Summary of Significant Accounting Policies (Policies)
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3 Months Ended |
Sep. 30, 2019 |
Accounting Policies [Abstract] |
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Interim Financial Statements |
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Interim Financial Statements |
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These unaudited condensed consolidated
financial statements as of and for the three (3) months ended September 30, 2019 and 2018, respectively, reflect all adjustments
including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial
position, results of operations and cash flows for the periods presented in accordance with the accounting principles
generally accepted in the United States of America.
These interim unaudited condensed
consolidated financial statements should be read in conjunction with the Company's consolidated financial statements
and notes thereto for the years ended June 30, 2019 and 2018, respectively, which are included in the Company's
June 30, 2019 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on October 15,
2019. The Company assumes that the users of the interim financial information herein have read, or have access to, the
audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed
for a fair presentation may be determined in that context. The results of operations for the three (3) months ended September
30, 2019 are not necessarily indicative of results for the entire year ending June 30, 2020.
We made certain reclassifications
to prior period amounts to conform with the current year's presentation. These reclassifications did not have a
material effect on our condensed consolidated statement of financial position, results of operations or cash flows.
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Use of Estimates |
Use of Estimates |
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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 period. Actual
results could differ from those estimates. Estimates are used in the determination of depreciation and amortization, the valuation
for non-cash issuances of common stock, and the website, income taxes and contingencies, valuing convertible notes for BCF
and derivative liability, among others. |
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Cash and Cash Equivalents |
Cash and Cash Equivalents |
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The Company classifies
as cash and cash equivalents amounts on deposit in the banks and cash temporarily in various instruments with original maturities
of three months or less at the time of purchase. |
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Fair Value of Financial Instruments |
Fair Value of Financial Instruments |
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Statement of financial
accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose
estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for
assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value. |
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Inventories |
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Inventories |
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Inventories consisting of packaged food items and supplies are stated at the lower of cost (FIFO) or net
realizable value, including provisions for spoilage commensurate with known or estimated exposures which are recorded as a charge
to cost of sales during the period spoilage is incurred. The Company has no minimum purchase commitments with its vendors. |
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Advertising Costs |
Advertising Costs |
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Advertising
costs are expensed when incurred and are included in advertising and promotional expense in the accompanying statements of
operations. Although not traditionally thought of by many as "advertising costs", the Company includes expenses
related to graphic design work, package design, website design, domain names, and product samples in the category of "advertising
costs". The Company incurred advertising costs of $198,270 and $103,440 for the three months ended September 30,
2019 and 2018, respectively. Of the $198,270 classified as "advertising costs", $7,123 was for samples
expenses, $24,261 was related to graphic design, and $132,595 was related to marketing and distribution partnerships. Only
33,448, or 16.9% of this total was for what would be considered by many to be advertising in the form of paid advertisements. |
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Income Taxes |
Income Taxes |
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The Company has
not generated any taxable income, and, therefore, no provision for income taxes has been provided. |
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Deferred income
taxes are reported for timing differences between items of income or expense reported in the financial statements and those
reported for income tax purposes in accordance with FASB Topic 740, "Accounting for Income Taxes", which requires
the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable
to temporary differences and carry-forwards when realization is more likely than not. |
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A valuation allowance
has been recorded to fully offset the deferred tax asset even though the Company believes it is more likely than not that
the assets will be utilized. |
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The Company's
effective tax rate differs from the statutory rates associated with taxing jurisdictions because of permanent and temporary
timing differences as well as a valuation allowance. |
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Revenue Recognition |
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Revenue Recognition |
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The Company generates
its revenue by selling its nighttime snack products wholesale and direct to consumer. |
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All sources of revenue
are recorded pursuant to FASB Topic 606 Revenue Recognition, to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
This includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify
the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to
the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation.
In addition, this revenue generation requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash
flows arising from contracts with customers. |
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The Company offers
sales incentives through various programs, consisting primarily of advertising related credits. The Company records advertising
related credits with customers as a reduction to revenue as no identifiable benefit is received in exchange for credits claimed
by the customer. |
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The Company revenue from contracts
with customers provides that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services.
The Company incurs costs associated
with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment
activities and recognizes these costs at the same time that it recognizes the underlying product revenue. As this policy
election is in line with the Company's previous accounting practices, the treatment of shipping and handling activities
under FASB Topic 606 did not have any impact on the Company's results of operations, financial condition and/or
financial statement disclosures.
The adoption of ASC 606 did not
result in a change to the accounting for any of the Company's revenue streams that are within the scope of the amendments.
The Company's services that fall within the scope of ASC 606 are recognized as revenue as the Company satisfies
its obligation to the customer.
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In May
2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updates revenue recognition guidance relating
to contracts with customers. This standard states that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This standard is effective for annual reporting periods, and interim periods therein,
beginning after July 1, 2018. The Company adopted ASU 2014-09 and its related amendments (collectively known as "ASC
606") during the first quarter of fiscal 2019 using the full retrospective method. |
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E-commerce revenues.
