Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Aug. 31, 2016 | Feb. 29, 2016 | |
Document and Entity Information: | ||
Entity Registrant Name | Kush Bottles, Inc. | |
Document Type | 10-K | |
Document Period End Date | Aug. 31, 2016 | |
Trading Symbol | kshb | |
Amendment Flag | false | |
Entity Central Index Key | 1,604,627 | |
Current Fiscal Year End Date | --08-31 | |
Entity Common Stock, Shares Outstanding | 48,300,162 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | FY | |
Entity Public Float | $ 27,352,881 |
Kush Bottles, Inc. - Consolidat
Kush Bottles, Inc. - Consolidated Balance Sheets - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 | |
Current Assets: | |||
Cash | $ 1,027,003 | $ 201,259 | |
Accounts receivable, net of allowance | 199,844 | 146,392 | |
Prepaids | 596,456 | 153,389 | |
Inventory | 1,142,458 | 662,368 | |
TOTAL CURRENT ASSETS | 2,965,761 | 1,163,408 | |
Goodwill | 2,376,589 | 2,376,589 | |
Deposits | 12,220 | ||
Property and equipment, net | 273,597 | 205,271 | |
Total Assets | 5,628,167 | 3,745,268 | |
Current Liabilities: | |||
Accounts payable | 369,636 | 377,199 | |
Accrued expenses and other current liabilities | 549,101 | 391,334 | |
Line of credit | 85,000 | ||
Notes payable- related parties | 75,000 | ||
Notes payable- current portion | 20,247 | 27,394 | |
Total Current Liabilities | 938,984 | 955,927 | |
LONG-TERM DEBT | |||
Notes payable | 39,307 | 54,585 | |
TOTAL LIABILITIES | 978,291 | 1,010,512 | |
COMMITMENTS AND CONTINGENCIES | |||
STOCKHOLDERS' EQUITY | |||
Preferred stock | [1] | ||
Common stock | [2] | 48,300 | 46,133 |
Additional paid-in capital | 5,278,284 | 3,437,070 | |
Accumulated deficit | (676,708) | (748,447) | |
Total Stockholders' Equity | 4,649,876 | 2,734,756 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 5,628,167 | $ 3,745,268 | |
[1] | $0.001 par value; 10,000,000 shares authorized, No shares issued and outstanding | ||
[2] | $0.001 par value; 265,000,000 shares authorized, 48,300,162 and 46,132,779 shares issued and outstanding, respectively. |
Statement of Financial Position
Statement of Financial Position - Parenthetical - $ / shares | Aug. 31, 2016 | Aug. 31, 2015 |
Statement of Financial Position | ||
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par Value | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 265,000,000 | 265,000,000 |
Common Stock, Shares Issued | 48,300,162 | 46,132,779 |
Common Stock, Shares Outstanding | 48,300,162 | 46,132,779 |
Kush Bottles, Inc. - Consolida4
Kush Bottles, Inc. - Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | |
Income Statement | ||
REVENUE | $ 8,215,452 | $ 4,013,571 |
COST OF GOODS SOLD | 5,536,234 | 2,585,397 |
GROSS PROFIT | 2,679,218 | 1,428,174 |
OPERATING EXPENSES | ||
Depreciation | 26,253 | 30,267 |
Stock compensation expense | 137,887 | |
Selling, general and administrative | 2,430,623 | 1,743,628 |
Total Operating Expenses | 2,594,763 | 1,773,895 |
INCOME (LOSS) FROM OPERATIONS | 84,455 | (345,721) |
OTHER INCOME (EXPENSES) | ||
Other income | 7,582 | 12,980 |
Interest expense | (20,298) | (6,562) |
Total Other Income (Expense) | (12,716) | 6,418 |
INCOME (LOSS) BEFORE INCOME TAXES | 71,739 | (339,303) |
PROVISION FOR INCOME TAXES | ||
NET INCOME (LOSS) | $ 71,739 | $ (339,303) |
BASIC AND DILUTED INCOME (LOSS) PER SHARE | $ 0 | $ (0.01) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- BASIC | 46,911,818 | 42,718,159 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- DILUTED | 48,109,866 | 42,718,159 |
Kush Bottles, Inc. - Consolida5
Kush Bottles, Inc. - Consolidated Statement of Stockholders' Equity - USD ($) | Common Stock | Common Stock to be Issued | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance, Value at Aug. 31, 2014 | $ 40,720 | $ 750 | $ 535,082 | $ (409,144) | $ 167,408 |
Balance, Shares at Aug. 31, 2014 | 40,720,000 | 750,000 | |||
Stock issued for services, Value | $ 50 | $ (50) | |||
Stock issued for services, Shares | 50,000 | ||||
Stock sold to investors, Value | $ 1,263 | (100) | 735,838 | 737,001 | |
Stock sold to investors, Shares | 1,262,779 | ||||
Stock compensation, Value | $ 600 | $ (600) | |||
Stock compensation, Shares | 600,000 | ||||
Acquisition of Dank Bottles, Inc., Value | $ 3,500 | 2,166,150 | 2,169,650 | ||
Acquisition of Dank Bottles, Inc., Shares | 3,500,000 | ||||
Net loss | (339,303) | (339,303) | |||
Balance, Value at Aug. 31, 2015 | $ 46,133 | 3,437,070 | (748,447) | 2,734,756 | |
Balance, Shares at Aug. 31, 2015 | 46,132,779 | ||||
Stock sold to investors, Value | $ 1,955 | 1,576,093 | 1,578,048 | ||
Stock sold to investors, Shares | 1,955,028 | ||||
Net loss | 71,739 | 71,739 | |||
Stock option amortization | 91,960 | 91,960 | |||
Accrued compensation paid in stock, Value | $ 147 | 95,049 | 95,196 | ||
Accrued compensation paid in stock, Shares | 147,500 | ||||
Stock issued for prepaid machinery, Value | $ 25 | 32,225 | 32,250 | ||
Stock issued for prepaid machinery, Shares | 25,000 | ||||
Share-based compensation, Value | $ 40 | 45,887 | 45,927 | ||
Share-based compensation, Shares | 39,855 | ||||
Balance, Value at Aug. 31, 2016 | $ 48,300 | $ 5,278,284 | $ (676,708) | $ 4,649,876 | |
Balance, Shares at Aug. 31, 2016 | 48,300,162 |
Kush Bottles, Inc. - Consolida6
Kush Bottles, Inc. - Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
NET INCOME (LOSS) | $ 71,739 | $ (339,303) | |
Adjustments to reconcile net income (loss) to net cash (used in) operating activities: | |||
Depreciation | 80,341 | 30,267 | |
Stock compensation expense | 137,887 | ||
Changes in operating assets and liabilities | |||
Accounts receivable | (53,452) | (24,412) | |
Prepaids | (410,817) | (15,340) | |
Inventory | (480,090) | (208,427) | |
Deposits | (12,220) | ||
Accounts payable | (7,563) | 94,285 | |
Accrued expenses and other current liabilities | 252,963 | 260,702 | |
Net cash used in operating activities | (421,212) | (202,228) | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Acquisition of Company | [1] | (273,725) | |
Purchase of property and equipment | (148,667) | (137,220) | |
Net cash used in investing activities | (148,667) | (410,945) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Repayment of related party loan | (75,000) | (75,000) | |
Drawdown on line of credit | 155,000 | ||
Payments on line of credit | (240,000) | ||
Proceeds from notes payable | 173,472 | ||
Repayment of notes payable | (22,425) | (44,045) | |
Proceeds from sale of stock | 1,578,048 | 737,001 | |
Net cash provided by financing activities | 1,395,623 | 791,428 | |
NET INCREASE IN CASH | 825,744 | 178,255 | |
Cash, beginning of period | 201,259 | 23,004 | |
Cash, end of period | 1,027,003 | 201,259 | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||
Cash paid for interest | 20,298 | 6,562 | |
Cash paid for income taxes | |||
NON-CASH INVESTING AND FINANCING ACTIVITIES | |||
Prepaid machinery paid in stock | 32,250 | ||
Accrued compensation paid in stock | $ 95,196 | ||
[1] | Acquisition of Dank Bottles, LLC |
Note 1 - Nature of Business and
Note 1 - Nature of Business and Significant Accounting Policies | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 1 - Nature of Business and Significant Accounting Policies | NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business Kush Bottles, Inc. (“the Company”) was incorporated in the state of Nevada on February 26, 2014. The Company specializes in the wholesale distribution of packaging supplies for the cannabis industry. The Company’s wholly owned subsidiary Kim International Corporation (KIM) was originally incorporated as Hy Gro Economics Corporation ("Hy Gro") on December 2, 2010. On October 30, 2012, Hy Gro amended its articles of incorporation to reflect a name change to KIM International Corporation (KIM). Recapitalization On March 4, 2014, the shareholders of KIM exchanged all 10,000 of their common shares for 32,400,000 common shares of Kush Bottles, Inc. The operations of KIM became the operations of Kush after the share exchange and accordingly the transaction is accounted for as a recapitalization of KIM whereby the historical financial statements of KIM are presented as the historical financial statements of the combined entity. Subsequent to the share exchange, the members of KIM owned 32,400,000 of shares of Company’s common stock, effectively obtaining operational and management control of Kush. Kush had no operations prior to the share exchange. As a result of the recapitalization, KIM was the acquiring entity in accordance with ASC 805, Business Combinations. The accumulated losses of KIM were carried forward after the completion of the share exchange. Operations prior to the share exchange were those of KIM. All reference to common stock shares and per share amounts have been restated to effect the recapitalization which occurred on March 4, 2014. Acquisition of Dank Bottles, LLC On April 10, 2015, the Company entered into an equity purchase agreement to acquire all of the issued and outstanding membership interests in Dank Bottles, LLC ("Dank"), a Colorado limited liability company, effectively making Dank a wholly owned subsidiary of the Company. In exchange for the purchased interests, the Company paid cash consideration of $ 373,725 and issued 3,500,000 shares of common stock to the sellers of Dank. Of the $373,725 of cash consideration, $ 273,725 was paid on April 10, 2015 and the remaining $100,000 is to be paid in 10 monthly installments beginning on July 31, 2015 and ending April 30, 2016. The following table summarizes the total consideration paid by each major class of consideration, including non-cash consideration paid: Consideration paid: Cash $ 273,725 Note payable, short-term 100,000 3,500,000 Common shares of Kush Bottles, Inc. 2,169,650 Total consideration $ 2,543,375 On April 10, 2015, there was no public market for the Company's common stock and, as such, we evaluated the best evidence to estimate the common