| 2. Basis of Presentation and Summary of Significant Accounting Policies | 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies presented below is designed to assist in understanding the Company's financial statements. Such financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying financial statements. Earnings per Share Basic earnings per common share equal net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. The Company incurred a net loss for periods ended September 30, 2016 and 2015, respectively and therefore, basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive. As at September 30, 2016, 1,182,369 shares associated with convertible note payable of $603,008 was considered to be anti-dilutive. Going Concern and Capital Resources Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. The Company has generated limited revenues from its principal operations, and there is no assurance of future revenues. During the fiscal year ended September 30, 2016, the Company began researching and investigating the viability of a new product platform for functional beverages. As of September 30, 2016 the Company had cash (operating capital) of $40,613 and had $600,000 convertible notes as well as a $145,000 short-term loan. The Company has not attained profitable operations since inception. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has had recurring losses, an accumulated deficit, is dependent on the shareholder to provide additional funding for operating expenses and has limited revenues. These items raise substantial doubts about the Company's ability to continue as a going concern. Use of Estimates In preparing these financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Fair Value of Financial Instruments The Company's financial instruments include cash, account receivable, accounts payable, accrued liabilities and short-term debt. The estimated fair value of these instruments approximates its carrying amount due to the short maturity of these instruments. Cash and Cash Equivalents The Company considers all highly-liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of September 30, 2016 and 2015, respectively. Accounts Receivable Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. Bad debts expense or write offs of receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic conditions. There have $0 bad debt allowance during the period reported on. Major Customers During the years ended September 30, 2016 and 2015, revenue was primarily from two major customers. Besides those revenues, there were $51,384 account receivable owed by customer A as of September 30 th Customer Name 2016 Sales % of Total Revenue 2015 Sales % of Total Revenue Customer A $ 259,104 57 % $ - - Customer B $ 91,712 21 % $ 50,466 44 % Customer C $ 70,462 15 % $ - - Customer D $ 500 0.1 % $ 42,900 37 % Revenue Recognition The Company recognizes revenue only when all of the following criteria have been met: · Persuasive evidence of an arrangement exists; · Delivery has occurred or services have been rendered; · The fee for the arrangement is fixed or determinable; and · Collectability is reasonably assured. Persuasive Evidence of an Arrangement Delivery Has Occurred or Services Have Been Performed Collectability Is Reasonably Assured Return and Exchange Policy The Company provides a 30-day money-back guarantee if a buyer is not satisfied with a product. All of the products are thoroughly inspected and securely packaged before they are shipped to ensure buyers receive the best possible product. If for any reason buyers are unsatisfied with the products, they can return them and the Company will exchange or refund the purchase minus any shipping charges. For the wholesale customers, return policies are various based on their specific requirements with customers. As of September 30 th Cost Recognition Cost of products sold is primarily comprised of direct materials consumed in the manufacturing of primary coffee blender products. Cost of products sold also includes directly related labors' salaries. Selling, General and Administrative Expense Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, research and development costs, administrative and other indirect overhead costs, depreciation expense and other miscellaneous operating items. Due to researching and investigating the viability of a new product platform for functional beverages, company incurred large advertising expenses. Personnel expenses, occupying a majority portion of SG&A, were $308,631 and $363,788 for the years ended September 30, 2016 and 2015, respectively. Company covers shipping fees for wholesalers and distributors and the shipping and handling expenses are recorded under operating expenses. The Company expenses advertising costs when incurred. Advertising expense for the years ended September 30, 2016 and 2015 is as follows: September 30, 2016 September 30, 2015 Advertising $ 33,030 $ 34,530 Research and Development Research and development expenses are expensed in the statements of operations as incurred in accordance with FASB ASC 730, Research and Development. Research and development expenses include salaries, related employee expenses, research expenses, manufacturing expenses and consulting fees. Cash Flow Presentation The Statement of Cash Flows is prepared using the indirect method, which reconciles net loss to cash flow from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in net loss. The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. Inventory Inventory, consisting principally of raw materials held for production and sale is stated at the lower of cost or market or net realizable value, using the weighted average cost method. Both finished goods and work in process using the weighted average cost method. The Company reviews inventory levels at least quarterly and records a valuation allowance when appropriate. At September 30, 2016 and 2015 the Company concluded the carrying value of the inventory of $206,356 and $201,764 respectively, the amount reflected on the balance sheet is net of this adjustment. September 30, 2016 September 30, 2015 Raw Material $ 124,035 $ 69,836 Work in Process 14,366 - Finished goods 67,955 131,928 Inventories $ 206,356 $ 201,764 Property, Plant and Equipment Equipment is stated at cost, net of depreciation. The Company depreciates equipment on a straight line basis. Office equipment is depreciated over a 3 year life, furniture over a 7 year life, and other equipment over a 7 year life. Property and equipment is recorded at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight- line method over the expected useful life of the asset, after the asset is placed in service. Depreciation expense for the years ended September 30, 2016 and 2015 was $41,921 and $22,147 respectively. Accumulated depreciation amounts was $59,088 and $20,032 for the year ended September 30, 2015 and 2016. Repair and maintenance costs are expensed as incurred. Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment that exceed $1,000 are capitalized. Below is fixed assets as of September 30 th September 30, 2016 September 30, 2015 Furniture and Fixture $ 31,514 $ 30,736 Machinery and Equipment $ 169,864 $ 171,743 Vehicles $ 9,657 $ 9,657 Samples The Company distributes samples of its products as a component of its marketing program. Costs for samples are expensed at the time the samples are shipped and recorded under operating expenses. Long-Lived Assets In accordance with Financial Accounting Standards Board (" FASB " ) Accounting Standards Codification ( " ASC " ) 360, Property, Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicated 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 a 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 its fair value which is generally determined based on 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. Income Taxes In accordance with ASC 740 - Income Taxes, the provision for income taxes is computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of September 30, 2016 and 2015. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash with high quality banking institutions. From time to time, the Company may or may not maintain cash balances at certain institutions in excess of the Federal Deposit Insurance Corporation limit. 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. Stock-based Compensation We account for share-based awards issued to employees in accordance with Accounting Standards Codification (ASC) 718, "Compensation-Stock Compensation". Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period , which is normally the vesting period. Share-based compensation to directors is treated in the same manner as share-based compensation to employees, regardless of whether the directors are also employees. We account for share-based compensation to persons other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. We estimate the fair value of share-based payments using the Black Scholes option-pricing model for common stock options and warrants and the closing price of our common stock for common share issuances. |
