemental Cash Flow Information
3 Months Ended
Sep. 30, 2017
Supplemental Cash Flow Information [Abstract]  
SUPPLEMENTAL CASH FLOW INFORMATION
2.SUPPLEMENTAL CASH FLOW INFORMATION

 

  For the Three Months Ended 
  September 30,  September 30, 
  2017  2016 
Statement of Operation Information:      
Interest paid (net interest income) $968  $20,683 
         
Non-Cash Investing and Financing Activities:        
Conversion of $9,460 convertible debt and $5,540 accrued interest to common stock in 2016 $-  $15,000 
Amortization of loan discount $2,600  $2,700
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt
3 Months Ended
Sep. 30, 2017
Equity Transactions, Notes Payable and Convertible Debt [Abstract]  
EQUITY TRANSACTIONS, NOTES PAYABLE AND CONVERTIBLE DEBT
3. EQUITY TRANSACTIONS, NOTES PAYABLE AND CONVERTIBLE DEBT

 

Private Placements

 

During the three months ended September 30, 2017, the Company issued 100,000,000 shares of its common stock in connection with private placements pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended, raising gross proceeds of $5,000 and incurring finder’s fees of $500. The proceeds were used by the Company as working capital.

 

During the three months ended September 30, 2016, the Company did not issue any shares of stock in private placements.

 

Stock Based Compensation

 

During the three months ended September 30, 2017, the Company did not issue any common stock, warrants or options to employees or officers.

 

During the three months ended September 30, 2016, the Company did not issue any common stock, warrants or options to employees or officers.

 

Other Short-Term Notes 

 

Note Payable, Director

 

A Director of the Company loaned the Company $90,000 in the fourth quarter of fiscal year ended June 30, 2015 and additionally advanced the Company $60,000 and received $40,000 in repayments during the fiscal year ended June 30, 2016, which together with $5,486 of accrued interest for FYE 2016 and $7,123 of accrued interest for FYE 2017 resulted in $122,609 outstanding at June 30, 2017 During the three months ended September 30, 2017 and 2016 the Company recorded $1,863 and $1,755 of accrued interest and $124,472 was outstanding at September 30, 2017.

  

Other Note payable

 

During the fourth quarter fiscal 2017 an unaffiliated shareholder advanced the Company $1,000. At June 30, 2017 $1,000 remained outstanding under this note.  During the quarter ended September 30, 2017 this shareholder advanced the Company $2,000. At September 30, 2017 $3,000 remained outstanding under this note.

 

Note Payable, Finance Company- Discontinued Operations

 

The Company Borrowed approximately $66,000 from a finance company under two advances commencing January 2016, with scheduled repayments of approximately $87,500 originally due through July 2016, incurring $36,193 of finance charges which were included in interest expense during the fiscal year ended June 30, 2016. At June 30, 2016, 27,210 remained outstanding under this note. During the FYE June 30, 2017 we made $12,300 of repayments which included $2,103 of principal and $10,197 of finance charges which are included in interest expense for the period. At June 30, 2017, $27,936 remained outstanding under this note.

 

During the three months ended September 30, 2017 and 2016 we incurred $2,600 and $2,700 of finance charges under this note, l and at September 30, 2017, $30,535 remained outstanding.

 

Long Term Convertible Debentures / Debt Discount

 

The Company had three separate convertible debt arrangements with independent investors that were in effect at various times during the fiscal year ended June 30, 2017, all three of which were still active as of September 30, 2017.

 

During the three months ended September 30,2017 no conversions were made under any Convertible Debentures.

 

During the three months ended September 30, 2016, the Company incurred the conversion of $15,000 of Convertible Debt, which consisted of $5,540 principal and $9,460 accrued interest thereon relating to the forbearance agreement, into 187,500,000 shares of the Company’s Common stock.

   

The following table summarizes notes payable under convertible debt and debenture agreements as of: 

    September 30,     June 30,  
    2017  
    (unaudited)        
Arrangement #1 - JMJ Financial, Inc   $ 109,000     $ 802,060  
Arrangement #2 - St. George Investments/Fife Forbearance Obligation     828,005       809,873  
Arrangement #3 - MH Investment trust II     3,333       3,333  
Total notes payable     940,338       1,615,266  
Convertible Notes payable-short term portion   $ 940,338     $ 1,615,266  

 

Included in accrued expenses is $61,723 and $413,271 of interest accrued on these notes at September 30, 2017 (unaudited) and June 30, 2017, respectively.

 

These transactions are intended to provide liquidity and capital to the Company and are summarized below.

 

Arrangement #1 (JMJ Financial, Inc.)

 

The Company entered into a convertible note on November 17, 2009, in which the Company received a total of $186,000 of proceeds in connection with a new financing agreement with JMJ Financial. This transaction consists of the following: 1) a convertible note in the amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of September 23, 2012 and (2) a secured promissory note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of September 23, 2012 due from the holder of the convertible note, of which the Company received a total of $150,000 of proceeds in connection with the second promissory note under this agreement. At June 30, 2012 this convertible note had $372,060 outstanding which was combined with the April 5, 2010 arrangement with JMJ Financial, Inc. JMJ Financial sold this Note to River North Equity LLC.

 

On December 15, 2009 the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the amount of $1,500,000 plus a one-time interest factor of 12% ($180,000) and a maturity date of December15, 2012 and (2) a secured promissory note in the amount of $1,400,000 plus a one-time interest rate factor of 13.2% ($180,000) and a maturity date of December 15, 2012 due from the holder of the convertible note. To date the Company has received a total of $300,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The Company and the holder entered into a Forbearance Agreement amendment, as amended, and funding and conversions have not occurred since April 2011. As of June 30, 2012, this convertible note had $321,000 outstanding which was combined with the April 5, 2010 arrangement with JMJ Financial, Inc. JMJ Financial also sold this Note to River North Equity LLC.

 

On April 5, 2010, the Company entered into a financing agreement with JMJ Financial that consists of the following: 1) a convertible note issued by the Company in the principal amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date of December 15, 2012, and (2) a secured promissory note from the holder of the convertible note in the amount of $1,100,000 plus a one-time interest rate factor of 13.2% ($144,000 each) and a maturity date of December 15, 2012. To date the Company has received a total of $100,000 cash under this note and has issued no shares of common stock to the holder upon conversions. The remaining $1,144,000 of cash to be received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the holder. As of June 30, 2012, this convertible note had $109,000 outstanding which was combined with the November 17, 2009 and December 15, 2009 arrangements with JMJ Financial, Inc., for a total of $802,060 for convertible notes. The Company has no promissory notes receivable from JMJ as of June 30, 2012.

 

In April of 2017, the Company received a judgment from the Federal District Court of Northern Illinois Eastern Division in its favor dismissing a claim by River North Equity which effectively negated two notes River North Equity purchased from JMJ Financial. At June 30, 2017 the amount recorded in Current Liabilities for the two notes and accrued interest thereon subject to the River North Equity claim was $1,046,416. Such amount is included in the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial which totaled $1,212,940 on that date. River North failed to appeal the Judgement by July 17, 2017 and the Judgement become final. As a result of this proceeding the Company recorded the cancellation of the two notes assigned to River North from JMJ Financial for a total of $693,060 of principal and $358,534 accrued interest thereon. This resulted in a $1,051,594 gain from the cancellation of debt during the three months ended September 30, 2017.

