1. Organization and description of business Generation NEXT Franchise Brands, Inc. (formerly known as Fresh Healthy Vending International, Inc. and referred to herein collectively with its subsidiaries as "we", the "Company", "our Company", or "GNext") operates through its wholly-owned subsidiaries, Fresh Healthy Vending LLC ("FHV LLC"), The Fresh and Healthy Vending Corporation, FHV Acquisition Corp. ("FHV Acquisition"), Reis &amp; Irvys, Inc. (R&amp;I), 19 Degrees, Inc. and Generation Next Vending Robots, Inc. as a franchisor, direct seller and owner and operator of robotic soft serve vending kiosks, healthy drink and snack vending machines and micro markets that feature cashless payment devices and remote monitoring software. The Company uses in-house location specialists that are responsible for securing locations for its franchisees; additionally, the Company has negotiated discounts with a national product distribution chain. The Company also operates its own frozen yogurt equipment. Effective May 2016, the Company shifted focus away from franchise sales of its healthy drink and snack vending machines and micro markets. We will no longer market our vending machines and micro markets to new franchisees. Because it was determined the assets of FHV LLC are currently insufficient to satisfy FHV LLCs obligations to creditors, as of September 28, 2018, FHV LLC has executed an Assignment for the Benefit of Creditors under California law, whereby all of the assets of FHV LLC have been assigned to a third party fiduciary who will expeditiously liquidate such assets and distribute the proceeds thereof to FHV LLCs creditors pursuant to the priorities established and permitted by law. During fiscal year 2017, we obtained the exclusive rights to sell a new frozen yogurt vending robot, branded Reis &amp; Irvys. As of the date of this report, we have received approval to sell franchises in a number of states in the U.S. and Canada and have booked a net 1,417 units aggregating approximately $59 million in customer advances-due from franchisees and contract liabilities- franchisees advances and deferred revenues, prior to certain offset adjustments aggregating 10.3 million. As of June 30, 2018, and through the date of this report, the Company has delivered and installed 75 frozen yogurt vending machines. The Company has redeveloped the next generation frozen yogurt robot and has spent $5.2 million in research and development expenses through June 30, 2018. The Company anticipates it will continue to incur additional research and development expenses throughout fiscal 2019. On December 29, 2016, the Company entered into an Asset Purchase Agreement (the Agreement) with Robofusion, Inc. (RFI), whereby the Company acquired the intellectual property assets of RFI, a developer of robotic-kiosk vending technology, primarily frozen yogurt and ice cream vending robots, using RFI's trademarked name of Reis &amp; Irvy's (the Acquisition). The Company considered the guidance in ASC 805, Business Combinations, and determined the transaction was a purchase of an asset. As a result, the estimated fair of the assets acquired were capitalized. The intent of the purchase was to combine robotics and artificial intelligence platforms to facilitate the manufacture of an unattended robot in order to disrupt traditional frozen yogurt and ice cream retail establishments and, on a larger scale, establish ourselves as an industry leader in the emerging and fast-growing space of unattended retail. Since acquisition, we have developed a state-of-the art robotic soft serve vending robot that is a completely unique vending machine and entertainment experience. The robot accepts cash, credit cards, and is the first of its kind to accept bitcoin. A proprietary software platform is utilized that allows us to readily monitor the sales of our franchisees and our corporate-owned machines, which assists our franchisees and us in facilitating the management and maintenance of the vending robot. In order to protect the Companys rights, several U.S. and international patents have been approved and granted. Our vending standards are UL ( Underwriters Laboratories ) (approval in process), NSF ( National Sanitation Foundation ) recognized (approved in August 2018), and National Automated Merchandising Association ( NAMA) certified (approved in September 2018), which we believe are among the highest standards in the industry. This ensures food temperature compliance, which includes auto-contingency processes should electrical or hardware malfunction; it also ensures that ambient air stays within specified parameters at all times. Our third-party cashless payment technology provides the highest level of data and network security compliance while ensuring complete transparency. As a result, our robotic soft serve vending robots will contain minimal amounts of cash. All transactions are managed by third parties to facilitate financial compliance with local and national laws and regulations. Funds from all electronic transactions are collected by Reis &amp; Irvys and remitted to the franchisee within ten days of the subsequent month.