| Summary of Significant Accounting Policies | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Basis of Presentation The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S.
GAAP) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting
of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months
ended September 30, 2016 are not necessarily indicative of the result that may be expected for the year ending December 31, 2016.
These condensed consolidated financial statements should be read in conjunction with the financial statements for the year ended
December 31, 2015 and related notes thereto included in the Companys Form 10-K filed with the United States Securities and
Exchange Commission (SEC) on March 22, 2016. Principles of Consolidation The unaudited interim condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions
have been eliminated. Use of Estimates The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect
the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such
estimates. Management utilizes various other estimates, including but not limited to, assessing the collectability of accounts
receivable, accrual of rebates to customers, the valuation of inventory, determining the estimated lives of long-lived assets,
determining the potential impairment of intangibles, the fair value of warrants issued, the fair value of stock options, the fair
value of a beneficial conversion feature and other legal claims and contingencies. The results of any changes in accounting estimates
are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed
periodically and the effects of revisions are reflected in the period that they are determined to be necessary. Revenue Recognition Revenue is stated net of sales discounts and
rebates paid to customers (see Customer Marketing Programs and Sales Incentives, below). Net sales are recognized
when all of the following conditions are met: (1) the price is fixed and determinable; (2) evidence of a binding arrangement exists
(generally, purchase orders); (3) products have been delivered and there is no future performance required; and (4) amounts are
collectible under normal payment terms. These conditions typically occur when the products are delivered to or picked up by the
Companys customers. Customer Marketing Programs and Sales Incentives, continued The Company participates in various programs
and arrangements with customers designed to increase the sale of its products. Among these programs are arrangements under which
allowances can be earned by customers for various discounts to the end retailers or for participating in specific marketing programs.
The Company believes that its participation in these programs is essential to ensuring volume and revenue growth in a competitive
marketplace. In addition, during the three and nine months
ended September 30, 2016, the Company issued shares of common stock in the amounts of 0 and 3,400, respectively, at a fair value
of $4.00 per share, to customers and the owners of customers. Included in the costs of these programs were costs associated with
the fair value of shares issued, which totaled $0 and $26,221 for the three months September 30, 2016 and 2015, respectively and
$45,165 and $54,919 for the nine months ended September 30, 2016 and 2015, respectively. Additionally, the Company may be required to
occasionally pay fees to its customers (Placement Fees) in order to place its products in the customers stores.
In some cases, the Placement Fees carry no further benefit or minimum revenue guarantee other than the right to place the Companys
product in the store of the customer. The Placement Fees are recorded as a reduction of revenue. If, at the time the Placement
Fees are recognized in the statement of operations, the Company has cumulative negative revenue with that particular customer,
such negative revenue is reclassified and recorded as a part of selling and marketing expense. For the three and nine months ended
September 30, 2016, the Company recorded $0 and $11,087, respectively, of Placement Fees to selling and marketing expense. No such
Placement Fees were recorded in selling and marketing expense for the three and nine months ended September 30, 2015. Shipping and Handling Costs Shipping and handling costs incurred to move
finished goods from the Companys sales distribution centers to customer locations are included in selling and marketing
expenses on the condensed consolidated statements of operations and totaled $117,998 and $27,563 for the three months ended September
30, 2016 and 2015, respectively and $319,668 and $71,813 for the nine months ended September 30, 2016 and 2015, respectively. Advertising The Company expenses advertising costs as incurred.