 

As of September 30, 2017, and as of June 30, 2017, the aggregate remaining amount of convertible securities held by JMJ could be converted into 42,039,500 and 303,234,810 common shares at the conversion floor price of $.004.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $5,813 and $22,550 interest on this agreement.

 

At September 30, 2017 the amount recorded in Current Liabilities for convertible note plus accrued interest thereon previously issued to JMJ Financial was $109,000 and $59,158, respectively. At June 30, 2017 the amount recorded in Current Liabilities for all three convertible notes and accrued interest thereon previously issued to JMJ Financial was $802,060 and $410,879, respectively.

   

Arrangement #2 (John Fife dba St. George Investors)/Fife Forbearance

 

The Company entered into an amended agreement on June 1, 2012, when principle of $557,500 accrued interest of $66,338 and $95,611 of contractual charges for previous notes with John Fife totaled $719,449; whereby, the Company agreed to make payments of principle and interest of $33,238 per month commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then no conversions into the Company’s common stock would be available to the holder.

 

On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George Investments LLC and assigned to John Fife. The notice included alleged defaults with respect to payments owed by the Company under the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed according to the notice is approximately $902,279.

 

On December 15, 2014, a Memorandum Opinion and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”) for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed. The Company commenced settlement negotiations with the Plaintiff after we explored options including an appeal of the Judgment which the Company concluded would have a low probability of success.

 

Effective February 10, 2015, the Company entered into a Forbearance Agreement with the Holder. The agreement provides that the Holder would forego his right to enforce its remedies pursuant to the Judgment, which include demand for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, (after accounting for a payment of $15,000 the Company paid, under the terms of the agreement).

 

The terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts; $30,000.00 per month on each of the following dates: March 15, 2015.

 

April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full.

 

The Forbearance agreement required the Company to place, and the Company had done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments. The original agreement also provided that the Company file a Proxy statement before June 1, 2015 should additional shares be needed for the conversion reserve. The Company has not filed such a proxy statement due to cost prohibitions. The Company had not issued any stock for conversions since entering into the forbearance agreement and during the year ended June 30, 2015 and has made cash payments repaying $69,081 of principle and $41,019 of interest under the agreement. The value of the forbearance debt obligation on June 30, 2015 was $902,253. 

 

As of August 11, 2015 the Company entered into an Amendment No. 1 with Fife to the Forbearance Agreement rescheduling the monthly payment schedules.

 

As of January 19, 2016 the Company entered into a Second Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments.

 

During the three months ended September 30, 20176 the Company repaid $9,460 of principle and $5,540 of interest under the agreement, with non-cash conversions of 187,500,000 shares of the Company’s common stock valued at $15,000. . The value of the forbearance debt obligation on June 30, 2017 was $809,873.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $18,132 and $16,633 interest on this agreement. The value of the forbearance debt obligation on September 30, 2017 was $828,005.

 

As of June 30, 2017 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,123,399,750 shares of our common stock should the entire obligation be converted.

 

On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, if repaid within revised payment period, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011. (See Note 5 and Note 8)

 

As of September 30, 2017 this forbearance obligation, as amended, would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. 

  

Arrangement #3 (MH Investment trust II)

 

On August 26, 2014, the Company issued to the MH Investment Trust, a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 in which the Company received $40,000 in gross proceeds on September 1, 2014. The instrument is in the principal amount of $40,000 and matured on May 1, 2015. Interest only was payable at the rate of 12% per annum by the Company to the holder until maturity. The instrument is convertible into the Company’s common stock at 60% of the volume weighted average price of the stock based upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the proceeds of the financing used by the Company as working capital.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $173 and $154 interest on this agreement.

 

At September 30, 2017 the note balance was $3,333 and accrued interest of $2,565, at 12%, remained due under this agreement. At June 30, 2017 the note balance was $3,333 and accrued interest of $2,392, at 12%; remained due under this agreement. Based upon the price of the Company’s common stock on September 30, 2017 and June 30, 2017 this Note is convertible into approximately 98,300,000 and 95,412,167 shares of common stock, respectively. 

RETIRED SHARES 

Effective June 26, 2016, November 25, 2016 and June 26, 2017, Karen Durando, the wife of Ron Durando, returned 299,569,203, 800,000,000 and 295,430,797, for a total of 1,395,000,000 shares of common stock of the Company.

 

Such shares were previously issued common stock of the Company. The return of common stock was to provide the Company with sufficient authorized but unissued shares of stock to enable the Company to have additional authorized shares of its common stock to complete present private placements to provide operating capital for the Company.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments
3 Months Ended
Sep. 30, 2017
Commitments/Contingencies [Abstract]  
COMMITMENTS
5. CONTINGENCIES

 

The Company had been in litigation with John Fife with respect to a Convertible Note originally issued on September 13, 2011 in the principal amount of $557,000. Fife sought damages on a Motion for Summary Judgment in the amount in excess of $1,300,000 attorney’s fees. On December 15, 2014 the federal district court in the North East District of Illinois found in favor of Fife on a motion for Summary Judgment. The Company has entered into a Forbearance Agreement with Fife as a result of negotiations to settle such Judgment.

 

The value of the forbearance obligation on September 30, 2017 is $828,005 (See Note 3), all of which are included in current liabilities at that date. The value of the judgment totaled approximately $1.6 million as of December 31, 2014 and bears a punitive interest rate of 16% and would become payable in full (1.325 million) if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which payments through June 30, 2017 totaled $275,000. As of June 30, 2016, 812,500,000 shares from this reserve have been issued to satisfy the conversion provisions of the Forbearance Agreement. During the year ended June 30, 2017 187,500,000 shares were issued from this reserve and no amounts remain under the reserve agreement with our transfer agent. The Company is in arrears on the agreement and has negotiated a settlement for approximately $360,000 in cash payments. The Company is in arrears on this settlement. (See Note 3)

 

As of September 30, 2017, this forbearance obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares immediately for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. Subsequent to September 30, 2017 this Forbearance Agreement with Fife has been amended several times; the most recent providing for settlement amounts less than the aggregate of liabilities recorded in the financial statements. (See Note 3)

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Contingencies
3 Months Ended
Sep. 30, 2017
Commitments/Contingencies [Abstract]  
CONTINGENCIES
5.CONTINGENCIES

 

The Company had been in litigation with John Fife with respect to a Convertible Note originally issued on September 13, 2011 in the principal amount of $557,000. Fife sought damages on a Motion for Summary Judgment in the amount in excess of $1,300,000 attorney’s fees. On December 15, 2014 the federal district court in the North East District of Illinois found in favor of Fife on a motion for Summary Judgment. The Company has entered into a Forbearance Agreement with Fife as a result of negotiations to settle such Judgment.

 

The value of the forbearance obligation on September 30, 2017 is $828,005 (See Note 3), all of which are included in current liabilities at that date. The value of the judgment totaled approximately $1.6 million as of December 31, 2014 and bears a punitive interest rate of 16% and would become payable in full (1.325 million) if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which payments through June 30, 2017 totaled $275,000. As of June 30, 2016, 812,500,000 shares from this reserve have been issued to satisfy the conversion provisions of the Forbearance Agreement. During the year ended June 30, 2017 187,500,000 shares were issued from this reserve and no amounts remain under the reserve agreement with our transfer agent. The Company is in arrears on the agreement and has negotiated a settlement for approximately $360,000 in cash payments. The Company is in arrears on this settlement.

