Related Party Transactions

3 Months Ended

Mar. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 6. RELATED PARTY TRANSACTIONS

Sales to Related Party Distributor

The Company is engaged with a distributor that is wholly-owned by the Company’s CEO (the “Distributor”). The Distributor is responsible for shipping out product samples, transferring small quantities of product to local distributors at the request of the Company, sales of product to local retailers or small wholesalers and for the fulfillment of online sales orders. The Company may withdraw cases of product from the Distributor at the Company’s will for Company use, for which the Company will provide the Distributor with a credit memo based on a per-case price equal to the price paid by the Distributor to the Company.

The Distributor pays the Company on a per case basis which is consistent with terms between the Company and third party distributors. Since the Company uses a substantial amount of the Distributor’s inventory as samples and promotions, the Company offers the Distributor credit terms of “on consignment.” During the three months ended March 31, 2012 and 2011, the Company recognized revenue from product sales to the Distributor of $12,800 and $19,920, respectively, which represented 0.07% and 0.07%, respectively, of total product revenue recognized by the Company. At March 31, 2012 and December 31, 2011, receivable from the Distributor was $11,324 and $1,758, respectively.

Shipping Reimbursements from Related Party

At March 31, 2012, and December 31, 2011, the Company had outstanding accounts receivable of $2,603 and $2,603, respectively, from a company owned by the CEO’s wife. These receivables represent shipping reimbursements erroneously billed by logistics and shipping companies. The Company paid these invoices and then in turn generated invoices to the company owned by the CEO’s wife for reimbursement.

Advances to Related Party

During the period beginning February 2011 through April 2011, the Company advanced $49,484 to a company owned by the CEO’s wife. As of March 31, 2012 and December 31, 2011, that company had repaid $40,152 of these advances resulting in outstanding advances due of $9,332 as of these dates.

Acquisition of Fixed Assets from Related Party

During the period ended November 30, 2011, the Company purchased two used vehicles from companies owned by the CEO for a total of $7,850. There were no such purchases from related parties in the periods ended March 31, 2012 and December 31, 2011.

Advances from Related Party

During 2011, the Company received related party advances from a company majority owned by the CEO and of which the CEO was the sole officer and director in the aggregate amount of $38,800. On March 7, 2012, the Company issued 438,000 restricted shares of common stock to settle the $38,800 advances from third parties that were outstanding at December 31, 2011. The 438,000 restricted shares were valued at $43,800 ($0.10 per share) with a par value of $438 resulting in a loss on extinguishment of debt of $5,000.