Advertising expense totaled $84,433 and $29,130, respectively, for the three months ended September 30, 2016 and 2015 and $114,980
and $155,623, respectively, for the nine months ended September 30, 2016 and 2015. Research and Development The Company expenses the costs of research
and development as incurred. For the three and nine months ended September 30, 2016, research and development expense related to
new product initiatives were $0 and $46,667, respectively. These expenses were incurred pursuant to a product development agreement,
which will require the Company to pay $40,000 in cash and $40,000 in common stock upon the completion of the arrangement. There
were no research and development expenses incurred during the three and nine months ended September 30, 2015. Research and development
expenses are included within general and administrative expenses within the condensed consolidated statement of operations. As
of September 30, 2016, $50,000 was included in accrued expenses in the condensed consolidated balance sheet related to this arrangement. Operating Leases The Company records rent related to its operating
leases on a straight line basis over the lease term. Cash and Cash Equivalents The Company considers all highly liquid instruments
with an original maturity of three months or less when acquired to be cash equivalents. Restricted Cash Pursuant to the terms of the Credit
Agreement with Lender, the Company was required to utilize $150,000 of certain $1,000,000 in proceeds from the Credit Agreement
for initiatives related to the development of an alcohol business. As of December 31, 2015, $127,580 of the Companys cash
on hand was restricted for use in the development of an alcohol business. On March 17, 2016, LIBB entered into an agreement with
Lender whereby such restriction was lifted. Accounts Receivable The Company sells products to distributors
and in certain cases directly to retailers, and extends credit, generally without requiring collateral, based on its evaluation
of the customers financial condition. While the Company has a concentration of credit risk in the retail sector, it believes
this risk is mitigated due to the diverse nature of the customers it serves, including, but not limited to, its type, geographic
location, size, and beverage channel. Potential losses on the Companys receivables are dependent on each individual customers
financial condition and sales adjustments granted after the balance sheet date. The Company carries its trade accounts receivable
at net realizable value. Typically, accounts receivable have terms of net 30 days and do not bear interest. The Company monitors
its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these
allowances by (1) evaluating the aging of its receivables; (2) analyzing its history of sales adjustments; and (3) reviewing its
high-risk customers. Past due receivable balances are written off when the Companys efforts have been unsuccessful in collecting
the amount due. Accounts receivable, net, is as follows:
As of
September 30, 2016 December 31, 2015
Accounts receivable, gross $ 1,545,061 $ 405,096
Allowance for doubtful accounts (75,395 ) (42,000 )
Accounts receivable, net $ 1,469,666 $ 363,096 Concentrations of Credit Risk Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions, short-term
investments and accounts receivable. At times, the Companys cash in banks is in excess of the Federal Deposit Insurance
Corporation (FDIC) insurance limit. The Company has not experienced any loss as a result of these deposits. These
cash balances are maintained with one bank. As of September 30, 2016, the Company was exposed to concentrations of credit risk
through short-term investments. As of September 30, 2016, three customers accounted for 25%, 11% and 11% of the Companys
trade receivables, respectively. As of December 31, 2015, two customers accounted for 14% and 30% of the Companys trade
receivables. The Company does not generally require collateral or other security to support customer receivables. The Company monitors
its exposure for credit losses and maintains allowances for anticipated losses, as required. Inventories The Companys inventory includes
raw materials such as bottles, sweeteners, labels, flavors and packaging. Finished goods inventory consists primarily of bottled
iced tea. The Company values its inventories at
the lower of cost or net realizable value, net of reserves. Cost is determined using the first-in, first-out (FIFO) method. As
of September 30, 2016 and December 31, 2015, the Company recorded a reserve of $28,615 and $41,790, respectively, to reduce the
cost of certain products to estimated net realizable value. The following table summarizes inventories as of the dates presented:
As of
September 30, 2016 December 31, 2015
Finished goods, net $ 543,755 $ 565,624
Raw materials and supplies, net 434,404 146,934
Total inventories $ 978,159 $ 712,558 Property and Equipment Property and equipment is recorded at cost.