 

As of September 30, 2017, this forbearance obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 625,000,000 shares immediately for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. Subsequent to September 30, 2017 this Forbearance Agreement with Fife has been amended several times; the most recent providing for settlement amounts less than the aggregate of liabilities recorded in the financial statements. (See Note 3) 

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Fair Value Measurements
3 Months Ended
Sep. 30, 2017
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS
6.FAIR VALUE MEASUREMENTS

 

Effective July 1, 2008, we adopted Accounting Standards Codification (“ASC”) 820-10-20, Fair Value Measurements , which provides a framework for measuring fair value under GAAP. ASC 820-10-20 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10-20 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820-10-20 also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels. Financial assets and liabilities valued using level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and liabilities valued using level 2 inputs are based primarily on quoted prices for similar assets or liabilities in active or inactive markets. For certain long-term debt, the fair value was based on present value techniques using inputs derived principally or corroborated from market data. Financial assets and liabilities using level 3 inputs were primarily valued using management’s assumptions about the assumptions market participants would utilize in pricing the asset or liability. Valuation techniques utilized to determine fair value are consistently applied.

 

The table below presents reconciliation for liabilities measured at fair value on a recurring basis at September 30, 2017 and 2016. At September 30,2017 the Company’s common stock is subject to limited trading and availability of shares for conversions is nominal. We therefore believe there is no basis for applying a derivative liability to the conversion feature of the Notes.

 

  Fair Value Measurements Using Significant 
  Unobservable Inputs (Level 3) 
  Derivative Liability 
  September 30,  September 30, 
  2017  2016 
Balance, Beginning of Period $     -  $- 
Increase (Decrease) in Derivative and associated liabilities  -            - 
Debt discounts  -   - 
Balance, Ending $-  $- 

 

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

 

Some of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature, such as cash and cash equivalents, receivables and payables.

 

We have determined that it is not practical to estimate the fair value of our notes payable because of their unique nature and the costs that would be incurred to obtain an independent valuation. We do not have comparable outstanding debt on which to base an estimated current borrowing rate or other discount rate for purposes of estimating the fair value of the notes payable and we have not been able to develop a valuation model that can be applied consistently in a cost-efficient manner. These factors all contribute to the impracticability of estimating the fair value of the notes payable. At September 30, 2017, the carrying value of the notes payable and accrued interest for convertible agreements and officers’ notes was approximately $1,681,665. The JMJ convertible notes, which were originally due at various times through December 31, 2012, yield an interest rate of 12%, the Fife Forbearance obligation is 9%. Refer to Note 3 of these unaudited condensed consolidated financial statements for more information about the Company’s notes payable as of September 30, 2017.

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Related Party Transactions
3 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS
7.RELATED PARTY TRANSACTIONS

  

MICROPHASE CORPORATION

 

During a portion of the fiscal year ended June 30, 2016, the Company leased office space from Microphase at its Norwalk location. Rental expense charged by Microphase was $4,500 from July 1, 2015 through June 30, 2016. Microphase provided certain research and development services and shares administrative personnel from time to time. Mr. Necdet Ergul retired as the chairman of the board of mPhase in Nov 2007. Mr. Ergul and his family had owned a controlling interest and he is a director of Microphase Corporation. Mr. Durando was a strategic employee of Microphase Corporation from January 2, 2015 through May 31, of 2017.On February 9, 2015 Mr. Durando assigned all his interests in the Capital Stock of Microphase to the RCKJ Trust as the Grantor. On June 2, 2017 the RCKJ Trust, the holder of Durando’s prior interest in Microphase, and the Ergul Family Limited partnership, the holder of Ergul’s prior interest in Microphase, each exchanged all their respective shares of stock in Microphase in exchange for shares of stock in Digital Power Corporation, a publicly-held company then listed on the New York Stock exchange.

 

During the three months ended September 30, 2017 and 2016, $0 and $2,250 have been charged for rent and $0 and $0 have been charged for other expenses, respectively, to the Company by Microphase. As a result of the foregoing transactions, as of September 30, 2017 and June 30, 2017, the Company owed $32,545 to Microphase.

 

OTHER RELATED PARTIES

 

On September 30, 2017, Mr. Biderman, an outside Director’s affiliated firms of Palladium Capital Advisors and Eagle Strategic Advisers were owed unpaid finders’ fees in the aggregate amount of $186,000, which is included in due to related parties. Also Mr. Biderman loaned the Company $90,000 in the fourth quarter of the fiscal year ended June 30, 2015 and additionally, he advanced the Company $20,000 in the fiscal year ended June 30, 2016, net of repayments, together with $7,123 and $5,486 of accrued interest for fiscal years 2017 and 2016 that resulted in $122,609 outstanding at June 30, 2017.

 

During the three months ended September 30, 2017 and 2016 the Company recorded $1,863 and $1,755 of accrued interest on this loan and $124,472 was outstanding at September 30, 2017.

 

During the three months ended September 30, 2017 and 2016, Mr. Biderman’s firm charged finders’ fees of $500 and $0.

 

During the three months ended September 30, 2017 and 2016, the Company recorded $0 and $0 of fees to the wife of the Company’s President, for product marketing services.  

 

Transactions with Officers

 

At various points during past fiscal years Messrs. Durando, Dotoli and Smiley provided bridge loans to the Company evidenced by individual promissory notes and deferred compensation so as to provide working capital to the Company.

 

During the three months ended September 30, 2017 and 2016, $10,076 and $9,082 have been charged for interest on loans from officers.

 

At September 30, 2017 the aggregate principal amount of the officers’ loans together with accrue interest totaled $679,604. At June 30, 2017 the officers’ loans together with accrue interest totaled $658,311.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
3 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS
8. SUBSEQUENT EVENTS

 

  Subsequent to September 30, 2017, Messrs. Durando, and  Smiley  loaned the Company approximately $38,100 and $20,000,  to provide general working capital to commence the filings necessary to bring the Company’s financial statements and required periodic  reports pursuant to section 13 or 15(d) of the securities exchange act of 1934 current. $10,000 of Mr. Smiley's loan is convertible into shares of the Company's common stock at $.00005, if available, for a period of one year.

 

  From October 1, 2017 through the date hereof, the Company issued 1,700,000,000 shares of its common stock in private placements pursuant to Section 4(a)(2) of the Securities Act of 1933  raising gross proceeds aggregate of $85,000 all of which was used for working capital and general corporate purposes.
     
  On August 18, 2017 the Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011. On February 16, 2018 the Company and John Fife entered into an Amendment to a Judgment Settlement Agreement dated August 18, 2017 modifying the repayment schedule of a Convertible Debenture of the Company originally issued on September 13, 2011. The Company is in arrears on the revised settlement terms of a February 16, 2018 Amendment to such Agreement and does not believe it can settle such liability until after becoming current in its SEC filings. The revised agreement can be settled as soon as September 15, 2018 for $265,000 if paid in full, or up to $390,000 if paid in 24 monthly installments through September 2020. This would result in approximately a $600,000 gain if paid under the revised settlement terms.
     
