Summary of Significant Accounting Policies |
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Summary of
Significant
Accounting Policies |
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Management
is responsible for the fair presentation of the Company's financial statements, prepared in accordance with U.S. generally
accepted accounting principles (GAAP). |
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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 beneficial conversion
features, derivative liabilities, depreciation and amortization, the valuation for non-cash issuances of common stock, and
the website, income taxes and contingencies, among others. |
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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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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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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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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 debt extinguishment. |
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Reclassification
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The Company may make certain reclassifications
to prior period amounts to conform with the current year's presentation. These reclassifications did not have a material
effect on its consolidated statement of financial position, results of operations or cash flows.
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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 will be effective for us beginning
July 1, 2019. The standard may have a material impact on our balance sheets in the future if we entered into new leases, but will
not have a material impact on our statement of operations. The most significant impact will be the recognition of ROU assets and
lease liabilities for operating leases. We are currently evaluating the impact of this standard on our financial statements, including
accounting policies, processes, and systems.
The Company will continue to monitor
these emerging issues to assess any potential future impact on its financial statements.
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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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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 |
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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 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. |
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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.
Included in this category are expenses related to public relations, investor relations, new package design, website
design, design of promotional materials, cost of trade shows, cost of products given away as promotional samples, and paid
advertising. The Company incurred advertising costs of $732,297 and $189,352 for the years ended June 30, 2019
and 2018, respectively. |
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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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The
Company generates its revenue from products sold from traditional retail outlets along with items distributed from the Company's
and other customer websites. |
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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 occasionally 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.
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.
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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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 June 30, 2019 and 2018 the Company did not have any uninsured cash deposits. |
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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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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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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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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 debt extinguishment. |
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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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