Significant Accounting Policies

12 Months Ended

Nov. 30, 2016

Significant Accounting Policies

Accounting Principles

The accounting and reporting policies of the Company conform to United States generally accepted accounting principles.

Basic and Diluted Loss per Share

Basic and diluted loss per share is based on the weighted average number of shares outstanding. Fully diluted shares are calculated as follows:


	November 30, 2016		November 30, 2015
Weighted average shares – basic		172,312,161		63,865,281
Convertible debentures		499,204,197		388,924,397
Weighted average shares – fully diluted		671,516,358		452,789,678

Fair Value Measurements

Valuation Hierarchy

ASC 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring and non-recurring basis as of November 30, 2016, and 2015:

Derivative liabilities


Fair Value Measurements
	Total Carrying value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
November 30, 2016	$	132,098					$	132,098
November 30, 2015	$	1,324,409		-		-	$	1,324,409

The derivative liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level 3 of the valuation hierarchy.

The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


	November 30, 2016			November 30, 2015
Beginning balance	$	1,324,409		$	921,815
Derivative liabilities recorded		-			180,343
Unrealized (gain) loss attributable due to the change in liabilities		(1,192,311	)		222,251
Ending balance	$	132,098		$	1,324,409

The fair value of the derivative liabilities was calculated using the Black-Scholes Option Pricing model under the assumptions detailed in Note 8. Gains and losses (realized and unrealized) included in earnings (to change in fair value of derivative liability) for the years ended November 30, 2016, and 2015, are reported in other expenses as follows:


	November 30, 2016			November 30, 2015
(Gain) Loss on derivative liabilities recorded during the period		-			-
Debt discount attributable to derivative liabilities recorded		-			-
Derivative liabilities converted during the period		-			-
Unrealized (gain) attributable due to the change in liabilities	$	(1,192,311	)	$	(222,251	)
Net unrealized (gain) loss included in earnings	$	(1,192,311	)	$	(222,251	)

The Company did not have any Level 1 or Level 2 assets or liabilities as of November 30, 2016, and November 30, 2015 and had Level 3 liabilities consisting of notes payable. The carrying amount of the notes payable at November 30, 2016, and 2015 approximate their respective fair value based on the Company’s incremental borrowing rate.

Cash and cash equivalents include money market securities that are considered to be highly liquid and easily tradable as of November 30, 2016, and 2015, respectively. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy.

In addition, FASB ASC 825-10-25 Fair Value Option was effective at the time of adoption. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.

Income Taxes

Income taxes are accounted for in accordance with the provisions of FASB ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash includes demand deposits, saving accounts and money market accounts. The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents.

Revenue Recognition

The Companies follow the guidance of the FASB ASC 605-10-S99 “Revenue Recognition Overall – SEC Materials”. The Companies record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Revenues consist primarily of product sales.

Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those reported.

Accounts receivable and concentration of credit risk

The Company provides credit to its clients in the form of payment terms. The Company limits its credit risk by performing credit evaluations of its clients and maintaining a reserve, if deemed necessary, for potential credit losses. Such evaluations include the review of a customer’s outstanding balances with consideration towards such customer’s historical collection experience, as well as prevailing economic and market conditions and other factors. The Company currently has no accounts receivable in 2016 and, therefore, does not currently have a concentrated credit risk associated with trade receivables.

Inventory

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company reviews physical inventory for obsolescence and/or excess and will record a reserve if necessary. As of the date of this report, no reserve was deemed necessary.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation, with depreciation recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term, if applicable. When assets are retired or disposed, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Repairs and maintenance are charged to expense in the period incurred.

Fixed assets consist primarily of computer equipment and furniture and fixtures. The estimated useful lives range from three to five years..

The Company’s property and equipment are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from the undiscounted future cash flows of such asset over the anticipated holding period. An impairment loss is measured by the excess of the asset’s carrying amount over its estimated fair value.

Impairment analyses are based on management’s current plans, asset holding periods, and currently available market information. If these criteria change, the Company’s evaluation of impairment losses may be different and could have a material impact to the consolidated financial statements.

For the years ended November 30, 2016, and 2015, based on the results of management’s impairment analyses, there were no impairment losses.

At November 30, 2016 and 2015, fixed assets consisted of the following:

Schedule of fixed assets
	November 30, 2016			November 30, 2015
Furniture and fixtures	$	3,153		$	3,153
Computer equipment		18,271			18,271
Less: accumulated depreciation		(6,686	)		(6,423	)
Fixed assets, net	$	14,738		$	15,001

During the years ended November 30, 2016, and 2015, there were no additions to fixed assets. Depreciation expense for the years ended November 30, 2016, and 2015 was $263 and $13,192, respectively.

Recently Adopted Accounting Pronouncements

Management does not believe that any recently issued but not yet effective accounting pronouncements if currently adopted would have a material effect on the accompanying financial statements.

Telco Cuba, Inc. 10-K/A