  ●  Subsequent to September 30, 2017, effective October 19, 2017 Mr. Smiley returned 1,367,226,459 to the Company.  Effective December 31, 2017 Patricia Dotoli, the wife of, Gus Dotoli, returned 1,336,972,075 shares of common stock to the Company.

 

  On December 28, 2017 the Company entered into a non-binding letter of intent with Scepter Commodities, LLC for the proposed acquisition by Scepter of 80% of the fully-diluted shares of the Company on a reverse split basis.

 

  On  December 1, 2017 the Company announced in a Form 8k filing that as part of an over recapitalization of the Company that, subject to filing with the Secretary of State of New Jersey of an Amendment to its Certificate of Incorporation increasing it authorized shares of common stock to 72 billion shares, the Board of Directors has approved the granting of a total of 5,750,000,000 shares of common stock to Officers, Directors and an Accounting Consultant of the Company. It is necessary for the Company to complete the filing of 4 years of back state and federal income tax returns with the Department of Revenue of New Jersey in order to amend its Certificate of Incorporation. In addition, the Board of Directors approved the issuance of 16,000,000,000 shares to Officers and Directors and the Company’s accounting Consultant in exchange for aggregate indebtedness and fees owed to such persons in the approximate amount of $1,600,000.

 

  On April 3, 2018, April 27, 2018, May 30, 2018 and June 21, 2018 the Company and Scepter entered into Amendment No. 2, 3 ,4 & 5 to a Letter of Intent with Scepter Commodities LLC extending the time frame for the Company to become current in its SEC filings to April 30, 2018, May 31, 2018, June 15, 2018, and until July 15, 2018, respectively.
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Sep. 30, 2017
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]  
NATURE OF OPERATIONS

NATURE OF OPERATIONS

 

mPhase Technologies, Inc. (the “Company”) was organized on October 2, 1996 and is presently focused on restructuring its debt obligations to be in a position to capitalize on its existing intellectual property portfolio and endeavor to further develop new “smart surface” products through the sciences of microfluidics, micro-electromechanical systems (MEMS) and nanotechnology. The Company plans to restructure its business through some combination of raising additional capital, strategic partnerships and or mergers & acquisitions.

BASIS OF PRESENTATION

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ending September 30, 2017 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the year ended June 30, 2017.

GOING CONCERN

GOING CONCERN

 

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. 

 

Through September 30, 2017, the Company had incurred (a) cumulative losses totaling ($211,055,476) and (b) a stockholders’ deficit of ($3,536,930). During the three months ended September 30, 2017, the Company had $(21,286) net cash used in operating activities. At September 30, 2017, the Company had $599 of cash to fund short-term working capital requirements. In addition, the Company relies on the continuation of funding through private placements of its common stock. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this quarterly report. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company’s ability to continue as a going concern and its future success is dependent upon its ability to raise capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) allow the successful wide scale development, deployment and marketing of its smart surface products. There can be no assurance the necessary debt or equity financing will be available, or if so, on terms acceptable to the Company.

INVENTORY

INVENTORY- Discontinued Operations

 

The Company uses the First In First Out method (FIFO) to account for inventory which is carried at lower of cost and net realizable value. As of June 30, 2017, inventory consisted primarily of its various Jump products including the Jump and the mini Jump, and our remaining flashlight inventory, and was valued at $3,477. As of September 30, 2017, inventory consisted primarily of the Company’s line of Jump products including the new Jump Plus, and our remaining flashlight inventory, and was valued at $3,477. The Company’s Board of Directors, in a meeting on June 25, 2016, determined it was in the best interest of the Company to discontinue its entire line of Jump products in the 1st quarter of fiscal year 2017 owing to increased competition and decreasing margins. Appropriate reserves have been taken as of June 30, 2017 and September 30, 2017, to assure that the cost of such inventory does not exceed the expected net realizable value.

USE OF ESTIMATES

USE OF ESTIMATES

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include net realizable value of inventories, estimated value of stock-based compensation and changes in and the ending fair value of derivative liability. Actual results could differ from those estimates.

CHANGE IN ACCOUNTING ESTIMATE FOR THE VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

CHANGE IN ACCOUNTING ESTIMATE FOR THE VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

 

Changes in fair value of derivative liabilities results from the changes in the fair value due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The increase in fair value of derivative liabilities recognized effective June 30, 2016 is due to a change in accounting estimate related to the accounting for derivative liabilities. Due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, in addition to limited shares available for conversions for such instruments as amended, the convertible notes were determined to have no basis for applying a derivative liability to the conversion of these notes. As a result, the Company recorded a change in accounting estimate which resulted in a gain on change in derivative liability of approximately $200,000 effective June 30, 2016.

 

As of September 30, 2017, due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, and limited shares available for conversions for for outstanding convertible securities, l there is no basis for applying a derivative liability to the conversion of these notes.

LOSS PER COMMON SHARE, BASIC AND DILUTED

LOSS PER COMMON SHARE, BASIC AND DILUTED

 

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net loss adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company had no warrants to purchase shares of its common stock and no options to purchase shares of its common stock outstanding at September 30, 2017.

  

At September 30, 2017 the Company has convertible securities held by third parties that are immediately convertible into 765,339,500 shares of common stock.. Under the terms of the Forbearance Agreement, as amended, with John Fife (arrangement #4), Fife may acquire a total of 10,350,062,518 shares of the Company’s common stock based upon the conversion terms; if the forbearance agreement discussed in Note 3 is settled entirely in stock. In addition, the Company has convertible notes plus accrued interest thereon held by officers of the Company, subject to availability, convertible into approximately 1,699,010,000, immediately, if available.

 

The following table illustrates debts convertible into shares of the Company’s Common Stock at September 30, 2017:

 

  Note Principle  Accrued Interest  Total  Shares Convertible 
           immediately  over full term, if available* 
Arrangement #1 - JMJ Financial, Inc $109,000  $59,158  $168,158   42,039,500   42,039,500 
Arrangement #2 - St. George Investments/Fife Forbearance Obligation  828,005   -   828,005   625,000,000   10,350,062,500 
Arrangement #3 - MH Investment trust II  3,333   2,565   5,898   98,300,000   98,300,000 
Total Convertible Notes payable  940,338   61,723   1,002,061   765,339,500   10,490,402,000 
Notes Payable- Officers*  679,604   -   679,604   -   1,699,010,000 
Total $1,619,942  $61,723  $1,681,665   765,339,500   12,189,412,000 

 

* convertible if shares available

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

 

The Company has classified the operating results and associated assets and liabilities from its Jump line of products, which ceased having material sales in the first quarter of Fiscal 2017, as Discontinued Operations in the Consolidated Financial Statements for the Fiscal Years ended June 30, 2017 and 2016.