Major property additions, replacements, and betterments are capitalized, while maintenance and repairs that do not extend the useful
lives of an asset or add new functionality are expensed as incurred. Depreciation is recorded using the straight-line method over
the respective estimated useful lives of the Companys assets. The estimated useful lives typically are 3 years for cold-drink
containers, such as reusable fridges, wood racks, vending machines, barrels, and coolers, and are depreciated using the straight-line
method over the estimated useful life of each group of equipment, as determined using the group-life method. Under this method,
the Company does not recognize gains or losses on the disposal of individual units of equipment when the disposal occurs in the
normal course of business. The Company capitalizes the costs of refurbishing its cold-drink containers and depreciates those costs
over the estimated period until the next scheduled refurbishment or until the equipment is retired. The estimated useful lives
are typically 3 to 5 years for office furniture and equipment and are depreciated on a straight-line basis. The estimated useful
lives for trucks and automobiles are typically 3 to 5 years and are depreciated on a straight line basis. For the three months
ended September 30, 2016 and 2015, depreciation expense was $39,420 and $27,043, respectively. For the nine months ended September
30, 2016 and 2015, depreciation expense was $117,118 and $76,578, respectively. The Company disposed of one of its vehicles on
July 18, 2016. In connection with the disposal, the Company recognized a loss of $515. Intangible Assets Intangible assets with indefinite useful lives
are not amortized, but are tested for impairment annually or when circumstances indicate that there could be an impairment. The
assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not,
the change in useful life from indefinite to finite is made on a prospective basis. Intangibles assets with indefinite useful lives
consist of the cost to purchase an internet domain name for $20,000. The domain name is considered to have a perpetual life and
as such, is not amortized. Insignificant costs incurred associated with renewing this asset are expensed as incurred. Intangible assets with finite useful lives
are amortized over their expected useful life. Intangible assets with useful lives are tested for impairment when circumstances
indicate that there could be an impairment. Intangible assets with finite useful lives include website development costs of $3,741
and $7,494 as of September 30, 2016 and December 31, 2015, respectively. The estimated useful life of the capitalized costs of
the Companys website is 3 years and is depreciated on a straight line basis. As of September 30, 2016, the cost of the website
development was $15,000 and the accumulated amortization was $11,259. As of December 31, 2015, the cost of the website development
was $15,000 and the accumulated amortization was $7,506. Amortization expense was $1,251 and $1,251 for the three months ended
2016 and 2015, respectively and $3,753 and $3,753 for the nine months ended September 30, 2016 and 2015, respectively. Deferred Offering Costs The Company capitalizes the costs related to
proposed offerings of its equity instruments as deferred offering costs and records the deferred offering costs as an offset to
additional paid in capital upon the completion of the associated capital raising activity. Income Taxes The Company recognizes deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates
the degree to which tax assets and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction. In its interim financial statements, the Company
follows the guidance in ASC 270, Interim Reporting and ASC 740 Income Taxes, whereby the Company utilizes
the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from
U.S. statutory rates primarily as a result of valuation allowance related to the Companys net operating loss carryforward
as a result of the historical losses of the Company. Income Taxes, continued Management makes judgments as to the
interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities.
In managements opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax
jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company accounts for uncertain
tax positions in accordance with ASC 740 - Income Taxes. No uncertain tax provisions have been identified. The Company
accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying
condensed consolidated statements of operations. Our primary tax jurisdictions are our federal, various state, and local taxes.
Generally, Federal, State and Local authorities may examine the Company's tax returns for three years from the date of filing. In accordance with ASC 740, the Company
evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration
of all available evidence and using a more likely than not standard. Significant weight is given to evidence that
can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses
and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year
loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to
improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising
during the period, which may impact its future operating results. Earnings per share Basic net earnings per common share
is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share reflect,
in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants.
The computation of diluted earnings per share excludes those dilutive securities with an exercise price in excess of the average
market price of the Companys common shares during the periods presented. The computation of diluted earnings per share excludes
outstanding options in periods where the exercise of such options would be antidilutive. Potentially dilutive securities outlined
in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion
would have been anti-dilutive.
