| Summary of Significant Accounting Policies | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation These
financial statements are presented in United States dollars and have been prepared in accordance with United States generally
accepted accounting principles. In
the opinion of management, the accompanying unaudited condensed financial statements contain all accruals and adjustments (each
of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of June
30, 2019 and the results of its operations for the six months then ended. The condensed balance sheet as of December 31, 2018
is derived from the December 31, 2018 audited financial statements. Significant accounting policies have been consistently applied
in the interim financial statements. The results of operations for the six months ended June 30, 2019 are not necessarily indicative
of the results to be expected for the entire year. Going
Concern The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, however, the
above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any
adjustment to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result should the Company be unable to continue as a going concern. Management
plans to fund future operations by raising capital and or seeking joint venture opportunities. Principles
of Consolidation The
Company evaluates the need to consolidate affiliates based on standards set forth in ASC 810 Consolidation (“ASC 810”). The
consolidated financial statements include the accounts of the Company and its majority owned subsidiary, PHCP. All significant
consolidated transactions and balances have been eliminated in consolidation. The operations of the Company are included in the
consolidated financial statement from the date of the Agreement. Use
of Estimates In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from
those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, estimate
of fair value of share based payments and valuation of deferred tax assets. Cash
and Cash Equivalents The
Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents. Accounts
Receivable We
record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts
to reflect any loss anticipated on the accounts receivable balances and is charged to other income (expense) in the combined statements
of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual
terms of the receivables, and our relationships with, and the economic status of, our customers. As of June 30, 2019 and December
31, 2018, an allowance for estimated, uncollectible accounts was determined to be unnecessary. Inventory Inventory
is reported at the lower of cost or market on the first-in, first-out (FIFO) method. Our inventory is subject to obsolescence.
Accordingly, quantities on hand are periodically monitored for items no longer being sold, which are written off. All inventory
is stored at the manufacturer and maintained by them. Inventory consists of pouches, display and shipping boxes and no inventory
is deemed obsolete. Machinery
and Equipment Machinery
and equipment is recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance,
and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations
for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line
method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes
where appropriate. The estimated useful lives for significant machinery and equipment categories are as five years. Revenue
Recognition The
Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis such
as identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction
price and allocating the transaction price to each separate performance obligation. The Company’s policy is to record revenue
as earned when a firm commitment, indicating sales quantity and price exists, delivery has taken place and collectability is reasonably
assured. The Company records sales of finished products once the customer places the order and the product is shipped. Delivery
is considered to have occurred when title and risk of loss have transferred to the customer. Provisions for discounts, returns,
allowances, customer rebates and other adjustments are netted with gross sales. The Company accounts for such provisions during
the same period in which the related revenues are earned. Provisions for discounts, returns, allowances, customer rebates and
other adjustments are minimal and are recorded as a reduction of revenue Cost
of Sales The
costs associated with our royalty income are packaging, a royalty of $1.20 per case, and repair and maintenance costs of our filling
machines. General
and Administrative This
category includes costs of legal and accounting, telephone, office supplies, product samples, insurance, registration costs, and
consulting expenses. Travel
and Entertainment This
category includes the costs of air travel, hotels, meals and reimbursed automotive expenses. Stock-Based
Compensation The
Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company
records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and
restricted stock awards using the Black-Scholes option pricing model. Share based expense paid through direct stock grants is
expensed over the vesting period or upon issuance for awards with no further service requirements. During the six months ended
June 30, 2019 and 2018 the Company recognized stock-based compensation expense of $323,000 and $0, respectively. See Note 6 for
additional information. Fair
Value of Financial Instruments The
Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair
Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that
would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair
value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions
that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and
risk of nonperformance. The
guidance also establishes a fair value hierarchy for measurements of fair value as follows:
● Level
1 - quoted market prices in active markets for identical assets or liabilities.
● Level
2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets
for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active,
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities.
● Level
3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities. The
carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2019 and December 31,
2018, due to the short-term nature of these instruments. Net
Loss per Share Net
loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as
defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings per common share (“EPS”)
calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during
the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number
of common shares and dilutive common share equivalents outstanding. As of June 30, 2019 and 2018, dilutive instruments consisted
of warrants to purchase shares of the Company’s common stock, the effects of which due to the net loss are anti-dilutive. Recent
Accounting Pronouncements In
February 2016, the FASB issued ASU, Leases, which requires lessees to recognize most leases on their balance sheets as a right-of-use
asset with a corresponding lease liability. Lessor accounting under the standard is substantially unchanged. Additional qualitative
and quantitative disclosures are also required. The Company adopted the standard effective January 1, 2019 using the cumulative-effect
adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative
periods presented. The Company adopted the following practical expedients and elected the following accounting policies related
to this standard update:
● The
option to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs
for leases that commenced prior to January 1, 2019.
● Short-term
lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term
of 12 months or less; and
● The
option to not separate lease and non-lease components for certain equipment lease asset categories such as freight car, vehicles
and work equipment.
● The
package of practical expedients applied to all of its leases, including (i) not reassessing whether any expired or existing
contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii)
not reassessing initial direct costs for any existing leases. The
Company has inventoried all leases where the Company is a lessee as of the initial date of application and has examined other
contracts with suppliers, vendors, customers and other outside parties to identify whether such contracts contain an embedded
lease as defined under the new guidance. As of June 30, 2019, Company’s only lease was a month to month lease, which is
immaterial to the consolidated financial statements. As
a result of the above, the adoption of ASC 842 did not have a material effect on the consolidated financial statements. The Company
will review for the existence of embedded leases in future agreements. In
June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which
currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or
services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The
ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. This standard is effective for public companies
for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption
permitted as long as ASU 2014-09 has been adopted. The Company adopted the guidance on January 1, 2019. The adoption did not have
a material impact on our consolidated financial statements. The
Company reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations. |