stock's fair value. The common stock was valued using the market approach. The market approach bases the valuation measurement on what other similar enterprises or comparable transactions indicate the value to be. From the period of inception to April 10, 2015, the Company had sold 1,471,112 shares of its common stock to accredited investors for cash of $ 912,000 , at a weighted average offering price of $ 0.6199 per share. Accordingly, the Company has valued the price of the common stock issued in conjunction with these transactions at $ 0.6199 per share. The Company considers these transactions preceding the acquisition the best evidence of fair value for the common stock. In the absence of an active market trading its securities, management will continue to monitor transactions in the Company's common stock to ascertain its value under the market approach. The following table summarizes the final purchase price allocation, and the estimated fair values of the net assets acquired, liabilities assumed, identifiable intangible assets, and goodwill that resulted from the acquisition of Dank as of April 10, 2015: Cash and cash equivalents $ 73,505 Accounts receivable, net 71,667 Inventory 300,901 Prepaid expenses 9,848 Property and equipment, net 76,767 532,688 Accounts payable 230,600 Customer deposits 72,585 Payroll liabilities 9,889 Notes payable, short-term 52,828 365,902 Goodwill 2,376,589 Total consideration $ 2,543,375 The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805, Business Combinations. As of April 10, 2015, the assets acquired, including the identifiable intangible assets, and liabilities assumed from Dank were recorded at their respective fair values. Any excess of the purchase price for the acquisition over the net fair value of Dank identified tangible and intangible assets acquired and liabilities assumed were recorded as goodwill. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. Basis of Presentation The accompanying consolidated financial statements and related notes include the activity of the Company and its wholly owned subsidiaries, KIM and Dank, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Significant inter-company transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers cash and cash equivalents to consist of cash on hand and investments having an original maturity of 90 days or less that are readily convertible into cash. As of August 31, 2016 and 2015, the Company had $1,027,003 and $201,259, respectively. Accounts Receivable Trade accounts receivable are stated at the amount the Company expects to collect, and are derived from sales to customers. Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. A reserve for uncollectible trade receivables is established when collection of amounts due from clients is deemed improbable. Indicators of improbable collection include client bankruptcy, client litigation, client cash flow difficulties, or ongoing service or billing disputes. Historically, the Company has experienced a de minimis amount of bad debts. Trade credit is generally extended on a short-term basis, thus trade receivables do not bear interest. The Company’s allowance for doubtful accounts was $ 2,000 and $ 5,080 as of August 31, 2016 and 2015, respectively. Inventory Inventories are stated at the lower of cost or net realizable value using the first-in first out (FIFO) method. The Company’s inventory consists of finished goods of $ 1,142,458 and $ 662,368 as of August 31, 2016 and 2015, respectively. Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, after the asset is placed in service. Gains and losses from the retirement or disposition of property and equipment are included in operations in the period incurred. Maintenance and repairs are expensed as incurred. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows: Furniture and Fixtures 5-7 years Computer Equipment 3 years Computer Software 3 years Leasehold Improvements The shorter of remaining term of the lease or useful life The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate the carrying values of such assets may not be recoverable. For property and equipment to be held and used, impairment is determined by a comparison of the carrying value of the asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Property and equipment to be disposed of by sale is carried at the lower of then current carrying value or fair value less cost to sell. No events were noted that would cause an impairment of property and equipment in the years ended August 31, 2016 and 2015. Fair Value of Financial Instruments The fair value of certain of our financial instruments, including cash and cash equivalents, receivables, other current assets, accounts payable, accrued compensation and employee benefits, other accrued liabilities and notes payable, approximate their carrying amounts because of the short-term maturity of these instruments. Concentration of Risk Financial instruments that potentially expose us to concentrations of risk consist primarily of cash and cash equivalents and accounts receivable, which are generally not collateralized. Our policy is to place our cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. The Company generally does not require collateral from its customers, but its credit extension and collection policies include analyzing the financial condition of potential customers, establishing credit limits, monitoring payments, and aggressively pursuing delinquent accounts. The Company maintains allowances for potential credit losses. A significant portion of the Company’s revenues are derived from the sales of products to the purveyors of cannabis products and services. Goodwill and Other Long-Lived Assets Goodwill represents the excess of cost over the fair value of identifiable assets acquired and liabilities assumed in business combinations. The Company’s management assess goodwill for impairment on an annual basis during the fourth quarter using an August 1 measurement date unless circumstances require a more frequent measurement. When evaluating goodwill for impairment, the Company may first perform an assessment qualitatively whether it is more likely than not that a reporting unit's carrying amount exceeds its fair value, referred to as a "step zero" approach. If, based on the review of the qualitative factors, the Company determines it is not more likely than not that the fair value of goodwill is less than its carrying value; it would conduct the two-step impairment test. Events and circumstances the Company considers in performing the "step zero" qualitative assessment include macro-economic conditions, market and industry conditions, internal cost factors, share price fluctuations, and the operational stability and the overall financial performance of the reporting units. If the Company concludes that it is more likely than not that a reporting unit's fair value is less than its carrying amount, it would perform the first step (“step one”) of the two-step impairment test and calculate the estimated fair value of the goodwill by using discounted cash flow valuation model. These methods require estimates of future revenues, profits, capital expenditures, working capital, and other relevant factors. The Company estimates these amounts by evaluating historical trends, current budgets, operating plans, industry data, and other relevant factors. For fiscal 2016, the Company began its assessment with the step zero qualitative analysis. The Company’s management determined that the fair value of the goodwill exceeded the carrying value goodwill. After evaluating and weighing all relevant events and circumstances, the Company concluded that it is not more likely than not that the fair value of goodwill was less its carrying amounts. Consequently, the Company did not perform a step one quantitative analysis in fiscal 2016. Earnings (Loss) Per Share The Company computes net loss per share under Accounting Standards Codification subtopic 260-10, "Earnings Per Share" (“ASC 260-10”). Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period. EPS for convertible debt is calculated under the “if-converted” method. Under the if converted method, EPS is calculated as the more dilutive of EPS (i) including all interest (both cash interest and non-cash discount amortization) and excluding all shares underlying the Notes or; (ii) excluding all interest and costs directly related to the convertible debt (both cash interest and non-cash discount amortization) and including all shares underlying the convertible debt. Comprehensive Income (loss) Comprehensive income (loss) is the change in the Company’s equity (net assets) during each period from transactions and other events and circumstances from non-owner sources. During the years ended August 31, 2016 and 2015, the Company had no elements of comprehensive income or loss. Revenue Recognition It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 605 "Revenue Recognition". Four basic criteria must be met before revenue can be recognized; (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding fixed nature in selling prices of the products delivered and the collectability of those amounts. The Company has not implemented any specific rebate programs. Provisions for discounts to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. As of August 31, 2016 and 2015, the Company had provisions for sales discounts of $96,591 and $21,183, respectively. The Company has not established a formal customer incentive program, but considers and accomodates discounts to certain customers on a case by case basis, including by way of example, for volume shipping or for certain new customers with orders over a specific discretionary dollar threshold. During the year ended August 31, 2016 and 2015, the Company had a refund allowance of $0. Consistent with ASC 605-15-25-1, the Company considers factors such as historical return