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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Interim
Financial Statements |
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These
unaudited condensed consolidated financial statements as of and for the three (3) months
ended September 30, 2018 and 2017, 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, 2018 and 2017, respectively, which are included in
the Company’s June 30, 2018 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission
on September 28, 2018. 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, 2018 are not necessarily indicative of results for the entire year ending June 30, 2019.
We
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 our condensed consolidated statement of financial position, results
of operations or cash flows.
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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 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 |
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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 market, 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 |
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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 $103,440 and $41,824 for the three months ended September 30,
2018 and 2017, respectively. Of the $103,440 classified as “advertising costs”, $34,170.50 was related
to packaging, and over 90% of that was related to the packaging design for the Nightfood ice cream launch. |
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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 by selling its nighttime snack products wholesale and direct to consumer. |
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All
sources of revenue is recorded pursuant to FASB Topic 605 Revenue Recognition, when persuasive evidence of arrangement exists,
delivery of services has occurred, the fee is fixed or determinable and collectability is reasonably assured. |
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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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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, 2018 and June 30, 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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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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During
the three months ended September 30, 2018, the Company did not have any one customer account for more than 10% of the revenue
volume. |
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Receivables
Concentration |
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As
of September 30, 2018, the Company has one customer with an open accounts receivable. |
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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, 2018 and 2017 are based on net income available
to common shareholders divided by the weighted average of the number of common shares outstanding. As of September 30, 2018,
there are no outstanding common stock equivalents. |
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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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In
May 2014, the FASB issued ASU 2014-09—Revenue from Contracts with Customers (Topic 606). The guidance requires an entity
to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.
The FASB delayed the effective date to annual reporting periods beginning after December 15, 2017, including interim reporting
periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December
15, 2016, including interim reporting periods within that reporting period. In addition, in March and April 2016, the FASB issued
new guidance intended to improve the operability and understandability of the implementation guidance on principal versus agent
considerations. |
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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. |
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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 January 1, 2020. 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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In
August 2016, the FASB issued “ASU” 2016-15, Statement of Cash Flows –
Classification of Certain Cash Receipts and Cash Payments. This standard clarifies
how specific cash receipts and cash payments are classified and presented in the statement
of cash flows. This update is effective for fiscal years and interim periods within those
fiscal years beginning after December 15, 2017. Early adoption is permitted. The
Company does not expect the adoption of ASU 2016-15 to have a material effect on its
consolidated financial statements.
In
May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation. This standard provides guidance
related to the scope of stock option modification accounting, to reduce diversity in practice and reduce cost and complexity
regarding existing guidance. This update is effective for annual periods beginning after December 15, 2017. Early
adoption is permitted. The Company does not expect the adoption of ASU 2017-09 to have a material effect on its consolidated
financial statements.
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In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework
- Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair
value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure
requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those
fiscal years. Early adoption is permitted in interim periods, including periods for which financial statements have not been issued
or financial statements have not been made available for issuance. The adoption of this standard is not expected to have a material
effect on the Company's consolidated financial statements. |
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