 

The Assets and Liabilities associated with discontinued operations included in our Consolidated Balance Sheet were as follows:

 

  September 30, 2017  June 30, 2017 
  (Unaudited)    
ASSETS Total  Discontinued  Continuing  Total  Discontinued  Continuing 
CURRENT ASSETS                  
Cash $594  $-  $594  $4,163  $-  $4,163 
Accounts receivable, net  -   -   -   -   -   - 
Inventory, net  3,477   3,477   -   3,477   3,477   - 
Prepaid and other current assets  800   800   -   1,050   1,050   - 
TOTAL CURRENT ASSETS  4,871   4,277   4,871   8,690   4,527   8,690 
                         
Property and equipment, net  -   -   -   683   -   683 
Other assets  800   -   800   800   -   800 
TOTAL ASSETS $5,671  $4,277  $5,671  $10,173  $4,527  $10,173 
                         
LIABILITIES                        
CURRENT LIABILITIES                        
Accounts payable $841,531  $397,078  $444,453  $839,824  $397,078  $442,746 
Accrued expenses  705,576   142,195   563,381   1,037,125   142,195   894,930 
Due to related parties  217,545   -   217,545   217,045   -   217,045 
Notes payable, Officers’  679,604   -   679,604   658,311   -   658,311 
Notes payable, Director & Investor  127,472   -   127,472   123,609   -   123,609 
Note Payable, Finance Company  30,535   30,535   -   27,936   27,936   - 
Current Portion, Long term convertible debentures  940,338   -   940,338   1,615,266   -   1,615,266 
TOTAL LIABILITIES $3,542,601  $569,808  $2,972,793  $4,519,116  $567,209  $3,951,907 

 

Revenue and Expense Recognition for Discontinued Operations

 

The Company has recognized revenue on its JUMP products when the products were shipped, and title passed to the customer.  

 

The results of discontinued operations include specifically identified and allocated common overhead expenses.

 

The Revenues and expenses associated with discontinued operations included in our Consolidated Statements of operations were as follows:

 

  For the Three Months Ended 
  September 30,
2017
  September 30,
2016
 
  Discontinued  Discontinued 
REVENUES $-  $19,892 
         
COSTS AND EXPENSES        
         
Cost of Sales  -   20,075 
         
Research and Development  -   38 
         
Selling and Marketing  1,424   8,193 
         
General and administrative  4,301   22,880 
         
TOTAL COSTS AND EXPENSES  5,725   51,186 
         
OPERATING LOSS  (5,725)  (31,294)
         
OTHER INCOME (EXPENSE)        
Interest (Expense)  (10,373)  (12,127)
Other income (Expense)  -   12,500 
         
TOTAL OTHER INCOME (EXPENSE)  (10,373)  373 
         
Loss From Discontinued Operations $(16,098) $(30,921)
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Sep. 30, 2017
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]  
Schedule of illustrates debts convertible into shares
  Note Principle  Accrued Interest  Total  Shares Convertible 
           immediately  over full term, if available* 
Arrangement #1 - JMJ Financial, Inc $109,000  $59,158  $168,158   42,039,500   42,039,500 
Arrangement #2 - St. George Investments/Fife Forbearance Obligation  828,005   -   828,005   625,000,000   10,350,062,500 
Arrangement #3 - MH Investment trust II  3,333   2,565   5,898   98,300,000   98,300,000 
Total Convertible Notes payable  940,338   61,723   1,002,061   765,339,500   10,490,402,000 
Notes Payable- Officers*  679,604   -   679,604   -   1,699,010,000 
Total $1,619,942  $61,723  $1,681,665   765,339,500   12,189,412,000 

 

* convertible if shares available

Schedule of discontinued operations

 

  September 30, 2017  June 30, 2017 
  (Unaudited)    
ASSETS Total  Discontinued  Continuing  Total  Discontinued  Continuing 
CURRENT ASSETS                  
Cash $594  $-  $594  $4,163  $-  $4,163 
Accounts receivable, net  -   -   -   -   -   - 
Inventory, net  3,477   3,477   -   3,477   3,477   - 
Prepaid and other current assets  800   800   -   1,050   1,050   - 
TOTAL CURRENT ASSETS  4,871   4,277   4,871   8,690   4,527   8,690 
                         
Property and equipment, net  -   -   -   683   -   683 
Other assets  800   -   800   800   -   800 
TOTAL ASSETS $5,671  $4,277  $5,671  $10,173  $4,527  $10,173 
                         
LIABILITIES                        
CURRENT LIABILITIES                        
Accounts payable $841,531  $397,078  $444,453  $839,824  $397,078  $442,746 
Accrued expenses  705,576   142,195   563,381   1,037,125   142,195   894,930 
Due to related parties  217,545   -   217,545   217,045   -   217,045 
Notes payable, Officers’  679,604   -   679,604   658,311   -   658,311 
Notes payable, Director & Investor  127,472   -   127,472   123,609   -   123,609 
Note Payable, Finance Company  30,535   30,535   -   27,936   27,936   - 
Current Portion, Long term convertible debentures  940,338   -   940,338   1,615,266   -   1,615,266 
TOTAL LIABILITIES $3,542,601  $569,808  $2,972,793  $4,519,116  $567,209  $3,951,907 

 

  For the Three Months Ended 
  September 30,
2017
  September 30,
2016
 
  Discontinued  Discontinued 
REVENUES $-  $19,892 
         
COSTS AND EXPENSES        
         
Cost of Sales  -   20,075 
         
Research and Development  -   38 
         
Selling and Marketing  1,424   8,193 
         
General and administrative  4,301   22,880 
         
TOTAL COSTS AND EXPENSES  5,725   51,186 
         
OPERATING LOSS  (5,725)  (31,294)
         
OTHER INCOME (EXPENSE)        
Interest (Expense)  (10,373)  (12,127)
Other income (Expense)  -   12,500 
         
TOTAL OTHER INCOME (EXPENSE)  (10,373)  373 
         
Loss From Discontinued Operations $(16,098) $(30,921)
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Supplemental Cash Flow Information (Tables)
3 Months Ended
Sep. 30, 2017
Supplemental Cash Flow Information [Abstract]  
Summary of supplemental cash flow information
  For the Three Months Ended 
  September 30,  September 30, 
  2017  2016 
Statement of Operation Information:      
Interest paid (net interest income) $968  $20,683 
         
