| NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis
of Accounting The
Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a November 30,
year-end. Use
of Estimates and Assumptions 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. In accordance with ASC No. 250 all adjustments are normal and recurring. Principal
of Consolidation The
Company consolidated financial statements as of November 30, 2018 include the accounts of Trident Brands Incorporated and its
subsidiaries: Trident Brands Canada Ltd, Sports Nutrition Products Inc., Brain Armor Inc., Trident Sports Nutrition Inc. and Trident
Brands International Ltd. Earnings
(Loss) Per Share The
Company follows the guidance in ASC No. 260, “Earnings Per Share”, which specifies the computation, presentation and
disclosure requirements for earnings (loss) per share for entities with publicly held common stock. Basic
net earnings (loss) per share amounts are computed by dividing the net earnings (loss) by the weighted average number of common
shares outstanding. Due to net losses during the years ended November 30, 2018 and 2017, diluted earnings (loss) per share are
the same as the basic earnings (loss) per share since inclusion of common stock equivalents would have been anti-dilutive. Cash
Equivalents The
Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Accounts
Receivable and Allowance for Doubtful Accounts Accounts
receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible
amounts as necessary. As of November 30, 2018 and 2017, the Company’s accounts receivable was netted against an allowance
of $32,383 and $29,852 respectively. Inventory Inventories
are stated at the lower of cost or net realizable value. Cost is principally determined using the first-in, first-out (FIFO) method.
We regularly review inventory for obsolete and slow moving inventory and write it off as necessary. Cost
Method Investment Our
cost method investment consists of an investment in a private company in which we do not have the ability to exercise significant
influence over its operating and financial activities. The investment is tested for impairment, at least annually, and more frequently
upon the occurrences of certain events. The
Company recognized an impairment on its cost method investment of $440,542 during the year ended November 30, 2018. Long-Lived
Assets We
review our long-lived assets, including intangible assets subject to amortization, for recoverability whenever events or changes
in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred
to as "the asset") may not be recoverable. Such circumstances include, but are not limited to:
• a
significant decrease in the market price of the asset;
• a
significant change in the extent or manner in which the asset is being used;
• a significant
change in the business climate that could affect the value of the asset;
• a current period
loss combined with projection of continuing loss associated with use of the asset; and
• a current
expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated
useful life. We
continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability
of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated
cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition
of the asset. Intangible
Assets Intangible assets
have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter The Company currently does not have any amortizable intangible assets.
The Company’s indefinite-lived intangible assets consist of trademarks. The Company
reviews its Indefinite-lived intangible assets for impairment annually or whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be fully recoverable. Impairment losses are recognized only if the carrying amount
exceeds its fair value. Beneficial
Conversion Features The
intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted
for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the
convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using
the effective interest method. If the note payable is retired prior to the end of its contractual term,the unamortized discount
is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing
the effective conversion price, after considering the relative fair value of detachable instruments included in the financing
transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion. Fair
Value of Financial Instruments The
Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements
and Disclosures”. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes
a fair value hierarchy to classify the inputs used in measuring fair value as follows: Level
1– Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets
are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information
on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities
and listed equities. Level
2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly
observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies.
These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for
commodities, time value, volatility factors, and current market andcontractual prices for the underlying instruments, as well
as other relevant economic measures. Substantially
all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable
data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category
generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars. Level
3–Pricing inputs include significant inputs that are generally less observable fromobjective sources. These inputs may be
used with internally developed methodologies that result in management’s best estimate of fair value. The
carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of
these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and note
payable. The fair value of the Company’s long-term debt is estimated based on current rates that would be available for
debt of similar terms which is not significantly different from its stated value. As of November 30, 2018 and 2017, the Company
did not have any financial assets or liabilities measured and recorded at fair value on the Company’s consolidated balance
sheets on a recurring basis, except for a derivative liability, related to the embedded conversion option on the 2018 convertible
note, with a fair value as of November 30, 2018 of $892,000. The derivative liability was fair valued using Level 3 inputs. 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 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 under ASC 470, the Company will
continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the
guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification.
The Company’s sequencing policy is to evaluate for reclassification contracts with the earliest inception date first. Revenue The
Company markets a range of branded and private label consumer products in the active nutrition and dietary supplement categories
including Brain Armor® and P2N Peak Performance Nutrition®. Two
customers accounted for 90.5% and 5.2% of total revenue, compared to 94.3% and 3.7% in the prior year. Two customers accounted
for 59.7% and 17.4% of total accounts receivable, compared to 82.3% and 16.4% in the prior year. The
Company records revenue when all of the following criteria are met: a) persuasive evidence of an arrangement with the customer
exists, b) the price to the customer is fixed and determinable, c) product is shipped or delivery is complete (depending on the
terms) and d) collection probability is reasonably assured. We
record a reduction to gross sales based on estimated customer returns and allowances. Cost
of Sales Cost
of sales includes the direct purchase cost of the product based on the FIFO method. The Company purchased 97% of its
products from one vendor for the year ended November 30, 2018 and one vendor provided 99% of the Company's products for the year
ended November 30, 2017. Employee
Stock-Based Compensation The
Company accounts for employee stock-based compensation in accordance with ASC-718, “Compensation-Stock Compensation”.
ASC-718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including
stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the
employee is required to provide service in exchange for the award, usually the vesting period. Non-Employee
Stock-Based Compensation: The
Company accounts for non-employee stock-based compensation in accordance with the provision of ASC 505-50, “Equity Based
Payments to Non-Employees” (“ASC 505-50”), which requires that such equity instruments are recorded at their
fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying
equity instruments vest. Income
Taxes Income
taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded
for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and liabilities. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
of all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment. The Company includes interest and penalties arising from the underpayment of income
taxes in the statements of operation in the provision for income taxes. As of November 30, 2018 and 2017, the Company had no accrued
interest or penalties related to uncertain tax positions. Related
Parties A
party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls,
is controlled by, or is under common control with the Company. Related
parties also include principal owners of the Company, its management, members of the immediate families of principal owners of
the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence
the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting
parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related
party. Recent
Accounting Pronouncements The
Company has evaluated the following recent accounting pronouncements through the date the financial statements were issued and
filed with the Securities and Exchange Commission and believe that none of them will have a material effect on the Company’s
financial statements: In
May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients. The amendments in this update affect the guidance in ASU 2014-09. The core principle of the guidance in Topic
606 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 amendments
in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted
in Topic 606. Topic 606 became effective for the Company on December 1, 2018. Management evaluated Topic 606 and the
modified retrospective adoption of ASU 2016-12 did not have any material impact on the Company’s consolidated financial
statements. In
May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments
in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity
to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including
adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have
not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made
available for issuance. In
July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging
(Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments
(or embedded features) with down round features. When determining whether certain financial instruments should be classified as
liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument
is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified
instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be
accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity
classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic
260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction
of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down
round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20,
Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of
this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content
in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the
amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is
permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period,
any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. |
