| Note 2 - Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Basis of Presentation: The interim unaudited
financial information referred to above has been prepared and presented in conformity with accounting principles generally accepted
in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation
S-X. The interim financial information has been prepared on a condensed basis, such that certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
have been condensed or omitted in accordance with rules and regulations of the Securities and Exchange Commission. These interim
financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial
statements not misleading. This report on Form 10-Q should be read
in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the
fiscal year ended June 30, 2018 filed on October 12, 2018. Results of the three and nine months ended March 31, 2019 are not necessarily
indicative of the results that may be expected for the year ended June 30, 2019 and any other future periods. Consolidation These consolidated financial statements include the accounts of
Grow Capital, Inc. and its wholly-owned subsidiaries, WCS and Smoke on the Water, as of March 31, 2019. All significant intercompany
accounting transactions have been eliminated as a result of consolidation. Use of Estimates: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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. We believe that it is at least
reasonably possible that the effect on the financial statements of a condition, situation, or set of circumstances that existed
at the date of the financial statements will change in the near term due to one or more future confirming events and the effect
of the change would be material to the financial statements. Going Concern During the three- and nine-month
periods ended March 31, 2019, the Company reported a net loss of $ and
$ , respectively, combined with a working capital deficit of approximately $341,000
with approximately $100,000 of cash on hand. The Company believes that as of March 31, 2019 its existing capital resources are
not adequate to enable it to fully execute its business plan. These conditions raise substantial doubt as to the Company's
ability to continue as a going concern. On April 12, 2019, the Company completed a private placement of shares of its common
stock (“common If the Company
fails to sell WCS and Smoke on the Water, generate positive cash flow or obtain additional financing, when required, the Company
may have to modify, delay, or abandon some or all of its business and expansion plans, and potentially cease operations altogether.
The accompanying unaudited consolidated financial statements do not include any adjustments that might be necessary should we be
unable to continue as a going concern. Cash and Cash Equivalents For financial accounting
purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or
less at the time of purchase. Lease Receivables and deferred rent Lease receivables are recognized when rents
are due, and for the straight-line adjustment to rents over the term of the lease less an allowance for expected uncollectible
amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among
others, the customer's willingness or ability to pay, the Company's compliance with lease terms, the effect of general economic
conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are
considered past due. We do not charge interest on past due balances. The Company writes off lease receivables when it
determines that they have become uncollectible after all reasonable collection efforts have been made. If we record
bad debt expense, the amount is reflected as a component of operating expenses in the statements of operations. As of
March 31, 2019, and June 30, 2018, an allowance for doubtful accounts was recorded in the amount of $2,861. As of March 31,
2019, and June 30, 2018, the Company had recorded deferred rent for the straight-line value of rental income of $6,150 as
part of assets held for sale. Investment In and Valuation of Real
Estate Assets Real estate assets are stated at cost,
less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the cost of acquisition (excluding
acquisition related expenses), construction costs, and mortgage interest during the period the facilities are under construction
and prior to readiness for occupancy, and any tenant improvements, major improvements and betterments that extend the useful life
of the real estate assets and leasing costs. All repairs and maintenance are expensed as incurred. The Company is required to make subjective
assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective
asset to determine the appropriate useful life of the assets. Real estate assets, other than land, are depreciated on a straight-line
basis over the estimated useful life of the asset. The estimated useful lives of the Company's
real estate assets by class are generally as follows:
Land Indefinite
Buildings 40 years
Tenant improvements Lesser of useful life or lease term
Intangible lease assets Lease term Revenue Recognition We recognize revenue only when all of the
following criteria have been met:
o
persuasive evidence of an arrangement exists;
o use of the real property has taken place or services have been rendered;
o
the fee for the arrangement is fixed or determinable; and
o collectability is reasonably assured. Persuasive Evidence of an Arrangement Our real property lease agreements, which
are governed by the laws of the state of Oregon, usually are non-cancellable and range from six to thirty-six months with a cash
security deposit and personal guarantee required. We account for our leases in accordance with Accounting Standard Codification
("ASC") Topic 840, Leases Advertising Costs Advertising
costs are expensed as incurred. Advertising expense was $217 and $358 for the three months ended March 31, 2019
and 2018, respectively, and $4,473 and $717 for the nine months ended March 31, 2019 and 2018, respectively. Fair Value of Financial Instruments: The Company follows the fair value measurement rules, which provides
