Summary of Significant Accounting Policies (Policies)
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9 Months Ended |
Mar. 31, 2020 |
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| 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) and nine (9) months ended March 31, 2020 and 2019, 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 nine (9) months ended March 31, 2020 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 |
| 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 |
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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 reported advertising costs of
$673,814 and $285,700 for the nine months ended March 31, 2020 and 2019, respectively. The Company reported advertising costs
of $119,475 and $105,277 for the three months ended March 31, 2020 and 2019, respectively.
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| Income Taxes |
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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 |
| 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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Management
reviewed ASC 606-10-32-25 which states "Consideration payable to a customer includes cash amounts that an entity pays,
or expects to pay, to the customer (or to other parties that purchase the entity's goods or services from the customer). Consideration
payable to a customer also includes credit or other items (for example, a coupon or voucher) that can be applied against amounts
owed to the entity (or to other parties that purchase the entity's goods or services from the customer). An entity shall account
for consideration payable to a customer as a reduction of the transaction price and, therefore, of revenue unless the payment
to the customer is in exchange for a distinct good or service (as described in paragraphs 606-10-25-18 through 25-22) that
the customer transfers to the entity. If the consideration payable to a customer includes a variable amount, an entity shall
estimate the transaction price (including assessing whether the estimate of variable consideration is constrained) in accordance
with paragraphs 606-10-32-5 through 32-13." |
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If the
consideration payable to a customer is a payment for a distinct good service, then in accordance with ASC 606-10-32-26, the
entity should account for it the same way that it accounts for other purchases from suppliers (expense). Further, "if
the amount of consideration payable to the customer exceeds the fair value of the distinct good or service that the entity
receives from the customer, then the entity shall account for such an excess as a reduction of the transaction price. If the
entity cannot reasonably estimate the fair value of the good or service received from the customer, it shall account for all
of the consideration payable to the customer as a reduction of the transaction price." |
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Under
ASC 606-10-32-27, if the consideration payable to a customer is accounted for as a reduction of the transaction price, "an
entity shall recognize the reduction of revenue when (or as) the later of either of the following events occurs: |
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The
entity recognizes revenue for the transfer of the related goods or services to the customer. |
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The entity pays
or promises to pay the consideration (even if the payment is conditional on a future event). That promise might be implied
by the entity's customary business practices." |
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Management reviewed each arrangement
to determine if each fee paid is for a distinct good or service and should be expensed as incurred or if the Company should
recognize the payment as a reduction of revenue. |
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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. |
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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 March 31, 2020 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 |
| 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 |
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 |
| 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. |
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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 nine months ended March 31, 2020, the Company had one customer account for approximately 45% of the gross sales. During
the nine months ended March 31, 2019, one customer accounted for approximately 16% of the revenue volume. The reason
for this change is that almost all revenue in Fiscal Year 2019 was from sales of Nightfood bars direct to individual consumers,
whereas in Fiscal Year 2020, 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 March 31, 2020, the Company had receivables due from five
customers, each accounting for over 10% of the outstanding balance. As of June 30, 2019, the Company had
receivables due from five customers, four of which accounted for over 10% of the outstanding balance. |
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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 nine-month periods ending
March 31, 2020 and 2019, and the three-month periods ending March 31, 2020 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 |
| 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.
During the period ended March 31 2020 and 2019,
the Management determined and impaired $500,000 and $-0-, respectively as impairment on intangible asset
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| Digital Asset Capitalization |
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Digital Asset Capitalization |
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ASC
350-50-05-01 states " on accounting for costs incurred to develop a website, including whether to capitalize or expense
the following types of costs: |
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Costs
incurred in the planning stage |
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Costs incurred
in the website application and infrastructure development stage |
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c) |
Costs incurred
to develop graphics |
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d) |
Costs incurred
to develop content |
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Costs incurred
in the operating stage." |
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ASC
350-50-25-6 states "Costs incurred to purchase software tools, or costs incurred during the application development
stage for internally developed tools, shall be capitalized unless they are used in research and development and meet either
of the following conditions: |
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They do not have
any alternative future uses. |
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They are internally
developed and represent a pilot project or are being used in a specific research and development project (see paragraph 350-40-15-7)." |
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Further,
at ASC 350-50-25-7, "Costs to obtain and register an Internet domain shall be capitalized under Section 350-30-25." |
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During
the period ended March 31 2020, the Management determined and capitalized $1,000,000 under ASC 350-50 and accounted as an
intangible asset and amortize the costs over the life of the relationship. |
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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.
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The standard became effective
for us beginning on July 1, 2018 and did not have a material impact on our financial statements. |
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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. |
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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. |
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The
Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements. |
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