For the Three and Nine Months Ended September 30,
2016 2015
Options to purchase common stock 465,411 194,667
Warrants to purchase common stock 470,570 -
Total potentially dilutive securities 935,981 194,667 Fair Values of Financial Instruments The carrying amounts of cash, accounts
receivable, accounts payable and accrued expenses, notes payable and other current liabilities, approximate fair value due to the
short-term nature of these instruments. ASC 820 Fair Value Measurements
and Disclosures provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes
the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level
3 measurements). Fair value is defined as an exit price,
representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction
between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants
would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair
value as follows: Level 1 Quoted prices in active markets for identical assets
or liabilities. Level 2 Quoted prices for similar assets
or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active,
or other inputs that are observable, either directly or indirectly. Level 3 Significant unobservable inputs that cannot be corroborated
by market data. Fair values for short-term money market
investments are determined from quote prices in active markets for these money market funds, and are considered to be Level 1. The carrying value of financial instruments
in the Companys consolidated financial statements at September 30, 2016 and December 31, 2015 are as follows:
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) Significant Unobservable Inputs (Level 3)
Short-term investments at September 30, 2016 $ 2,507,302 $ - $ -
Short-term investments at December 31, 2015 $ - $ - $ - Seasonality The Companys business is seasonal with the summer
months in the second and third quarter of the fiscal year typically generating the largest net sales. Recent Accounting Pronouncements In January 2016, the Financial Accounting Standards
Board (FASB), issued Accounting Standards Update (ASU) 2016-01, Financial Instruments-Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance
in U.S. generally accepted accounting principles on the classification and measurement of financial instruments. Changes to the
current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and
the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the
valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt
securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and are to be
adopted by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which
the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial
liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The
Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements. In February 2016, the FASB issued new lease
accounting guidance (ASU No. 2016-02, Leases). The
Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated financial statements. On March 30, 2016, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation
Stock Compensation (Topic 718). This update requires that all excess tax benefits and tax deficiencies arising from
share-based payment awards should be recognized as income tax expense or benefit on the income statement. The amendment also states
that excess tax benefits should be classified along with other income tax cash flows as an operating activity. In addition, an
entity can make an entity-wide accounting policy election to either estimate the number of awards expected to vest or account for
forfeitures as they occur. The provisions of this update are effective for annual and interim periods beginning after December
15, 2016. The Company is currently evaluating the impact the adoption of this standard will have on its condensed consolidated
financial statements. In April 2016, the FASB issued
Accounting Standards Update ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606), Identifying
Performance Obligations and Licensing (ASU 2016-10). ASU 2016-10 clarifies the following two aspects of Topic
606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for
those areas. The provisions of this update are effective for annual and interim periods beginning after December 15, 2017, with
early application permitted. The Company is currently evaluating the impact the adoption of this standard will have on its condensed
consolidated financial statements. In May 2016, the FASB issued
Accounting Standards Update ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606), Narrow-Scope
Improvements and Practical Expedients (ASU 2016-12). The core principal of ASU 2016-12 is the recognition
of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The provisions of this update are effective for annual
and interim periods beginning after December 15, 2017, with early application permitted. The Company is currently evaluating the
impact the adoption of this standard will have on its condensed consolidated financial statements. Recent Accounting Pronouncements, continued In August 2016, the FASB issued Accounting
Standards Update ASU No. 2016-15 Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts
and Cash Payments (ASU 2016-15). The amendments for this update provide guidance on the eight specific cash
flows: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments
made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned
life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions,
and separately identifiable cash flows and application of the predominance principle. The provisions of this update are effective
for annual and interim periods beginning after December 15, 2016, with early application permitted. The Company is currently evaluating
the impact the adoption of this standard will have on its condensed consolidated financial statements . Managements Evaluation of Subsequent Events The Company evaluates events that have occurred
after the balance sheet date but before the condensed consolidated financial statements are issued. Based upon the review, other
than as presented within Note 10, the Company did not identify any recognized or non-recognized subsequent events that would have
required adjustment or disclosure in the condensed consolidated financial statements. |