of products, estimated remaining shelf life, price changes from competitors, and introductions of competing products in establishing a refund allowance. The Company recognizes revenues as risk and title to products transfers to the customer (which generally occurs at the time shipment is made), the sales price is fixed or determinable, and collectability is reasonably assured. The Company defers any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Warranty Costs The Company has not had any historical warranty related expenditures from the sales of its products, which if incurred would result in the return of any defective products by customers. Business Combinations Accounting for our acquisitions requires the Company to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. Thus, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations and comprehensive income (loss). Accounting for business combinations requires the Company’s management to make significant estimates and assumptions, especially at the acquisition date including its estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies and contingent consideration, where applicable. If management cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, the Company will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Although the Company believes the assumptions and estimates it has made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Subsequent to the measurement period, changes in the estimates of such contingencies will affect earnings and could have a material effect on the Company’s results of operations and financial position. Examples of critical estimates in valuing certain of the intangible assets the Company has acquired include but are not limited to: (i) future expected cash flows from product sales; (ii) the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. In addition, any uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. If applicable, the Company would reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to its preliminary estimates being recorded to goodwill provided that we are within the measurement period. Subsequent to the measurement period or the final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect the Company’s provision for income taxes in our consolidated statements of income and comprehensive income and could have a material impact on its results of operations and financial position. Share-based Compensation The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, "Compensation", which requires fair value measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards. The Company estimates the fair value of share-based payment awards on the date of grant using the Black-Scholes model. The Company’s determination of fair value of share-based payment awards on the date of grant is affected by a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, stock price, exercise price, dividends paid, expected term and risk free discount rate. Although the fair value of stock options is determined in accordance with an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The fair value is then expensed over the requisite service periods of the awards, which is generally the performance period and the related amount is recognized in the consolidated statements of operations. Advertising The Company conducts advertising for the promotion of its services. In accordance with ASC Topic 720-35-25, advertising costs are charged to operations when incurred. Income Taxes The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized. The Company applies the provisions of ASC 740, "Accounting for Uncertainty in Income Taxes". The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company did not identify any material uncertain tax positions on returns that have been filed or that will be filed. The Company did not recognize any interest or penalties for unrecognized tax benefits during the years ended August 31, 2016 and 2015, nor was any interest or penalties accrued as of August 31, 2016 and 2015. Fair Value of Financial Instruments The Company adopted ASC 820 which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under this standard certain assets and liabilities must be measured at fair value, and disclosures are required for items measured at fair value. The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1. 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 (e.g., 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 - Unobservable inputs that reflect management’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Application of Valuation Hierarchy A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodology used to measure fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy. Note Payable – Vehicle Loan. The Company had no financial assets or liabilities that are measured at fair value on a recurring basis as of August 31, 2016 and 2015. Segment Information The Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates resources to the business as a whole. Reclassification Certain reclassifications have been made to the prior period data to conform to the current presentation. These reclassifications had no effect on reported net loss. Recently Issued Accounting Pronouncements In May 2016, accounting guidance was issued to clarify the not yet effective revenue recognition guidance issued in May 2014. This additional guidance does not change the core principle of the revenue recognition guidance issued in May 2014, rather, it provides clarification of accounting for collections of sales taxes as well as recognition of revenue (i) associated with contract modifications, (ii) for noncash consideration, and (iii) based on the collectability of the consideration from the customer. The guidance also specifies when a contract should be considered “completed” for purposes of applying the transition guidance. The effective date and transition requirements for this guidance are the same as the effective date and transition requirements for the guidance previously issued in 2014, which is effective for interim and annual periods beginning on or after December 15, 2017. The Company not yet determined the impact that this new guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In April 2015, the FASB issued ASU 2015-03 , Interest- Imputation of Interest (Subtopic 835-30) In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern Risks and Uncertainties Other Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
Note 2 - Concentrations of Risk
Note 2 - Concentrations of Risk | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 2 - Concentrations of Risk | NOTE 2 – CONCENTRATIONS OF RISK Supplier Concentrations The Company purchases inventory from various suppliers and manufacturers. For the fiscal year ended August 31, 2016 and 2015, two vendors accounted for approximately 24% and 34% of total inventory purchases, respectively. Customer Concentrations For the fiscal year ended August 31, 2016 and 2015, there were no customers that represented over 10% of the Company’s revenues. |
Note 3 - Related-party Transact
Note 3 - Related-party Transactions | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 3 - Related-party Transactions | NOTE 3 – RELATED-PARTY TRANSACTIONS As a result of the Dank acquisition on April 10, 2015, the Company owed $ 100,000 to the sellers of Dank. The balance on this loan was $ 0 and $ 75,000 as of August 31, 2016 and 2015, respectively. The Company leases its California and Colorado facilities from related parties. During the fiscal years ended August 31, 2016 and 2015, the Company made rent payments of $ 174,750 and $ 115,400 , respectively, to these related parties. On May 13, 2016, the Company amended the Board of Directors Services Agreement with Greg Gamet dated May 4, 2015. The Director’s compensation was revised to include a new compensation arrangement that effectively supersedes the original compensation terms. Effective May 13, 2016, the Board approved the issuance of 250,000 stock options to acquire common stock at an exercise price of $1.00 per share, with 50% of such stock options vesting on May 13, 2017 and none before this date and the remaining 50% of such stock options vesting ratably in 4 quarterly installments over the following 12 months. |
Note 4 - Property and Equipment
Note 4 - Property and Equipment | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 4 - Property and Equipment | NOTE 4 – PROPERTY AND EQUIPMENT The major classes of fixed assets consist of the following as of August 31: August 31, 2016 August 31, 2015 Office Equipment $ 71,507 $ 28,955 Machinery and equipment 147,577 68,173 Leasehold improvements 63,323 32,780 Vehicles 116,592 140,609 398,999 270,517 Accumulated Depreciation (125,402) (65,246) $ 273,597 $ 205,271 Depreciation expense was $80,341 and $30,267 for the fiscal years ended August 31, 2016 and 2015, respectively. |
Note 5 - Goodwill
Note 5 - Goodwill | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 5 - Goodwill | NOTE 5 - GOODWILL The following table summarizes the changes in the carrying amount of goodwill for the fiscal years ended August 31, 2016 and 2015: Total Goodwill, gross $ 2,376,589 Accumulated impairment losses - Balance as of August 31, 2015 $ 2,376,589 Additions - Deductions - Impairment loss - Goodwill, gross $ 2,376,589 Accumulated impairment losses - Balance as of August 31, 2016 $ 2,376,589 The Company had no impairment to the carrying value of goodwill as of August 31, 2016. |
Note 6 - Long Term Debt
Note 6 - Long Term Debt | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 6 - Long Term Debt | NOTE 6 – LONG TERM DEBT Automobile Contracts Payable The Company has entered into purchase contracts for its vehicles. The loans are secured by the vehicles and bear interest at an average interest rate of approximately 12% per annum. The composition of these automobile contracts payable is summarized in the table below: Principal Due 2017 $ 20,247 2018 20,981 2019 12,723 2020 5,603 $ 59,554 |