The Company recognizes revenue upon shipment based on meeting the transfer of control criteria. The Company has made a policy
election to treat shipping and handling as costs to fulfill the contract, and as a result, any fees received from customers
are included in the transaction price allocated to the performance obligation of providing goods with a corresponding amount
accrued within cost of sales for amounts paid to applicable carriers. The Company has not revised prior period balances for
e-commerce revenues because the changes are not material. |
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Concentration of Credit Risk |
Concentration of
Credit Risk |
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Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at
financial institutions. At various times during the year, the Company may exceed the federally insured limits. To mitigate
this risk, the Company places its cash deposits only with high credit quality institutions. Management believes the risk of
loss is minimal. At September 30, 2019 and June 30, 2019, the Company did not have any uninsured cash deposits. |
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Beneficial Conversion Feature |
Beneficial
Conversion Feature |
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For conventional convertible debt
where the rate of conversion is below market value, the Company records any "beneficial conversion feature"
("BCF") intrinsic value as additional paid in capital and related debt discount.
When the Company records a BCF,
the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument.
The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share
of the unamortized amounts is immediately expensed.
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Debt Issue Costs |
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Debt Issue Costs |
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The Company may
pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other
consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of
operations as amortization of debt discount. |
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Original Issue Discount |
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Original Issue
Discount |
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If debt is issued
with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the
note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion
of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. |
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Valuation of Derivative Instruments |
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Valuation of
Derivative Instruments |
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ASC 815 "Derivatives and Hedging" requires that embedded derivative instruments be bifurcated
and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair
value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula.
Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability,
the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain
or loss on derivative liability under the line item "change in derivative liability". |
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Derivative Financial Instruments |
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Derivative Financial
Instruments |
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The Company does not use derivative
instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial
instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded
at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated
statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation
of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement
of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes
option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host
instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.
If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of
these instruments as derivative financial instruments.
Once determined, derivative liabilities
are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from
inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
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Stock-Based Compensation |
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Stock-Based Compensation |
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The
Company accounts for share-based awards issued to employees in accordance with FASB ASC 718. Accordingly, employee share-based
payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense
over the requisite service period. Additionally, share-based awards to non-employees are expensed over the period
in which the related services are rendered at their fair value. The Company applies ASC 505-50, "Equity Based Payments
to Non-Employees", with respect to options and warrants issued to non-employees. |
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Customer Concentration |
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Customer Concentration |
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During the three months ended September 30, 2019, the Company had one customer account for 34.4% of the
revenue volume. During the three months ended September 30, 2018, one customer accounted for approximately 16% of the
revenue volume. The reason for this change is that almost all revenue in 2018 was from sales of Nightfood bars direct to individual
consumers, whereas in 2019, the majority of revenue was from wholesale sales of ice cream direct to supermarkets and wholesalers.
As the Company continues to grow its distribution base, it is anticipated that revenue distribution will become less concentrated. |
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Receivables Concentration |
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Receivables Concentration |
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As of September 30, 2019, the Company had one customer accounting approximately, 37.9% of the outstanding
balance. As of September 30, 2018, only one customer had an outstanding balance. Their $16,548 in receivables represented 100%
of our receivables, and was collected in a timely fashion. |
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Income Per Share |
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Income Per Share |
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Net income per share
data for both the three-month periods ending September 30, 2019 and 2018 are based on net income available to common shareholders
divided by the weighted average of the number of common shares outstanding. |
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Impairment of Long-lived Assets |
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Impairment of Long-lived Assets |
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The Company accounts
for long-lived assets in accordance with the provisions of FASB Topic 360, Accounting for the Impairment of Long-Lived Assets.
This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value,
discounted cash flows or internal and external appraisals, as applicable. |
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Recent Accounting Pronouncements |
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Recent Accounting Pronouncements |
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The Company reviews all of the
Financial Accounting Standard Board's updates periodically to ensure the Company's compliance of its accounting
policies and disclosure requirements to the Codification Topics.
In May 2014, the Financial Accounting
Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, to establish ASC Topic 606, (ASC 606).
ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition and most industry-specific
guidance throughout the Industry Topics of the Codification. The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The guidance includes a five-step
framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations
in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations
in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. In addition, the standard
requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers.
In January 2016, the FASB issued
ASU No. 2016-01, Financial Instruments – Overall: Recognition and Measurements of Financial Assets and Financial
Liabilities. The standard will be effective for us beginning January 1, 2019. We are currently evaluating the impact of
this standard on our financial statements, including accounting policies, processes, and systems.
In February 2016, the FASB issued
ASU No. 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations
under the standard in January 2017, to increase transparency and comparability among organizations by requiring the recognition
of right-of-use ("ROU") assets and lease liabilities on the balance sheet. Most prominent among the changes
in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating
leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of
financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required
to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented
using a modified retrospective approach, with certain practical expedients available.
The standard became effective
for us beginning July 1, 2019. We have reviewed this and have determined that there is no material impact on our financial statements.
The Company will continue to monitor
these emerging issues to assess any potential future impact on its financial statements.
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