Non-Cash Investing and Financing Activities:        
Conversion of $9,460 convertible debt and $5,540 accrued interest to common stock in 2016 $-  $15,000 
Amortization of loan discount $2,600  $2,700
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt (Tables)
3 Months Ended
Sep. 30, 2017
Equity Transactions, Notes Payable and Convertible Debt [Abstract]  
Summary of notes payable under convertible debt and debenture agreements
  September 30,  June 30, 
  2017 
  (unaudited)    
Arrangement #1 - JMJ Financial, Inc $109,000  $802,060 
Arrangement #2 - St. George Investments/Fife Forbearance Obligation  828,005   809,873 
Arrangement #3 - MH Investment trust II  3,333   3,333 
Total notes payable  940,338   1,615,266 
Convertible Notes payable-short term portion $940,338  $1,615,266
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value Measurements (Tables)
3 Months Ended
Sep. 30, 2017
Fair Value Measurements [Abstract]  
Summary of liabilities measured at fair value on a recurring basis
  Fair Value Measurements Using Significant 
  Unobservable Inputs (Level 3) 
  Derivative Liability 
  September 30,  September 30, 
  2017  2016 
Balance, Beginning of Period $     -  $- 
Increase (Decrease) in Derivative and associated liabilities  -            - 
Debt discounts  -   - 
Balance, Ending $-  $- 
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($)
Sep. 30, 2017
Sep. 30, 2016
Debt Instrument [Line Items]    
Total Convertible Debt   $ 9,460
Notes Payable- Officers [Member]    
Debt Instrument [Line Items]    
Note Principle [1] $ 679,604  
Accrued Interest [1]  
Total Convertible Debt [1] $ 679,604  
Shares Convertible immediately [1]  
Shares Convertible over full term, if available [1] 1,699,010,000  
Total Convertible Notes payable [Member]    
Debt Instrument [Line Items]    
Note Principle $ 940,338  
Accrued Interest 61,723  
Total Convertible Debt $ 1,002,061  
Shares Convertible immediately 765,339,500  
Shares Convertible over full term, if available [1] 10,490,402,000  
Total [Member]    
Debt Instrument [Line Items]    
Note Principle $ 1,619,942  
Accrued Interest 61,723  
Total Convertible Debt $ 1,681,665  
Shares Convertible immediately 765,339,500  
Shares Convertible over full term, if available [1] 12,189,412,000  
Arrangement #1 - JMJ Financial, Inc [Member]    
Debt Instrument [Line Items]    
Note Principle $ 109,000  
Accrued Interest 59,158  
Total Convertible Debt $ 168,158  
Shares Convertible immediately 42,039,500  
Shares Convertible over full term, if available [1] 42,039,500  
Arrangement #2 - St. George Investments/Fife Forbearance Obligation [Member]    
Debt Instrument [Line Items]    
Note Principle $ 828,005  
Accrued Interest  
Total Convertible Debt $ 828,005  
Shares Convertible immediately 625,000,000  
Shares Convertible over full term, if available [1] 10,350,062,500  
Arrangement #3 - MH Investment trust II [Member]    
Debt Instrument [Line Items]    
Note Principle $ 3,333  
Accrued Interest 2,565  
Total Convertible Debt $ 5,898  
Shares Convertible immediately 98,300,000  
Shares Convertible over full term, if available [1] 98,300,000  
[1] convertible if shares available
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Details 1) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Sep. 30, 2016
Jun. 30, 2016
CURRENT ASSETS        
Cash $ 594 $ 4,163 $ 8,793 $ 4,717
Accounts receivable, net    
Inventory, net 3,477 3,477    
Prepaid and other current assets 800 1,050    
TOTAL CURRENT ASSETS 4,871 8,690    
Property and equipment, net 683    
Other assets 800 800    
TOTAL ASSETS 5,671 10,173    
CURRENT LIABILITIES        
Accounts payable 444,453 442,746    
Accrued expenses 563,381 894,930    
Due to related parties 217,545 217,045    
Notes payable, Officers' 679,604 658,311    
Notes payable, Director & Investor 127,472 123,609    
Note Payable, Finance Company 30,535 27,936    
Current Portion, Long term convertible debentures 940,338 1,615,266    
TOTAL LIABILITIES 3,542,601 4,519,116    
Discontinued [Member]        
CURRENT ASSETS        
Cash    
Accounts receivable, net    
Inventory, net 3,477 3,477    
Prepaid and other current assets 800 1,050    
TOTAL CURRENT ASSETS 4,277 4,527    
Property and equipment, net    
Other assets    
TOTAL ASSETS 4,277 4,527    
CURRENT LIABILITIES        
Accounts payable 397,078 397,078    
Accrued expenses 142,195 142,195    
Due to related parties    
Notes payable, Officers'    
Notes payable, Director & Investor    
Note Payable, Finance Company 30,535 27,936    
Current Portion, Long term convertible debentures    
TOTAL LIABILITIES 569,808 567,209    
Continuing [Member]        
CURRENT ASSETS        
Cash 594 4,163    
Accounts receivable, net    
Inventory, net    
Prepaid and other current assets    
TOTAL CURRENT ASSETS 4,871 8,690    
Property and equipment, net 683    
Other assets 800 800    
TOTAL ASSETS 5,671 10,173    
CURRENT LIABILITIES        
Accounts payable 444,453 442,746    
Accrued expenses 563,381 894,930    
Due to related parties 217,545 217,045    
Notes payable, Officers' 679,604 658,311    
Notes payable, Director & Investor 127,472 123,609    
Note Payable, Finance Company    
Current Portion, Long term convertible debentures 940,338 1,615,266    
TOTAL LIABILITIES $ 2,972,793 $ 3,951,907    
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Details 2) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
REVENUES
COSTS AND EXPENSES    
General and administrative 34,803 63,754
TOTAL COSTS AND EXPENSES 35,486 64,491
OPERATING LOSS (35,486) (64,491)
OTHER INCOME (EXPENSE)    
Interest (Expense) (62,889) (76,274)
Other income (Expense) 1,051,594
TOTAL OTHER INCOME (EXPENSE) 988,705 (76,274)
Loss From Discontinued Operations (16,098) (30,921)
Discontinued Operations [Member]    
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
REVENUES
COSTS AND EXPENSES    
Cost of Sales 20,075
Research and Development 38
Selling and Marketing 1,424 8,193
General and administrative 4,301 22,880
TOTAL COSTS AND EXPENSES 5,725 51,186
OPERATING LOSS (5,725) (31,294)
OTHER INCOME (EXPENSE)    
Interest (Expense) (10,373) (12,127)
Other income (Expense) 12,500
TOTAL OTHER INCOME (EXPENSE) (10,373) 373
Loss From Discontinued Operations $ (16,098) $ (30,921)
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) - USD ($)
3 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2016
Jun. 30, 2017
Basis of Presentation and Summary of Significant Accounting Policies (Textual)        
Cumulative losses $ (211,055,476)     $ (211,992,596)
Stockholders' deficit (3,536,930)     (4,508,943)
Inventory 3,477     3,477
Gain on change in derivative liability     $ 200,000  
Cash 599      
Net cash used in operating activities (21,286) $ (776)    
Discontinued Operations [Member]        
Basis of Presentation and Summary of Significant Accounting Policies (Textual)        
Inventory $ 3,477     $ 3,477
John Fife [Member]        
Basis of Presentation and Summary of Significant Accounting Policies (Textual)        
Debt conversion, description Convertible securities held by third parties that are immediately convertible into 765,339,500 shares of common stock.. Under the terms of the Forbearance Agreement, as amended, with John Fife (arrangement #4), Fife may acquire a total of 10,350,062,518 shares of the Company's common stock based upon the conversion terms; if the forbearance agreement discussed in Note 3 is settled entirely in stock. In addition, the Company has convertible notes plus accrued interest thereon held by officers of the Company, subject to availability, convertible into approximately 1,699,010,000, immediately, if available.      
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Supplemental Cash Flow Information (Details) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Statement of Operation Information:    
Interest paid (net interest income) $ 968 $ 20,683
Non-Cash Investing and Financing Activities:    
Conversion of $9,460 convertible debt and $5,540 accrued interest to common stock in 2016 15,000
Amortization of loan discount $ 2,600 $ 2,700
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Supplemental Cash Flow Information (Details Textual)
3 Months Ended
Sep. 30, 2016
USD ($)
Supplemental Cash Flow Information (Textual)  
Convertible debt $ 9,460
Conversion of accrued interest to common stock $ 5,540