Note 7 - Current Liabilities
Note 7 - Current Liabilities | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 7 - Current Liabilities | NOTE 7 – CURRENT LIABILITIES Line of Credit On April 6, 2015, the Company entered into a $240,000 revolving line of credit facility. The loan bears interest at prime plus 2.75%. The maturity date of the loan was extended from April 1, 2016 to September 1, 2016. The Company paid down the loan in full on August 19, 2016. As of August 31, 2016 and 2015, the balance on this loan is $0 and $85,000, respectively. Accrued Expenses Accrued expenses and other current liabilities consist of the following as of August 31: August 31, 2016 August 31, 2015 Customer deposits $ 260,409 $ 177,493 Accrued compensation 178,769 144,428 Credit card liabilities 67,813 56,748 Deferred rent 18,810 - Sales tax payable 23,300 12,665 $ 549,101 $ 391,334 |
Note 8 - Stockholders' Equity
Note 8 - Stockholders' Equity | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 8 - Stockholders' Equity | NOTE 8 – STOCKHOLDERS' EQUITY Preferred Stock The authorized preferred stock is 10,000,000 shares with a par value of $0.001. As of August 31, 2016 and 2015, the Company has no shares of preferred stock issued or outstanding. Common Stock The authorized common stock is 265,000,000 shares with a par value of $0.001. As of August 31, 2016 and 2015, 48,300,162 and 46,132,779 shares were issued and outstanding, respectively. During the year ended August 31, 2015, the Company sold 1,162,779 shares of its common stock to investors in exchange for cash of $ 737,001 . During the year ended August 31, 2016, the Company sold 1,955,028 shares of its common stock to investors in exchange for cash of $ 1,578,048 . On April 10, 2015, the Company concluded an equity purchase agreement to acquire all of the issued and outstanding membership interests in Dank. As a result of the acquisition, the Company issued 3,500,000 shares of common stock to the sellers of Dank at a fair value of $2,169,650. Share-based Compensation During the year ended August 31, 2016, the Company issued 187,355 shares of common stock to employees and consultants in exchange for $141,123 of services rendered, of which $95,196 was included in accrued expenses as of August 31, 2015. Stock Options The Company’s 2016 Stock Incentive Plan (the Plan) was adopted on February 9, 2016. The Plan permits the grant of share options and shares to its employees and directors for up to 5,000,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant; those option awards generally vest based on three years of continuous service and have 10-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the Plan. The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted during the years ended August 31, 2016 and 2015: «6NL75Y80|Level=3|Label=Schedule of Stock Options Roll Forward|Tag=us-gaap:ScheduleOfStockOptionsRollForwardTableTextBlock» August 31, 2016 August 31, 2015 Expected term (years) 2-4 N/A Expected volatility 60% N/A Weighted-average volatility 60% N/A Risk-free interest rate 0.71%-1.20% N/A Dividend yield 0% N/A Expected forfeiture rate 33% N/A The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on management's analysis of historical volatility for comparable companies. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. During the year ended August 31, 2016, the Company issued 1,039,000 stock options pursuant to the Company’s 2016 Stock Incentive Plan. A summary of the Company’s stock option activity during the year ended August 31, 2016 and 2015 is presented below: Weighted Weighted Average Average Remaining Aggregate No. of Exercise Contractual Intrinsic Options Price Term Value Balance Outstanding, August 31, 2015 1,000,000 $ 0.05 3.46 years $ 595,000 Granted 1,039,000 1.07 10.00 years - Exercised - - - - Forfeited - - - - Balance Outstanding, August 31, 2016 2,039,000 $ 0.57 6.15 years $ 2,283,680 Exercisable, August 31, 2016 1,130,000 $ 0.17 3.29 years $ 1,717,600 The weighted-average grant-date fair value of options granted during the years ended August 31, 2016 and 2015, was $0.43 and $0, respectively. There were no options exercised or forfeited during the years ended August 31, 2016 and 2015. A summary of the status of the Company’s non-vested options as of August 31, 2016, and changes during the year ended August 31, 2016, is presented below: Weighted Average No. of Grant-Date Options Fair Value Nonvested at August 31, 2015 - $ - Granted 1,039,000 448,016 Vested (130,000) (91,960) Forfeited - - Nonvested at August 31, 2016 909,000 $ 356,056 As of August 31, 2016, there was $356,056 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.3 years. The total fair value of shares vested during the years ended August 31, 2016 and 2015, was $91,960 and $0, respectively. These amounts are included in stock compensation expense on the consolidated statements of operations. |
Note 9 - Income Taxes
Note 9 - Income Taxes | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 9 - Income Taxes | NOTE 9 – INCOME TAXES For the fiscal years ended August 31, 2016 and 2015, the Company incurred a net profit (loss) of $71,739 and $(339,303), respectively. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is $366,757 as of August 31, 2016 and will expire beginning in the year 2034. The provision for income tax consists of the following: August 31, 2016 August 31, 2015 Federal income (tax) benefit attributable to: Current operations $ 24,391 $ 135,159 Non-deductible entertainment 31,059 Prior year adjustments 17,810 State tax, net of Federal benefit 9,516 Stock compensation - 37,921 Depreciation - 10,065 Less: valuation allowance (82,776) (183,145) Net provision for Federal income taxes $ - $ - [ The cumulative tax effect at the expected rate of 43% of significant items comprising our net deferred tax amount is as follows: August 31, 2016 August 31, 2015 Deferred tax asset attributable to: Net operating loss carryover $ 149,622 $ 148,412 Stock compensation 75,133 148,872 Depreciation 2,197 12,443 Valuation allowance (226,952) (309,727) Net deferred tax asset $ - $ - Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $366,757 for Federal income tax reporting purposes are subject to annual limitations, which expire starting 2034. Net operating loss carry forwards may be limited as to use in future years should a change in majority ownership occur. The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of August 31, 2016 and 2015, the Company had no accrued interest or penalties related to uncertain tax positions. The tax years that remain subject to examination by major taxing jurisdictions are for the years ended August 31, 2016, 2015 and 2014. |
Note 10 - Earnings (loss) Per S
Note 10 - Earnings (loss) Per Share | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 10 - Earnings (loss) Per Share | NOTE 10 – EARNINGS (LOSS) PER SHARE We calculate basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share reflect the effects of potentially diluted securities. Because we incurred a net loss for the fiscal year ended August 31, 2015, common stock equivalents are anti-dilutive, and accordingly basic and diluted loss per share were the same for fiscal 2015. The summary of the basic and diluted earnings per share computations is as follows: August 31, 2016 August 31, 2015 Net income (loss) $ 71,739 $ (339,303) Weighted average common shares outstanding for basic EPS 46,911,818 42,718,159 Net effect of dilutive options 1,198,048 - Weighted average common shares outstanding for diluted EPS 48,109,866 42,718,159 Basic earnings (loss) per share $ 0.00 $ (0.01) Diluted earnings (loss) per share $ 0.00 $ (0.01) |
Note 11 - Commitments and Conti
Note 11 - Commitments and Contingencies | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 11 - Commitments and Contingencies | NOTE 11 – COMMITMENTS AND CONTINGENCIES Lease The Company’s corporate head-quarters and primary distribution center is located in Santa Ana, California. The California facility lease expires on August 1, 2018 and requires monthly payments of $10,000 in fiscal 17 and $11,000 in fiscal 18, for a total of $ 252,000 in lease commitments through the end of term. On April 1, 2016, the Company entered into a new sublease agreement for a facility located in Woodinville, Washington. The lease commenced on July 15, 2016 and expires on January 31, 2020, and requires escalating monthly payments that range between $14,985 and $16,022, for a total of $ 622,653 in future lease commitments through the end of the lease term. Effective April 10, 2015, the Company assumed the facility lease in Denver, Colorado, which is the headquarters of operations for its wholly-owned subsidiary, Dank. The lease runs through March 31, 2020 and requires escalating monthly payments, ranging between $4,800 and $5,800, for a total of $241,800 in future lease commitments through the end of the term. During the years ended August 31, 2016 and 2015, the Company recognized $ 226,559 and $ 136,110 , respectively, of rental expense, related to its office, retail and warehouse space. Minimum future commitments under non-cancelable operating leases and other obligations were as follows at August 31, 2016: 2017 $ 354,107 2018 383,332 2019 258,304 2020 120,710 $ 1,116,453 Other Commitments In the ordinary course of business, the Company may enter into contractual purchase obligations and other agreements that are legally binding and specify certain minimum payment terms. The Company had no such agreements as of August 31, 2016. Litigation The Company may be subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. The Company had no pending legal proceedings or claims as of August 31, 2016 and 2015. |
Note 12 - Subsequent Events
Note 12 - Subsequent Events | 12 Months Ended |
Aug. 31, 2016 | |
Notes | |
