14. RESTATEMENT OF INTERIM CONDENSED FINANCIAL STATEMENTS

3 Months Ended

Sep. 30, 2017

Restatement Of Interim Condensed Financial Statements

14. RESTATEMENT OF INTERIM CONDENSED FINANCIAL STATEMENTS

During the September 30, 2017 quarter, the Company sold $400,000 of its product to its manufacturer for $400,000 and recorded it as gross revenue. The transaction eliminated $400,000 in short term debt. During the course of the audit it was determined that the transaction should have been classified as net sales. Accordingly, the Company should not have (i) recognized gross revenue of $400,000 for the sale related to 4,000 units to the Company’s manufacturer, (ii) recognized the cost of sales related to 4,000 units of Company products sold to that manufacturer in the amount of $400,000.

The Company also determined that it erroneously overstated the derivative liability as of September 30, 2017 and it should be reduced by $485,031. The change in derivative calculation also affected total debt discount, amortization of the debt discount, change in fair value of derivatives, and derivative expense.

The effects of these corrections on the interim consolidated financial statements were:

AFTERMASTER, INC.
Consolidated Balance Sheets
	September 30,				September 30,
	2017				2017
	As Reported		Correction		As Restated
Derivative Liability	2,932,616		(485,031	)	2,447,585
Convertible notes payable - related party, net of discount of $2,847 and $3,818, respectively	3,955,000		(2,847	)	3,952,153
Convertible notes payable, net of discount of $612,548 and $549,737, respectively	2,470,073		10,129		2,480,202
			—
Total Current Liabilities	11,216,552		(477,749	)	10,738,803
Total Liabilities	11,216,552		(477,749	)	10,738,803
Additional paid In capital	64,256,052		49,840		64,305,892
Accumulated Deficit	(74,293,242	)	427,909		(73,865,333	)
Total Stockholders' Deficit	(9,893,460	)	477,749		(9,415,711	)

	For the Three Months Ended
	September 30,
	2017						2017
	As Reported			Correction			As Restated
REVENUES
Product Revenues		494,681			(400,000	)		94,681
Total Revenues		615,396			(400,000	)		215,396
COSTS AND EXPENSES
Cost of Revenues (Exclusive of Depreciation and Amortization)		556,328			(400,000	)		156,328
Total Costs and Expenses		1,477,125			(400,000	)		1,077,125
Interest Expense		(875,313	)		19,862			(855,451	)
Derivative Expense		(133,652	)		(3,814	)		(137,466	)
Change in Fair Value of Derivative		209,039			(6,219	)		202,820
Total Other Expense		(1,127,962	)		427,907			(700,055	)
Loss Before Income Taxes		(1,989,691	)		427,907			(1,561,784	)
NET LOSS	$	(1,989,691	)		427,907		$	(1,561,784	)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS	$	(2,046,058	)		427,907		$	(1,618,151	)
Basic and diluted Loss Per Share of Common Stock	$	(0.02	)	$	(0.01	)	$	(0.01	)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS		(2,046,058	)		427,907			(1,618,151	)
COMPREHENSIVE LOSS	$	(2,121,718	)		427,907		$	(1,693,811	)

AFTERMASTER, INC.
Consolidated Statements of Cash Flows
		For the Three Months Ended
		September 30,
		2017					2017
		As Reported		Correction			As Restated
Net Loss	$	(1,989,691	)	427,907		$	(1,561,784	)
Amortization of debt discount and issuance costs		418,126		(16,231	)		401,895
Derivative expense		133,652		3,814			137,466
Remeasurement of derivative		209,039		(6,219	)		202,820
Accounts payable and accrued expenses		64,084		(3,631	)		60,453
Derivative liability	$	435,778		(108,880	)	$	326,898
Original Issue Discount	$	35,250		76,485		$	111,735