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3. Summary of Significant Accounting Policies
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12 Months Ended | ||||||||||||
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Jun. 30, 2012
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| Accounting Policies [Abstract] | |||||||||||||
| 3. Summary of Significant Accounting Policies |
a. Basis of Presentation
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Company operates on a June year end fiscal basis.
b. Basic and Diluted Earnings per Share
Basic net loss per share amount is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are excluded from the calculation for all periods presented, as their inclusion would be anti-dilutive. Dilutive securities consist of convertible notes payable and convertible preferred stock.
c. Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. There are no restrictions on Company’s cash. At June 30, 2012 and 2011, balances in Company’s cash accounts did not exceed federally insured limits.
d. Accounts Receivable
Accounts receivable are stated at amounts management expects to collect. Management provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. As of June 30, 2012 and 2011, no allowances had been recorded.
e. Inventories
Inventories of paint and materials are located at the Company’s Fort Worth office and are valued at the lower of cost or market.
f. Property and Equipment
Property and equipment are recorded at cost. Depreciation is charged on the straight-line basis for furniture and equipment over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the term of the lease, or the life of the improvements, whichever is shorter. Maintenance and repairs are charged to expense as incurred. Major improvements are capitalized.
Estimated useful lives: Furniture, fixtures and equipment - 5 years Software – 3 years
g. Fair Value of Financial Instruments
Carrying amounts of certain of our financial instruments, including accounts receivable, accounts payable and other payables approximate fair value due to their short maturities. Carrying values of convertible notes payable, derivative liability and long-term debt approximate fair values as they approximate market rates of interest. None of our financial instruments are held for trading purposes.
h. Revenue Recognition
The Company’s revenue consists of payments for painting and maintenance services, and is recognized only when all of the following criteria have been met:
i. Warranties
The Company warrants the work for one year after completion of a project. Reserve for warranty work is established in the amount of 1% of sales for the previous twelve months. As of June 30, 2012 and 2011, the balances of warranty liability were $7,034 and $7,813, respectively. Warranty expenses for the fiscal years ended June 30, 2012 and 2011, were $3,951 and $5,811, respectively, and are included in the Cost of revenues on the Statements of Operations.
j. Equity-Based Payments to Non-Employees
The Company has issued common stock to non-employees for payment of services. Measurement of the share-based payment transactions with non-employees are based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.
k. Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
l. Income Taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards.
Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
m. Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits and accounts receivable. The cash is on deposit with a large federally insured bank. The Company has not experienced any losses in cash balances and does not believe it is exposed to any significant credit risk on cash and cash equivalents. As of June 30, 2012, approximately 52% of accounts receivable were concentrated with two customers. As of June 30, 2011, approximately 76% of our accounts receivable were concentrated with three customers. The Company believes its credit policies are prudent and reflect normal industry terms and business risks.
n. Recent Accounting Pronouncements
Below is a listing of the most recent accounting standards and their effect on the Company.
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between GAAP and International Financial Reporting Standards (“IFRS”). ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. ASU 2011-04 became effective for interim and annual periods beginning after December 15, 2011. The adoption of this amendment did not have a material impact on the Company’s financial statements.
On June 16, 2011, the FASB issued ASU No. 2011-05 Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires entities to report items of other comprehensive income on either part of a single contiguous statement of comprehensive income or in a separate statement of comprehensive income immediately following the statement of income. On December 23, 2011, the FASB issued an update to this pronouncement, ASU No. 2011-12 Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. The update defers the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. While early adoption is permitted, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and must be applied retrospectively. Presently, the Company does not have any transactions which require the reporting of comprehensive income; therefore, the Company does not anticipate any material impact from this pronouncement. On December 16, 2011, the FASB issued ASU No. 2011-11 Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. Application of ASU 2011-11 is required for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. The Company does not expect the adoption of this amendment to have a material impact on its financial statements. |