Note 12 - Subsequent Events | NOTE 12 – SUBSEQUENT EVENTS Subsequent to August 31, 2016 and through the date of this filing, the Company sold 660,285 restricted shares of common stock to accredited investors in exchange for cash consideration of $868,999. |
Note 1 - Nature of Business a19
Note 1 - Nature of Business and Significant Accounting Policies: Nature of Business (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Nature of Business | Nature of Business Kush Bottles, Inc. (“the Company”) was incorporated in the state of Nevada on February 26, 2014. The Company specializes in the wholesale distribution of packaging supplies for the cannabis industry. The Company’s wholly owned subsidiary Kim International Corporation (KIM) was originally incorporated as Hy Gro Economics Corporation ("Hy Gro") on December 2, 2010. On October 30, 2012, Hy Gro amended its articles of incorporation to reflect a name change to KIM International Corporation (KIM). |
Note 1 - Nature of Business a20
Note 1 - Nature of Business and Significant Accounting Policies: Recapitalization (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Recapitalization | Recapitalization On March 4, 2014, the shareholders of KIM exchanged all 10,000 of their common shares for 32,400,000 common shares of Kush Bottles, Inc. The operations of KIM became the operations of Kush after the share exchange and accordingly the transaction is accounted for as a recapitalization of KIM whereby the historical financial statements of KIM are presented as the historical financial statements of the combined entity. Subsequent to the share exchange, the members of KIM owned 32,400,000 of shares of CompanyÂ’s common stock, effectively obtaining operational and management control of Kush. Kush had no operations prior to the share exchange. As a result of the recapitalization, KIM was the acquiring entity in accordance with ASC 805, Business Combinations. The accumulated losses of KIM were carried forward after the completion of the share exchange. Operations prior to the share exchange were those of KIM. All reference to common stock shares and per share amounts have been restated to effect the recapitalization which occurred on March 4, 2014. |
Note 1 - Nature of Business a21
Note 1 - Nature of Business and Significant Accounting Policies: Acquisition of Dank Bottles, Llc (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Acquisition of Dank Bottles, Llc | Acquisition of Dank Bottles, LLC On April 10, 2015, the Company entered into an equity purchase agreement to acquire all of the issued and outstanding membership interests in Dank Bottles, LLC ("Dank"), a Colorado limited liability company, effectively making Dank a wholly owned subsidiary of the Company. In exchange for the purchased interests, the Company paid cash consideration of $ 373,725 and issued 3,500,000 shares of common stock to the sellers of Dank. Of the $373,725 of cash consideration, $ 273,725 was paid on April 10, 2015 and the remaining $100,000 is to be paid in 10 monthly installments beginning on July 31, 2015 and ending April 30, 2016. The following table summarizes the total consideration paid by each major class of consideration, including non-cash consideration paid: Consideration paid: Cash $ 273,725 Note payable, short-term 100,000 3,500,000 Common shares of Kush Bottles, Inc. 2,169,650 Total consideration $ 2,543,375 On April 10, 2015, there was no public market for the Company's common stock and, as such, we evaluated the best evidence to estimate the common stock's fair value. The common stock was valued using the market approach. The market approach bases the valuation measurement on what other similar enterprises or comparable transactions indicate the value to be. From the period of inception to April 10, 2015, the Company had sold 1,471,112 shares of its common stock to accredited investors for cash of $ 912,000 , at a weighted average offering price of $ 0.6199 per share. Accordingly, the Company has valued the price of the common stock issued in conjunction with these transactions at $ 0.6199 per share. The Company considers these transactions preceding the acquisition the best evidence of fair value for the common stock. In the absence of an active market trading its securities, management will continue to monitor transactions in the Company's common stock to ascertain its value under the market approach. The following table summarizes the final purchase price allocation, and the estimated fair values of the net assets acquired, liabilities assumed, identifiable intangible assets, and goodwill that resulted from the acquisition of Dank as of April 10, 2015: Cash and cash equivalents $ 73,505 Accounts receivable, net 71,667 Inventory 300,901 Prepaid expenses 9,848 Property and equipment, net 76,767 532,688 Accounts payable 230,600 Customer deposits 72,585 Payroll liabilities 9,889 Notes payable, short-term 52,828 365,902 Goodwill 2,376,589 Total consideration $ 2,543,375 The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805, Business Combinations. As of April 10, 2015, the assets acquired, including the identifiable intangible assets, and liabilities assumed from Dank were recorded at their respective fair values. Any excess of the purchase price for the acquisition over the net fair value of Dank identified tangible and intangible assets acquired and liabilities assumed were recorded as goodwill. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market data. |
Note 1 - Nature of Business a22
Note 1 - Nature of Business and Significant Accounting Policies: Basis of Presentation (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements and related notes include the activity of the Company and its wholly owned subsidiaries, KIM and Dank, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Significant inter-company transactions and balances have been eliminated in consolidation. |
Note 1 - Nature of Business a23
Note 1 - Nature of Business and Significant Accounting Policies: Use of Estimates (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Note 1 - Nature of Business a24
Note 1 - Nature of Business and Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers cash and cash equivalents to consist of cash on hand and investments having an original maturity of 90 days or less that are readily convertible into cash. As of August 31, 2016 and 2015, the Company had $1,027,003 and $201,259, respectively. |
Note 1 - Nature of Business a25
Note 1 - Nature of Business and Significant Accounting Policies: Accounts Receivable (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Accounts Receivable | Accounts Receivable Trade accounts receivable are stated at the amount the Company expects to collect, and are derived from sales to customers. Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. A reserve for uncollectible trade receivables is established when collection of amounts due from clients is deemed improbable. Indicators of improbable collection include client bankruptcy, client litigation, client cash flow difficulties, or ongoing service or billing disputes. Historically, the Company has experienced a de minimis amount of bad debts. Trade credit is generally extended on a short-term basis, thus trade receivables do not bear interest. The CompanyÂ’s allowance for doubtful accounts was $ 2,000 and $ 5,080 as of August 31, 2016 and 2015, respectively. |
Note 1 - Nature of Business a26
Note 1 - Nature of Business and Significant Accounting Policies: Inventory (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Inventory | Inventory Inventories are stated at the lower of cost or net realizable value using the first-in first out (FIFO) method. The CompanyÂ’s inventory consists of finished goods of $ 1,142,458 and $ 662,368 as of August 31, 2016 and 2015, respectively. |
Note 1 - Nature of Business a27
Note 1 - Nature of Business and Significant Accounting Policies: Property and Equipment (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Property and Equipment | Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, after the asset is placed in service. Gains and losses from the retirement or disposition of property and equipment are included in operations in the period incurred. Maintenance and repairs are expensed as incurred. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows: Furniture and Fixtures 5-7 years Computer Equipment 3 years Computer Software 3 years Leasehold Improvements The shorter of remaining term of the lease or useful life The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate the carrying values of such assets may not be recoverable. For property and equipment to be held and used, impairment is determined by a comparison of the carrying value of the asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Property and equipment to be disposed of by sale is carried at the lower of then current carrying value or fair value less cost to sell. No events were noted that would cause an impairment of property and equipment in the years ended August 31, 2016 and 2015. |
Note 1 - Nature of Business a28
Note 1 - Nature of Business and Significant Accounting Policies: Fair Value of Financial Instruments (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of certain of our financial instruments, including cash and cash equivalents, receivables, other current assets, accounts payable, accrued compensation and employee benefits, other accrued liabilities and notes payable, approximate their carrying amounts because of the short-term maturity of these instruments. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company adopted ASC 820 which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under this standard certain assets and liabilities must be measured at fair value, and disclosures are required for items measured at fair value. The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1. 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 (e.g., 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 - Unobservable inputs that reflect management’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Application of Valuation Hierarchy A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodology used to measure fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy. Note Payable – Vehicle Loan. The Company had no financial assets or liabilities that are measured at fair value on a recurring basis as of August 31, 2016 and 2015. |
