| 2. Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These consolidated financial statements include the accounts of the Company, its 80% owned subsidiary, Silex Holdings, Inc. and the Companys 80% indirectly owned subsidiary, Silex Interiors 2 LLC. All intercompany transactions and balances have been eliminated. The Companys year-end is August 31. These interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (SEC) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these interim financial statements should be read in conjunction with the Silexs audited financial statements and notes thereto for the year ended August 31, 2014, included in the Companys Form 8-K/A filed on January 6, 2016 with the SEC. The financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Companys financial position at May 31, 2015, and the results of its operations and cash flows for the nine-month periods ended May 31, 2015 and 2014. The results of operations for the period ended May 31, 2015 are not necessarily indicative of the results to be expected for future quarters or the full year. 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, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets, stock-based compensation, allowances for doubtful accounts, inventory reserves, and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Cash Equivalents Cash equivalents are represented by operating accounts or money market accounts maintained with insured financial institutions. The Company also considers all highly liquid short-term debt instruments with a maturity of three months or less when purchased to be cash equivalents. Accounts Receivable Accounts receivable consist of the unpaid balances due to the Company from its customers. At May 31, 2015 and August 31, 2014, the Company has estimated that all amounts recorded are collectible and, thus has not provided an allowance for uncollectible amounts. Investments The Company determines the appropriate classification of its investments in equity securities at the time of purchase and reevaluates such determinations at each reporting date. Investments in entities in which the Companys ownership is greater than 20% and less than 50%, or which the Company does not control through majority ownership or means other than voting rights, are accounted for by the equity method and are included in long-term assets. The Company accounts for its marketable security investments as available for sale securities in accordance with Accounting Standards Codification (ASC) guidance on accounting for certain investments in debt and equity securities. The Company periodically evaluates whether declines in fair values of its investments below the Companys carrying value are other-than-temporary in accordance with ASC guidance. The Companys policy is to generally treat a decline in the investments quoted market value that has lasted continuously for more than six months as other-than-temporary decline in value. The Company also monitors its investments for events or changes in circumstances that have occurred that may have a significant adverse effect on the fair value of the investment and evaluates qualitative and quantitative factors regarding the severity and duration of the unrealized loss and the Companys ability to hold the investment until a forecasted recovery occurs to determine if the decline in value of an investment is other-than-temporary. Declines in fair value below the Companys carrying value deemed to be other-than-temporary are charged to earnings. Inventory Inventory is determined on an average cost basis and is stated at the lower of cost or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration and other factors. As at May 31, 2015 and August 31, 2014, inventory consisted of granite, quartz and other countertops, Property and Equipment Property and equipment is recorded at cost when acquired. Amortization is provided principally on the straight-line method over the estimated useful lives of the related assets, which is 3-7 years for equipment, furniture and fixtures, and vehicles. Leasehold improvements are being amortized over a five-year estimated useful life. Expenditures for maintenance and repairs are charged to expense as incurred, whereas expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Long-Lived Assets In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. No impairment charges were incurred during the three-month and nine-month periods ended May 31, 2015 and 2014. Revenue Recognition Revenue from the sales of products without an installation package is recognized when persuasive evidence of an arrangement exists, the product is delivered to the customer, the price is fixed or determinable, and collectability is reasonably assured. Revenue is recognized under these arrangements either at the time the customer picks up the products or the products are delivered to and accepted by the customer. Revenue from the sales of products that include an installation package is recognized when persuasive evidence of an arrangement exists, the product is delivered and services have been rendered to the customer, the price is fixed or determinable, and collectability is reasonably assured. Revenue is recognized under these arrangements upon the completion and customer acceptance of the installation. Advertising The Company expenses advertising costs as incurred. Such costs totaled approximately $Nil and $Nil for the three-month and nine-month periods ended May 31, 2015 and 2014, respectively. Stock-Based Compensation The Company accounts for 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. Income Taxes The Company accounts for income taxes utilizing ASC 740, Income Taxes, which requires the measurement of deferred tax assets for deductible temporary differences and operating loss carry-forwards and measurement of deferred tax liabilities for taxable temporary differences. Measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax law. The effects of future changes in tax laws or rates are not included in the measurement. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Basic and Diluted Net Income (Loss) Per Share The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations and comprehensive loss. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is antidilutive. As of May 31, 2015, the Company had no potentially dilutive securities outstanding, other than those potentially issued in conversions of contingently convertible debt (refer to Note 4). However, at May 31, 2015, the number of potentially dilutive shares relating to these financial instruments was indeterminable. Financial Instruments ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 825 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Companys financial instruments consist principally of cash, accounts receivable, due from related party, accounts payable, due to related party, contingently convertible debt and long-term debt. Pursuant to ASC 825, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The carrying amount of cash is equal to its fair value. The carrying amounts of accounts receivable, due from related party, accounts payable and due to related party approximates fair values due to the short-term maturity of these instruments. The carrying values of the Companys contingently convertible debt and long-term debt approximates their fair values based on market rates available for similar debt. Assets and liabilities measured at fair value on a recurring basis were presented on the Companys consolidated balance sheet as of May 31, 2015 as follows: Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant For Identical Observable Unobservable Balance Instruments Inputs Inputs May 31, (Level 1) $ (Level 2) $ (Level 3) $ 2015 $ Assets: Cash 102,755 102,755 Recently Adopted Accounting Standards In July 2013, ASC guidance was issued related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The updated guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss carryforward, a similar tax loss, or tax credit carryforwards. A gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from disallowance of the uncertain tax position. The update is effective prospectively for the Companys fiscal year beginning September 1, 2014. The adoption of the pronouncement did not have a material effect on the Companys consolidated financial statements. In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830), to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business combinations achieved in stages in a foreign entity. The update is effective prospectively for the Companys fiscal year beginning September 1, 2014. The adoption of the pronouncement did not have a material effect on the Companys consolidated financial statements. In April 2014, the FASB issued ASU No. 2014-08, Discontinued Operations (Topic 205 and 360), which changed the criteria for determining which disposals can be presented as discontinued operations and modified related disclosure requirements. The updated guidance requires an entity to only classify discontinued operations due to a major strategic shift or a major effect on an entitys operations in the financial statements. The updated guidance will also require additional disclosures relating to discontinued operations. The update is effective prospectively for the Companys fiscal year beginning September 1, 2014. The adoption of the pronouncement did not have a material effect on the Companys consolidated financial statements. Recently Issued Accounting Standards In June 2014, ASU guidance was issued to resolve the diversity of practice relating to the accounting for stock-based performance awards for which the performance target could be achieved after the employee completes the required service period. The update is effective prospectively or retrospectively for annual reporting periods beginning December 15, 2015. The adoption of the pronouncement is not expected to have a material effect on the Companys consolidated financial statements. In May 2014, ASU guidance was issued related to revenue from contracts with customers. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. The ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods and is to be retrospectively applied. Early adoption is not permitted. The Company has not yet determined whether the adoption of this ASU will have any impact on the Companys consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU 2014-15). ASU 2014-15 is intended to define managements responsibility to evaluate whether there is substantial doubt about an organizations ability to continue as a going concern and to provide related footnote disclosure. This ASU provides guidance to an organizations management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is evaluating the impact the revised guidance will have on its consolidated financial statements. |