guidance on the use of fair value in accounting and disclosure for assets and liabilities when such accounting and disclosure is
called for by other accounting literature. These rules establish a fair value hierarchy for inputs to be used to measure fair value
of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into
three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority). Level 1—Unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to access at the balance sheet date. Level 2—Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted
prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates,
yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other
means (market corroborated inputs). Level 3—Inputs are unobservable and reflect the Company’s
assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based
on the best information available. Investments are reflected in the accompanying financial statements
at fair value. The carrying amount of receivables and accounts payable and accrued expenses approximates fair value due to the
short-term nature of those instruments. The estimated fair values
for financial instruments are determined at discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The carrying amounts of lease receivables, accounts
payable, and accrued liabilities approximate fair value given their short-term nature or effective interest rates, which constitutes
level three inputs. Share-based compensation The Company measures the cost of employee services received in exchange
for an award of equity instruments based on the grant date fair value of the award. Unregistered stock awards are measured based
on the fair market values of the underlying stock on the dates of grant. For service type awards, share-based compensation expense
is recognized on a straight-line basis over the period during which the employee is required to provide service in exchange for
the entire award. For awards that vest or begin vesting upon achievement of a performance condition, the Company estimates the
likelihood of satisfaction of the performance condition and recognizes compensation expense when achievement of the performance
condition is deemed probable using an accelerated attribution model. The fair value of options is calculated using the Black-Scholes
option pricing model to determine the fair value of stock options on the date of grant based on key assumptions such as expected
volatility and expected term, so long as the option does not contain provisions that require a more complex model to be used. Convertible debt and beneficial conversion features The Company evaluates embedded
conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value
recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated
under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features. Stock settled debt In certain instances, the
Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed
discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In these instances,
the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed
value transferred to the convertible note holder from the fixed discount conversion feature. As of March 31, 2019, and June
30, 2018, the Company had recorded within convertible notes, net of discount, the amount of $0 for the value of the stock
settled debt for certain convertible notes (See Note 6). Impairment of long-lived assets The Company monitors its long-lived assets and finite-lived intangibles
for indicators of impairment. If such indicators are present, the Company assesses the recoverability of affected assets by determining
whether the carrying value of such assets is less than the sum of the undiscounted future cash flows of the assets. If such assets
are found not to be recoverable, the Company measures the amount of such impairment by comparing the carrying value of the assets
to the fair value of the assets, with the fair value generally determined based on the present value of the expected future cash
flows associated with the assets. Income taxes Deferred tax assets and liabilities 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 net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured
at rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement
of operations in the period that includes the enactment date. A valuation allowance is recorded when it is not more likely than
not that all or a portion of the net deferred tax assets will be realized. Net (loss) income per share Basic earnings per share is computed by dividing income available
to common shareholders by the weighted average number of common shares outstanding for the period and contains no dilutive securities.
Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. For
the three and nine months ended March 31, 2019 and 2018, all potentially dilutive securities are anti-dilutive due to the Company's
losses from operations. All dilutive common stock equivalents are reflected in our earnings
(loss) per share calculations. Anti-dilutive common stock equivalents are not included in our earnings (loss) per share calculations. The following table sets forth the number of dilutive shares as
of March 31, 2019:
Options 500,000
Total dilutive shares 500,000 Recent accounting pronouncements In August 2018, the Securities and Exchange Commission (“SEC”)
adopted amendments to eliminate, integrate, update or modify certain of its disclosure requirements. The amendments are part of
the SEC’s efforts to improve disclosure effectiveness and were focused on eliminating disclosure requirements that have become
redundant, duplicative, overlapping, outdated, or superseded. Management has considered
all recent accounting pronouncements issued and their potential effect on our financial statements. The Company's management believes
that these recent pronouncements will not have a material effect on the Company’s financial statements. |