Note 1 - Nature of Business a29
Note 1 - Nature of Business and Significant Accounting Policies: Concentration of Risk (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Concentration of Risk | Concentration of Risk Financial instruments that potentially expose us to concentrations of risk consist primarily of cash and cash equivalents and accounts receivable, which are generally not collateralized. Our policy is to place our cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. The Company generally does not require collateral from its customers, but its credit extension and collection policies include analyzing the financial condition of potential customers, establishing credit limits, monitoring payments, and aggressively pursuing delinquent accounts. The Company maintains allowances for potential credit losses. A significant portion of the CompanyÂ’s revenues are derived from the sales of products to the purveyors of cannabis products and services. |
Note 1 - Nature of Business a30
Note 1 - Nature of Business and Significant Accounting Policies: Goodwill and Other Long-lived Assets (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Goodwill and Other Long-lived Assets | Goodwill and Other Long-Lived Assets Goodwill represents the excess of cost over the fair value of identifiable assets acquired and liabilities assumed in business combinations. The Company’s management assess goodwill for impairment on an annual basis during the fourth quarter using an August 1 measurement date unless circumstances require a more frequent measurement. When evaluating goodwill for impairment, the Company may first perform an assessment qualitatively whether it is more likely than not that a reporting unit's carrying amount exceeds its fair value, referred to as a "step zero" approach. If, based on the review of the qualitative factors, the Company determines it is not more likely than not that the fair value of goodwill is less than its carrying value; it would conduct the two-step impairment test. Events and circumstances the Company considers in performing the "step zero" qualitative assessment include macro-economic conditions, market and industry conditions, internal cost factors, share price fluctuations, and the operational stability and the overall financial performance of the reporting units. If the Company concludes that it is more likely than not that a reporting unit's fair value is less than its carrying amount, it would perform the first step (“step one”) of the two-step impairment test and calculate the estimated fair value of the goodwill by using discounted cash flow valuation model. These methods require estimates of future revenues, profits, capital expenditures, working capital, and other relevant factors. The Company estimates these amounts by evaluating historical trends, current budgets, operating plans, industry data, and other relevant factors. For fiscal 2016, the Company began its assessment with the step zero qualitative analysis. The Company’s management determined that the fair value of the goodwill exceeded the carrying value goodwill. After evaluating and weighing all relevant events and circumstances, the Company concluded that it is not more likely than not that the fair value of goodwill was less its carrying amounts. Consequently, the Company did not perform a step one quantitative analysis in fiscal 2016. |
Note 1 - Nature of Business a31
Note 1 - Nature of Business and Significant Accounting Policies: Earnings (loss) Per Share (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Earnings (loss) Per Share | Earnings (Loss) Per Share The Company computes net loss per share under Accounting Standards Codification subtopic 260-10, "Earnings Per Share" (“ASC 260-10”). Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average of all potentially dilutive shares of common stock that were outstanding during the periods presented. The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, would be used to purchase common shares at the average market price for the period. EPS for convertible debt is calculated under the “if-converted” method. Under the if converted method, EPS is calculated as the more dilutive of EPS (i) including all interest (both cash interest and non-cash discount amortization) and excluding all shares underlying the Notes or; (ii) excluding all interest and costs directly related to the convertible debt (both cash interest and non-cash discount amortization) and including all shares underlying the convertible debt. |
Note 1 - Nature of Business a32
Note 1 - Nature of Business and Significant Accounting Policies: Comprehensive Income (loss) (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Comprehensive Income (loss) | Comprehensive Income (loss) Comprehensive income (loss) is the change in the CompanyÂ’s equity (net assets) during each period from transactions and other events and circumstances from non-owner sources. During the years ended August 31, 2016 and 2015, the Company had no elements of comprehensive income or loss. |
Note 1 - Nature of Business a33
Note 1 - Nature of Business and Significant Accounting Policies: Revenue Recognition (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Revenue Recognition | Revenue Recognition It is the CompanyÂ’s policy that revenues from product sales is recognized in accordance with ASC 605 "Revenue Recognition". Four basic criteria must be met before revenue can be recognized; (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on managementÂ’s judgments regarding fixed nature in selling prices of the products delivered and the collectability of those amounts. The Company has not implemented any specific rebate programs. Provisions for discounts to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. As of August 31, 2016 and 2015, the Company had provisions for sales discounts of $96,591 and $21,183, respectively. The Company has not established a formal customer incentive program, but considers and accomodates discounts to certain customers on a case by case basis, including by way of example, for volume shipping or for certain new customers with orders over a specific discretionary dollar threshold. During the year ended August 31, 2016 and 2015, the Company had a refund allowance of $0. Consistent with ASC 605-15-25-1, the Company considers factors such as historical return of products, estimated remaining shelf life, price changes from competitors, and introductions of competing products in establishing a refund allowance. The Company recognizes revenues as risk and title to products transfers to the customer (which generally occurs at the time shipment is made), the sales price is fixed or determinable, and collectability is reasonably assured. The Company defers any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. |
Note 1 - Nature of Business a34
Note 1 - Nature of Business and Significant Accounting Policies: Warranty Costs (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Warranty Costs | Warranty Costs The Company has not had any historical warranty related expenditures from the sales of its products, which if incurred would result in the return of any defective products by customers. |
Note 1 - Nature of Business a35
Note 1 - Nature of Business and Significant Accounting Policies: Business Combinations (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Business Combinations | Business Combinations Accounting for our acquisitions requires the Company to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. Thus, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations and comprehensive income (loss). Accounting for business combinations requires the CompanyÂ’s management to make significant estimates and assumptions, especially at the acquisition date including its estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies and contingent consideration, where applicable. If management cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, the Company will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Although the Company believes the assumptions and estimates it has made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Subsequent to the measurement period, changes in the estimates of such contingencies will affect earnings and could have a material effect on the CompanyÂ’s results of operations and financial position. Examples of critical estimates in valuing certain of the intangible assets the Company has acquired include but are not limited to: (i) future expected cash flows from product sales; (ii) the acquired companyÂ’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined companyÂ’s product portfolio. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. In addition, any uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. If applicable, the Company would reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to its preliminary estimates being recorded to goodwill provided that we are within the measurement period. Subsequent to the measurement period or the final determination of the tax allowanceÂ’s or contingencyÂ’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect the CompanyÂ’s provision for income taxes in our consolidated statements of income and comprehensive income and could have a material impact on its results of operations and financial position. |
Note 1 - Nature of Business a36