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt (Details) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Summary of notes payable under convertible debt and debenture agreements    
Total notes payable $ 940,338 $ 1,615,266
Convertible Notes payable-short term portion 940,338 1,615,266
Arrangement #1 - JMJ Financial, Inc [Member]    
Summary of notes payable under convertible debt and debenture agreements    
Total notes payable 109,000 802,060
Arrangement #2 - St. George Investments/Fife Forbearance Obligation [Member]    
Summary of notes payable under convertible debt and debenture agreements    
Total notes payable 828,005 809,873
Arrangement #3 - MH Investment trust II [Member]    
Summary of notes payable under convertible debt and debenture agreements    
Total notes payable $ 3,333 $ 3,333
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt (Details Textual)
1 Months Ended 3 Months Ended 12 Months Ended
Jul. 31, 2016
USD ($)
Sep. 30, 2017
USD ($)
Arrangement
shares
Sep. 30, 2016
USD ($)
shares
Jun. 30, 2017
USD ($)
Jun. 30, 2016
USD ($)
Jan. 31, 2016
USD ($)
Jun. 30, 2015
USD ($)
Equity Transactions, Notes Payable and Convertible Debt (Textual)              
Conversion of convertible debt   $ 15,000        
Employees value            
Number of convertible debt arrangement | Arrangement   3          
Accrued expenses   $ 61,723   $ 413,271      
Related party advances   217,545   217,045      
Mr. Biderman's [Member]              
Equity Transactions, Notes Payable and Convertible Debt (Textual)              
Related party advances         $ 20,000   $ 90,000
Repayment of notes payable related parties         40,000    
Remains outstanding   124,472   122,609      
Accrued interest   1,863 1,755 7,123 5,486    
Shareholder advanced amount         60,000    
Note Payable, Finance Company [Member]              
Equity Transactions, Notes Payable and Convertible Debt (Textual)              
Repayment of notes payable related parties       12,300      
Company borrowed amount           $ 66,000  
Finance charges included in interest expense $ 87,500 2,600 2,700 10,197 36,193    
Remains outstanding   30,535   27,936 $ 27,210    
Principal amount       2,103      
Other Note Payable [Member]              
Equity Transactions, Notes Payable and Convertible Debt (Textual)              
Remains outstanding   3,000   1,000      
Unaffiliated shareholder advanced amount       $ 1,000      
Shareholder advanced amount   $ 2,000          
Convertible Debt [Member]              
Equity Transactions, Notes Payable and Convertible Debt (Textual)              
Conversion of convertible debt     $ 15,000        
Shares reserved for monthly payments | shares     187,500,000        
Accrued interest     $ 9,460        
Principal amount     $ 5,540        
Private Placements [Member]              
Equity Transactions, Notes Payable and Convertible Debt (Textual)              
Common stock issued in connection with private placements | shares   100,000,000          
Gross proceeds   $ 5,000          
Finder's fees   $ 500          
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt (Details Textual 1) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Oct. 01, 2012
Apr. 05, 2010
Dec. 15, 2009
Nov. 17, 2009
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2017
Apr. 30, 2017
Jun. 30, 2012
Equity Transaction and Convertible Debt (Textual)                  
Notes remaining balance                 $ 372,060
Current liabilities convertible notes         $ 940,338   $ 1,615,266    
Arrangement #1 (JMJ Financial, Inc.) [Member]                  
Equity Transaction and Convertible Debt (Textual)                  
Conversion floor price         $ 0.004   $ 0.004    
Amount received under agreement   $ 100,000 $ 300,000 $ 186,000          
Interest amount on convertible note         $ 5,813 $ 22,550      
Conversion fee converted into common stock         42,039,500   $ 303,234,810    
Notes remaining balance   1,144,000             321,000
Unpaid installment payment $ 37,018                
Principal amount               $ 693,060  
Accrued interest         59,158   410,879 $ 358,534  
Current liabilities convertible notes         109,000   802,060    
Cancellation of debt amount         $ 1,051,594        
Arrangement #1 (JMJ Financial, Inc.) [Member] | Convertible note [Member]                  
Equity Transaction and Convertible Debt (Textual)                  
Long-term debt   $ 1,200,000 $ 1,500,000 $ 1,200,000          
One-time interest factor on convertible note   12.00% 12.00% 12.00%          
Interest amount on convertible note   $ 144,000 $ 180,000 $ 144,000          
Convertible debt, maturity date   Dec. 15, 2012 Dec. 15, 2012 Sep. 23, 2012          
Notes remaining balance                 $ 109,000
Proceeds in connection with promissory note       $ 150,000          
Principal amount     $ 802,060            
Arrangement #1 (JMJ Financial, Inc.) [Member] | Secured Promissory Note [Member]                  
Equity Transaction and Convertible Debt (Textual)                  
Long-term debt   $ 1,100,000 $ 1,400,000 $ 1,100,000          
One-time interest factor on convertible note   13.20% 13.20% 13.20%          
Interest amount on convertible note   $ 144,000 $ 180,000 $ 144,000          
Convertible debt, maturity date   Dec. 15, 2012 Dec. 15, 2012 Sep. 23, 2012          
Arrangement #1 (JMJ Financial, Inc.) [Member] | Two Notes [Member]                  
Equity Transaction and Convertible Debt (Textual)                  
Claim amount issued             1,046,416    
Arrangement #1 (JMJ Financial, Inc.) [Member] | Three Convertible Notes [Member]                  
Equity Transaction and Convertible Debt (Textual)                  
Claim amount issued             $ 1,212,940    
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt (Details Textual 2) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended 23 Months Ended
Feb. 10, 2015
Aug. 18, 2017
Jun. 30, 2016
Dec. 31, 2014
Jun. 30, 2012
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2017
Jun. 30, 2015
Sep. 01, 2014
Nov. 20, 2012
Sep. 13, 2011
Equity Transaction and Convertible Debt (Textual)                        
Amortization of debt discount           $ 2,600 $ 2,700          
Contractual charges related to debt agreement amendment         $ 719,449              
Accrued interest charged           61,723   $ 413,271        
Increase in derivative liability     $ 200,000                  
Common stock shares converted, amount           $ 15,000          
Non-cash conversions shares of common stock             187,500,000          
Arrangement #2 (John Fife dba St. George Investors)/Fife Forbearance [Member]                        
Equity Transaction and Convertible Debt (Textual)                        
Contractual charges related to debt agreement amendment         95,611              
Accrued interest charged         66,338 41,464            
Interest rate       16.00%           8.00%   8.00%
Payments of principle and interest per month $ 1,600,000                 $ 33,238    
Unpaid installment payment 15,000                      
Alleged amount owed according to redemption notice                     $ 902,279  
Forbearance debt obligation $ 1,003,943         828,005   $ 809,873        
Common stock, capital shares reserved                 1,000,000,000      
Repaid principle           9,460     $ 69,081      
Company recorded repaid interest on this agreement           $ 5,540     41,019      
Litigation amount       $ 1,600,000                
Periodic payment, description   The Company entered into a Judgment Settlement Agreement with John Fife with respect to the Judgment in favor of Fife, which reduces the balance under the amended agreement to $360,000, if repaid within revised payment period, without conversion rights, in connection with the default by the Company under a Convertible Debenture dated September 13, 2011.                    
Terms agreement, description           The unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts; $30,000.00 per month on each of the following dates: March 15, 2015. April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full.            
Forbearance obligation derivative liability                 $ 902,253      
Principal amount         $ 557,500              
