SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | 3 Months Ended |
Sep. 30, 2013 |
Notes | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES | ' |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES |
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Cash and Cash Equivalents |
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For the purpose of the statement of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less. |
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Earnings (Loss) per Share |
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The basic earnings (loss) per common share is calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted earnings (loss) per share are calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares adjusted as of the first of the year for any potentially dilutive debt or equity. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. |
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Use of Estimates |
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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. Actual results could differ from those estimates. |
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Inventory |
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Inventory, comprised principally of raw materials, is stated at the lower of cost or market using the first-in, first-out (“FIFO”) method. This policy requires the Company to make estimates regarding the market value of our inventory, including an assessment of excess or obsolete inventory. The Company determines excess and obsolete inventory based on an estimate of the future demand and estimated selling prices for its products. |
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Revenue and Cost Recognition |
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The Company generally recognizes revenue upon delivery and when both the title and risk and rewards pass to the customers. Product sales are recognized net of product returns and discounts. Net sales include product sales and shipping and handling revenues. Shipping and handling costs paid by the Company are included in cost of sales. The Company generally receives the net sales price in accordance with the payment terms, which are net 30, or through credit card payments at the point of sale for online customers prior to the delivery of the products. Customers may return the Company's products within 45 days of purchase provided the products are in their original sealed container and in resalable condition. Allowances for product returns are provided at the time the sale is recorded. This accrual is based upon historical return rates by product types. |
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Fair Value Accounting for Financial Instruments |
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As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC (“ASC 820-10”), fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
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The three levels of the fair value hierarchy are described below: |
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Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
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Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; |
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Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
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Pursuant to ASC 825, the fair value of cash and marketable securities is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of cash, marketable securities, receivables, accounts payable and accrued liabilities, and other payables approximate their current fair values because of their nature and respective relatively short maturity dates or durations. |
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Assets measured at fair value on a recurring basis were presented on the Company’s balance sheet as of September 30, 2013 and December 31, 2012 as follows: |
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. | | Fair Value Measurements as of September 30, 2013 Using: |
| | Total Carrying | | | Quoted Market | | | Significant Other | | | Significant |
Value as of | Prices in Active | Observable Inputs | Unobservable Inputs |
| Markets | | |
| | 9/30/13 | | | (Level 1) | | | (Level 2) | | | (Level 3) |
Assets: | | | | | | | | | | | |
Equity securities | $ | 4,881 | | $ | 4,881 | | $ | 0 | | $ | 0 |
Total | $ | 4,881 | | $ | 4,881 | | $ | 0 | | $ | 0 |
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| | Fair Value Measurements as of December 31, 2012 Using: |
| | Total Carrying | | | Quoted Market | | | Significant Other | | | Significant |
Value as of | Prices in Active | Observable Inputs | Unobservable Inputs |
| Markets | | |
| | 12/31/12 | | | (Level 1) | | | (Level 2) | | | (Level 3) |
Assets: | | | | | | | | | | | |
Equity securities | $ | 1,315 | | $ | 1,315 | | $ | 0 | | $ | 0 |
Total | $ | 1,315 | | $ | 1,315 | | $ | 0 | | $ | 0 |
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Property and Equipment |
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Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, principally on a straight-line basis. Estimated service lives of property and equipment are as follows: |
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. | | Estimated | | | | | | | | | |
Description | | Life | | | | | | | | | |
Software | | 3 years | | | | | | | | | |
Computers | | 5 years | | | | | | | | | |
Equipment | | 5 years | | | | | | | | | |
Furniture and fixtures | | 7 years | | | | | | | | | |
Leasehold improvements | | 39 years | | | | | | | | | |
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Concentrations of Credit Risk |
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Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed completely to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments exist for groups of customers or counter parties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions described below. |
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Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, and marketable debt securities. The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer or sector. To manage the risk exposure, the Company maintains its portfolio of cash and cash equivalents and short-term and long-term investments. |
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Impairment of Long-lived Assets |
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We test intangibles and long-lived asset groups for recoverability when changes in circumstances indicate the carrying value may not be recoverable, for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, and significant negative industry or economic trends. We also perform a test for recoverability when management has committed to a plan to sell or otherwise dispose of an asset group and the plan is expected to be completed within a year. We evaluate recoverability of an asset group by comparing its carrying value to the future net undiscounted cash flows that we expect will be generated by the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of carrying value over the estimated fair value. When an impairment loss is recognized for assets to be held and used, we depreciate the adjusted carrying amount of those assets over their remaining useful life. |
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Reclassifications |
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Computer and website expenses of $36,000 were reclassified from professional fees to computer and website in the statement of operations to conform to the current presentation. The reclassification had no effect on previously reported total operating expenses, results of operations, or retained earnings. |
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Income Taxes |
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The Company accounts for its income taxes in accordance with ASC No. 740, "Income Taxes". Under Statement 740, a liability method is used whereby deferred tax assets and liabilities are determined based on temporary differences between basis used for financial reporting and income tax reporting purposes. Income taxes are provided based on tax rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not, that the Company will not realize the tax assets through future operations. No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward. |
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Stock-based compensation |
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The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. |
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ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505. |
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Other Comprehensive Income (Loss) |
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Marketable securities held by Canaccord and MorganStanley SmithBarney (the holding companies) are held for an indefinite period of time and thus are classified as available-for-sale securities. Realized investment gains and losses are included in the statement of operations, as are provisions for other than temporary declines in the market value of available for-sale-securities. Unrealized gains and unrealized losses deemed to be temporary are excluded from earnings (losses), net of applicable taxes, as a component of other comprehensive income (loss). Factors considered in judging whether an impairment is other than temporary include the financial condition, business prospects and creditworthiness of the issuer, the length of time that fair value has been less than cost, the relative amount of decline, and the Company’s ability and intent to hold the investment until the fair value recovers. |
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Recent Accounting Pronouncements |
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The Company has evaluated recent accounting pronouncements through August 12, 2013 and believes that none of them will have a material effect on the Company’s financial position, results of operations or cash. |