Note 1 - Nature of Business and Significant Accounting Policies: Share-based Compensation (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Share-based Compensation | Share-based Compensation The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, "Compensation", which requires fair value measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards. The Company estimates the fair value of share-based payment awards on the date of grant using the Black-Scholes model. The CompanyÂ’s determination of fair value of share-based payment awards on the date of grant is affected by a number of highly complex and subjective variables. These variables include, but are not limited to the CompanyÂ’s expected stock price volatility over the term of the awards, stock price, exercise price, dividends paid, expected term and risk free discount rate. Although the fair value of stock options is determined in accordance with an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The fair value is then expensed over the requisite service periods of the awards, which is generally the performance period and the related amount is recognized in the consolidated statements of operations. |
Note 1 - Nature of Business a37
Note 1 - Nature of Business and Significant Accounting Policies: Advertising (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Advertising | Advertising The Company conducts advertising for the promotion of its services. In accordance with ASC Topic 720-35-25, advertising costs are charged to operations when incurred. |
Note 1 - Nature of Business a38
Note 1 - Nature of Business and Significant Accounting Policies: Income Taxes (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized. The Company applies the provisions of ASC 740, "Accounting for Uncertainty in Income Taxes". The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company did not identify any material uncertain tax positions on returns that have been filed or that will be filed. The Company did not recognize any interest or penalties for unrecognized tax benefits during the years ended August 31, 2016 and 2015, nor was any interest or penalties accrued as of August 31, 2016 and 2015. |
Note 1 - Nature of Business a39
Note 1 - Nature of Business and Significant Accounting Policies: Segment Information (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Segment Information | Segment Information The Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates resources to the business as a whole. |
Note 1 - Nature of Business a40
Note 1 - Nature of Business and Significant Accounting Policies: Reclassification (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Reclassification | Reclassification Certain reclassifications have been made to the prior period data to conform to the current presentation. These reclassifications had no effect on reported net loss. |
Note 1 - Nature of Business a41
Note 1 - Nature of Business and Significant Accounting Policies: Recently Issued Accounting Pronouncements (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Policies | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2016, accounting guidance was issued to clarify the not yet effective revenue recognition guidance issued in May 2014. This additional guidance does not change the core principle of the revenue recognition guidance issued in May 2014, rather, it provides clarification of accounting for collections of sales taxes as well as recognition of revenue (i) associated with contract modifications, (ii) for noncash consideration, and (iii) based on the collectability of the consideration from the customer. The guidance also specifies when a contract should be considered “completed” for purposes of applying the transition guidance. The effective date and transition requirements for this guidance are the same as the effective date and transition requirements for the guidance previously issued in 2014, which is effective for interim and annual periods beginning on or after December 15, 2017. The Company not yet determined the impact that this new guidance will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In April 2015, the FASB issued ASU 2015-03 , Interest- Imputation of Interest (Subtopic 835-30) In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern Risks and Uncertainties Other Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
Note 1 - Nature of Business a42
Note 1 - Nature of Business and Significant Accounting Policies: Acquisition of Dank Bottles, Llc: Business Acquisition, Pro Forma Information (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Business Acquisition, Pro Forma Information | Consideration paid: Cash $ 273,725 Note payable, short-term 100,000 3,500,000 Common shares of Kush Bottles, Inc. 2,169,650 Total consideration $ 2,543,375 |
Note 1 - Nature of Business a43
Note 1 - Nature of Business and Significant Accounting Policies: Acquisition of Dank Bottles, Llc: Business Combination, Separately Recognized Transactions (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Business Combination, Separately Recognized Transactions | Cash and cash equivalents $ 73,505 Accounts receivable, net 71,667 Inventory 300,901 Prepaid expenses 9,848 Property and equipment, net 76,767 532,688 Accounts payable 230,600 Customer deposits 72,585 Payroll liabilities 9,889 Notes payable, short-term 52,828 365,902 Goodwill 2,376,589 Total consideration $ 2,543,375 |
Note 4 - Property and Equipme44
Note 4 - Property and Equipment: Property, Plant and Equipment (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Property, Plant and Equipment | August 31, 2016 August 31, 2015 Office Equipment $ 71,507 $ 28,955 Machinery and equipment 147,577 68,173 Leasehold improvements 63,323 32,780 Vehicles 116,592 140,609 398,999 270,517 Accumulated Depreciation (125,402) (65,246) $ 273,597 $ 205,271 |
Note 5 - Goodwill_ Schedule of
Note 5 - Goodwill: Schedule of Goodwill (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Goodwill | Total Goodwill, gross $ 2,376,589 Accumulated impairment losses - Balance as of August 31, 2015 $ 2,376,589 Additions - Deductions - Impairment loss - Goodwill, gross $ 2,376,589 Accumulated impairment losses - Balance as of August 31, 2016 $ 2,376,589 |
Note 6 - Long Term Debt_ Schedu
Note 6 - Long Term Debt: Schedule of Long-term Debt Instruments (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Long-term Debt Instruments | Principal Due 2017 $ 20,247 2018 20,981 2019 12,723 2020 5,603 $ 59,554 |
Note 7 - Current Liabilities_ S
Note 7 - Current Liabilities: Schedule of Accrued Liabilities (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Accrued Liabilities | August 31, 2016 August 31, 2015 Customer deposits $ 260,409 $ 177,493 Accrued compensation 178,769 144,428 Credit card liabilities 67,813 56,748 Deferred rent 18,810 - Sales tax payable 23,300 12,665 $ 549,101 $ 391,334 |
Note 8 - Stockholders' Equity_
Note 8 - Stockholders' Equity: Schedule of Stockholders Equity (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Stockholders Equity | Weighted Weighted Average Average Remaining Aggregate No. of Exercise Contractual Intrinsic Options Price Term Value Balance Outstanding, August 31, 2015 1,000,000 $ 0.05 3.46 years $ 595,000 Granted 1,039,000 1.07 10.00 years - Exercised - - - - Forfeited - - - - Balance Outstanding, August 31, 2016 2,039,000 $ 0.57 6.15 years $ 2,283,680 Exercisable, August 31, 2016 1,130,000 $ 0.17 3.29 years $ 1,717,600 |
Note 8 - Stockholders' Equity49
Note 8 - Stockholders' Equity: Schedule of Nonvested Share Activity (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Nonvested Share Activity | Weighted Average No. of Grant-Date Options Fair Value Nonvested at August 31, 2015 - $ - Granted 1,039,000 448,016 Vested (130,000) (91,960) Forfeited - - Nonvested at August 31, 2016 909,000 $ 356,056 |
Note 9 - Income Taxes_ Summary
Note 9 - Income Taxes: Summary of Income Tax Contingencies (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Summary of Income Tax Contingencies | August 31, 2016 August 31, 2015 Federal income (tax) benefit attributable to: Current operations $ 24,391 $ 135,159 Non-deductible entertainment 31,059 Prior year adjustments 17,810 State tax, net of Federal benefit 9,516 Stock compensation - 37,921 Depreciation - 10,065 Less: valuation allowance (82,776) (183,145) Net provision for Federal income taxes $ - $ - |
Note 9 - Income Taxes_ Schedule
Note 9 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Deferred Tax Assets and Liabilities | August 31, 2016 August 31, 2015 Deferred tax asset attributable to: Net operating loss carryover $ 149,622 $ 148,412 Stock compensation 75,133 148,872 Depreciation 2,197 12,443 Valuation allowance (226,952) (309,727) Net deferred tax asset $ - $ - |
Note 10 - Earnings (loss) Per52
Note 10 - Earnings (loss) Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Schedule of Earnings Per Share, Basic and Diluted | August 31, 2016 August 31, 2015 Net income (loss) $ 71,739 $ (339,303) Weighted average common shares outstanding for basic EPS 46,911,818 42,718,159 Net effect of dilutive options 1,198,048 - Weighted average common shares outstanding for diluted EPS 48,109,866 42,718,159 Basic earnings (loss) per share $ 0.00 $ (0.01) Diluted earnings (loss) per share $ 0.00 $ (0.01) |
Note 11 - Commitments and Con53
Note 11 - Commitments and Contingencies: Long-term Purchase Commitment (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Tables/Schedules | |
Long-term Purchase Commitment | 2017 $ 354,107 2018 383,332 2019 258,304 2020 120,710 $ 1,116,453 |
Note 1 - Nature of Business a54
Note 1 - Nature of Business and Significant Accounting Policies: Recapitalization (Details) | Mar. 04, 2014shares |
Details | |
Common Shares Exchanged | 10,000 |
Owned Shares of Company Stock | 32,400,000 |
Note 1 - Nature of Business a55
Note 1 - Nature of Business and Significant Accounting Policies: Acquisition of Dank Bottles, Llc (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 | Apr. 11, 2015 | Apr. 10, 2015 |