Forbearance obligation, description           (i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted.   i) up to 625,000,000 shares, for the satisfaction of the next required monthly payment, and (ii) up to 10,123,399,750 shares of our common stock should the entire obligation be converted.        
Interest on this agreement           $ 18,132 $ 16,633          
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Equity Transactions, Notes Payable and Convertible Debt (Details Textual 3) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Jun. 26, 2017
Nov. 25, 2016
Jun. 26, 2016
Aug. 26, 2014
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2017
Jun. 30, 2012
Line of Credit Facility [Line Items]                
Proceeds from issuance of common stock         $ 4,500    
Notes remaining balance               $ 372,060
Arrangement #3 - MH Investment trust II [Member]                
Line of Credit Facility [Line Items]                
Proceeds from private placement       $ 40,000        
Principal amount of debt       $ 40,000        
Convertible debt, maturity date       May 01, 2015        
Interest rate       12.00%        
Description of conversion price       The instrument is convertible into the Company's common stock at 60% of the volume weighted average price of the stock based upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the trading price exceeds $.0020 for the five days before such conversion.        
Look back period of stock price         10 days      
Converted into shares common stock         98,300,000   95,412,167  
Accrued interest         $ 2,565   $ 2,392  
Percentage of accrued interest         12.00%   12.00%  
Notes remaining balance         $ 3,333   $ 3,333  
Company recorded interest on this agreement         $ 173 $ 154    
Returned shares of common stock 295,430,797 800,000,000 299,569,203   1,395,000,000      
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments (Details) - USD ($)
3 Months Ended
Apr. 30, 2015
Sep. 30, 2017
Commitments (Textual)    
Monthly rental per month $ 2,200  
Unpaid rent   $ 22,000
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Contingencies (Details) - USD ($)
1 Months Ended 3 Months Ended
Sep. 13, 2011
Dec. 31, 2014
Sep. 30, 2017
Jun. 30, 2017
Jun. 30, 2016
Contingencies (Textual)          
Forbearance obligation reduced by payments, description     Would become payable in full (1.325 million) if the Company defaults under the forbearance obligation reduced by payments under the Forbearance Agreement, which payments through June 30, 2017 totaled $275,000.    
Settlement for approximately cash payments     $ 360,000    
John Fife [Member]          
Contingencies (Textual)          
Principal amount $ 557,000        
Sought damages value $ 1,300,000        
Forbearance Obligation [Member]          
Contingencies (Textual)          
Principal amount   $ 1,600,000      
Forbearance obligation     $ 828,005    
Interest rate   16.00%      
Convertible common stock shares     10,350,062,518    
Forbearance obligation reduced by payments, description     (i) up to 625,000,000 shares immediately for the satisfaction of the next required monthly payment, and (ii) up to 10,350,062,518 shares of our common stock should the entire obligation be converted. Subsequent to September 30, 2017 this Forbearance Agreement with Fife has been amended several times; the most recent providing for settlement amounts less than the aggregate of liabilities recorded in the financial statements. (See Note 3)    
Shares issued from reserve       187,500,000 812,500,000
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value Measurements (Details) - Level 3 [Member] - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Reconciliation for liabilities measured at fair value on a recurring basis    
Balance, Beginning of Period
Increase (Decrease) in Derivative and associated liabilities
Debt discounts
Balance, Ending
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value Measurements (Details Textual) - JMJ convertible notes [Member]
3 Months Ended
Sep. 30, 2017
USD ($)
Fair Value Measurements (Textual)  
Carrying value of notes payable and accrued interest $ 1,681,665
Interest rate of convertible debt 12.00%
Convertible note maturity date Through December 31, 2012
Percentage of Fife Forbearance obligation 9.00%
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Party Transactions (Details) - USD ($)
3 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2015
Related Party Transactions (Textual)          
Related party advances $ 217,545     $ 217,045  
Microphase [Member]          
Related Party Transactions (Textual)          
Rent 0 $ 2,250      
Other expenses 0 0 $ 4,500    
Company owed amount 32,545     32,545  
Mr. Biderman's [Member]          
Related Party Transactions (Textual)          
Related party advances     20,000   $ 90,000
Repayment of notes payable related parties     40,000    
Accrued interest 1,863 1,755 $ 5,486 7,123  
Unpaid fees amount 186,000        
Finders fees related parties 500 0      
Outstanding amount 124,472     122,609  
Officers [Member]          
Related Party Transactions (Textual)          
Accrued interest 679,604     $ 658,311  
Interest on loan 10,076 9,082      
President [Member]          
Related Party Transactions (Textual)          
Administrative expenses and Product marketing services $ 0 $ 0      
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events (Details) - USD ($)
1 Months Ended 3 Months Ended
Dec. 01, 2017
Dec. 28, 2017
Oct. 31, 2017
Aug. 18, 2017
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2017
Jun. 30, 2017
Subsequent Events (Textual)                
Aggregate gross proceeds         $ 4,500    
Common stock, shares issued         17,864,713,048     17,764,713,048
Related parties loaned the company         $ 11,300 $ 8,504    
Subsequent Events [Member]                
Subsequent Events (Textual)                
Description on recapitalization The Company that, subject to filing with the Secretary of State of New Jersey of an Amendment to its Certificate of Incorporation increasing it authorized shares of common stock to 72 billion shares, the Board of Directors has approved the granting of a total of 5,750,000,000 shares of common stock to Officers, Directors and an Accounting Consultant of the Company. It is necessary for the Company to complete the filing of 4 years of back state and federal income tax returns with the Department of Revenue of New Jersey in order to amend its Certificate of Incorporation. In addition, the Board of Directors approved the issuance of 16,000,000,000 shares to Officers and Directors and the Company's accounting Consultant in exchange for aggregate indebtedness and fees owed to such persons in the approximate amount of $1,600,000.              
Private placements [Member] | Subsequent Events [Member]                
Subsequent Events (Textual)                
Aggregate gross proceeds     $ 85,000          
Common stock, shares issued     1,700,000,000          
Karen Durando [Member]                
Subsequent Events (Textual)                
Related parties loaned the company         38,100      
Mr. Smiley [Member]                
Subsequent Events (Textual)                
Loans payable         $ 10,000      
Returned common stock         1,367,226,459      
Related parties loaned the company         $ 20,000      
Period of loan term         1 year      
Convertible common stock, conversion price         $ 0.00005      
John Fife [Member]                
Subsequent Events (Textual)                
Balance under amended agreement       $ 360,000        
Revised agreement, description       The revised agreement can be settled as soon as September 15, 2018 for $265,000 if paid in full, or up to $390,000 if paid in 24 monthly installments through September 2020. This would result in approximately a $600,000 gain if paid under the revised settlement terms.        
Patricia Dotoli [Member] | Subsequent Events [Member]                
Subsequent Events (Textual)                
Returned common stock             1,336,972,075  
Scepter Commodities, LLC [Member] | Subsequent Events [Member]                
Subsequent Events (Textual)                
Fully-diluted reverse split basis shares, percentage   80.00%            
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