Cash Consideration Paid | $ 273,725 | |||
Common Stock, Shares Issued | 48,300,162 | 46,132,779 | ||
Common Stock, Par Value | $ 0.001 | $ 0.001 | ||
Dank Bottles, LLC | ||||
Cash Consideration Paid | $ 373,725 | $ 273,725 | ||
Common Stock, Shares Issued | 3,500,000 | |||
Shares Sold to Accredited Investors | 1,471,112 | |||
Shares Sold for Cash | $ 912,000 | |||
Weighted Average Offering Price | $ 0.6199 | |||
Common Stock, Par Value | $ 0.6199 |
Note 1 - Nature of Business a56
Note 1 - Nature of Business and Significant Accounting Policies: Acquisition of Dank Bottles, Llc: Business Acquisition, Pro Forma Information (Details) | Aug. 31, 2016USD ($) |
Details | |
Cash Consideration Paid | $ 273,725 |
Short Term Note Payable | 100,000 |
Consideration Paid for Common Shares | 2,169,650 |
Consideration Paid | $ 2,543,375 |
Note 1 - Nature of Business a57
Note 1 - Nature of Business and Significant Accounting Policies: Acquisition of Dank Bottles, Llc: Business Combination, Separately Recognized Transactions (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 | Apr. 10, 2015 |
Accounts receivable, net of allowance | $ 199,844 | $ 146,392 | |
Inventory | 1,142,458 | 662,368 | |
Prepaids | 596,456 | 153,389 | |
Property and equipment, net | 273,597 | 205,271 | |
Goodwill | $ 2,376,589 | $ 2,376,589 | |
Dank Bottles, LLC | |||
Cash Equivalents, at Carrying Value | $ 73,505 | ||
Accounts receivable, net of allowance | 71,667 | ||
Inventory | 300,901 | ||
Prepaids | 9,848 | ||
Property and equipment, net | 76,767 | ||
Accounts Payable, Current | 230,600 | ||
Customer Deposits, Current | 72,585 | ||
Accounts Payable and Accrued Liabilities | 9,889 | ||
Short Term Notes Payable | 52,828 | ||
Goodwill | 2,376,589 | ||
Total Consideration | $ 2,543,375 |
Note 1 - Nature of Business a58
Note 1 - Nature of Business and Significant Accounting Policies: Accounts Receivable (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Details | ||
Allowance for Doubtful Accounts Receivable | $ 2,000 | $ 5,080 |
Note 1 - Nature of Business a59
Note 1 - Nature of Business and Significant Accounting Policies: Inventory (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Details | ||
Inventory, Finished Goods, Gross | $ 1,142,458 | $ 662,368 |
Note 3 - Related-party Transa60
Note 3 - Related-party Transactions (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Apr. 10, 2015 | |
Details | |||
Related Party Transaction, Due from (to) Related Party | $ 100,000 | ||
Loan Balance | $ 0 | $ 75,000 | |
Related Party Tax Expense, Due to Affiliates, Current | $ 174,750 | $ 115,400 |
Note 4 - Property and Equipme61
Note 4 - Property and Equipment: Property, Plant and Equipment (Details) - Fixed Assets - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Furniture and Fixtures, Gross | $ 71,507 | $ 28,955 |
Machinery and Equipment, Gross | 147,577 | 68,173 |
Leasehold Improvements, Gross | 63,323 | 32,780 |
Public Utilities, Property, Plant and Equipment, Vehicles | 116,592 | 140,609 |
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | (125,402) | (65,246) |
Property, Plant and Equipment, Other, Gross | $ 273,597 | $ 205,271 |
Note 4 - Property and Equipme62
Note 4 - Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | |
Details | ||
Depreciation | $ 80,341 | $ 30,267 |
Note 5 - Goodwill_ Schedule o63
Note 5 - Goodwill: Schedule of Goodwill (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Details | ||
Goodwill, Gross | $ 2,376,589 | $ 2,376,589 |
Goodwill | $ 2,376,589 | $ 2,376,589 |
Note 6 - Long Term Debt_ Sche64
Note 6 - Long Term Debt: Schedule of Long-term Debt Instruments (Details) - USD ($) | Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2018 | Aug. 31, 2017 |
Details | ||||
Long-term Debt | $ 5,603 | $ 12,723 | $ 20,981 | $ 20,247 |
Note 7 - Current Liabilities_65
Note 7 - Current Liabilities: Schedule of Accrued Liabilities (Details) - Accrued Expenses and other current liabilities - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Customer Deposits, Current | $ 260,409 | $ 177,493 |
Accrued Compensation | 178,769 | 144,428 |
Other Liabilities | 67,813 | 56,748 |
Deferred Tax Liabilities, Net, Current | 18,810 | |
Taxes Payable, Current | $ 23,300 | $ 12,665 |
Note 8 - Stockholders' Equity (
Note 8 - Stockholders' Equity (Details) | 12 Months Ended | 20 Months Ended | |
Aug. 31, 2016USD ($)$ / sharesshares | Aug. 31, 2015USD ($)$ / sharesshares | Aug. 31, 2016USD ($)$ / sharesshares | |
Details | |||
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred Stock, Par Value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 |
Common Unit, Authorized | 265,000,000 | 265,000,000 | |
Common Stock, Par Value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 |
Common Stock, Shares Issued | 48,300,162 | 46,132,779 | 48,300,162 |
Weighted Average Number of Shares, Restricted Stock | 1,955,028 | 1,162,779 | |
Cash | $ | $ 1,578,048 | $ 737,001 | $ 1,578,048 |
Expected Term Years, Minimum | 2 | ||
Expected Term Years, Maximum | 4 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 60.00% | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Weighted Average Volatility Rate | 60.00% | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate, Minimum | 0.71% | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate, Maximum | 1.20% | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% | ||
Expected Forfeiture Rate | 33.00% | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $ | $ 356,056 | $ 356,056 |
Note 8 - Stockholders' Equity67
Note 8 - Stockholders' Equity: Schedule of Stockholders Equity (Details) - USD ($) | 12 Months Ended | 20 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2016 | Aug. 31, 2015 | |
Details | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 2,039,000 | 2,039,000 | 1,000,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | $ 0.57 | $ 0.57 | $ 0.05 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term | 6 years 1 month 24 days | 3 years 5 months 16 days | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value | $ 2,283,680 | $ 2,283,680 | $ 595,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | 1,039,000 | ||
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 1.07 | ||
Weighted Average Remaining Contractual Term Granted | 10 years | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 1,130,000 | 1,130,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price | $ 0.17 | $ 0.17 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term | 3 years 3 months 14 days | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Aggregate Intrinsic Value | $ 1,717,600 | $ 1,717,600 |
Note 8 - Stockholders' Equity68
Note 8 - Stockholders' Equity: Schedule of Nonvested Share Activity (Details) | 12 Months Ended |
Aug. 31, 2016USD ($)shares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | 1,039,000 |
Nonvested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 909,000 |
Nonvested Weighted Average Grant Date Fair Value | $ | $ 356,056 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | 1,039,000 |
Weighted Average Grant Date Fair Value Granted | $ | $ 448,016 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares | (130,000) |
Weighted Average Grant Date Fair Value Vested | $ | $ (91,960) |
Note 9 - Income Taxes (Details)
Note 9 - Income Taxes (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | |
Details | ||
NET INCOME (LOSS) | $ 71,739 | $ (339,303) |
Note 9 - Income Taxes_ Summar70
Note 9 - Income Taxes: Summary of Income Tax Contingencies (Details) - USD ($) | 12 Months Ended | 20 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2016 | |
Details | |||
Current Federal Tax Expense (Benefit) | $ 24,391 | $ 135,159 | |
Non-deductible Entertainment | 31,059 | ||
Prior Year Adjustments | 17,810 | ||
Current Federal, State and Local, Tax Expense (Benefit) | 9,516 | ||
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-based Compensation Cost, Amount | $ 37,921 | ||
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Depletion, Amount | 10,065 | ||
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Other, Amount | $ (82,776) | $ (183,145) |
Note 9 - Income Taxes_ Schedu71
Note 9 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Details | ||
Deferred Tax Assets, Operating Loss Carryforwards | $ 149,622 | $ 148,412 |
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Share-based Compensation Cost | 75,133 | 148,872 |
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals, Contingencies | 2,197 | 12,443 |
Deferred Tax Assets, Valuation Allowance | $ (226,952) | $ (309,727) |
Note 10 - Earnings (loss) Per72
Note 10 - Earnings (loss) Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | |
Details | ||
NET INCOME (LOSS) | $ 71,739 | $ (339,303) |
Weighted Average Number of Shares Outstanding, Basic | 46,911,818 | 42,718,159 |
Net effect of dilutive options | $ 1,198,048 | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- DILUTED | 48,109,866 | 42,718,159 |
Earnings Per Share, Basic | $ 0 | $ (0.01) |
Earnings Per Share, Diluted | $ 0 | $ (0.01) |
Note 11 - Commitments and Con73
Note 11 - Commitments and Contingencies (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | |
Details | ||
Other Commitment | $ 252,000 | |
Future Minimum Sublease Rentals, Sale Leaseback Transactions | 622,653 | |
Operating Leases, Rent Expense | $ 226,559 | $ 136,110 |
Note 11 - Commitments and Con74
Note 11 - Commitments and Contingencies: Long-term Purchase Commitment (Details) | Aug. 31, 2016USD ($) |
Details | |
Operating Leases, Future Minimum Payments, Due in Rolling Year Two | $ 354,107 |
Operating Leases, Future Minimum Payments, Due in Rolling Year Three | 383,332 |
Operating Leases, Future Minimum Payments, Due in Rolling Year Four | 258,304 |
Operating Leases, Future Minimum Payments, Due in Rolling Year Five | 120,710 |
Operating Leases, Future Minimum Payments Due | $ 1,116,453 |