Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Business and Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of NAC Global and NAC (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and with the instructions to Form 10Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 8-K filed with the Securities and Exchange Commission on May 15, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2013 as reported in the Form 8-K have been omitted.

Principles of consolidation

Principles of consolidation

The consolidated financial statements include the accounts of NAC Global and its wholly-owned subsidiary, NAC. All intercompany accounts and transactions are eliminated in consolidation.

Use of estimates

Use of estimates

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 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.

Concentration of risks

Concentration of risks

The Company maintains its cash primarily in one financial institution. The balance, at times may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk to cash.

Two customers accounted for approximately 47% and 14% respectively of the Company’s revenues for the six months ended June 30, 2014. Two customers accounted for approximately 40% and 14% of the Company’s revenues for the six months ended June 30, 2013. In addition, these customers accounted for 32% and 8% of the Company’s accounts receivable balance at March 31, 2014 and March 31, 2013, respectively.

Six Months Ended June 30, 2014	Customer		Customer Sales	% of Total Revenue			Accounts Receivable (AR)	% of AR
	1	$	126,884	47	%	$	9,396	11	%
	2	$	37,440	14	%	$	18,720	21	%
		$	164,324	61	%	$	28,116	32	%
Six Months Ended June 30, 2013	Customer		Customer Sales	% of Total Revenue			Accounts Receivable (AR)	% of AR
	1	$	191,250	40	%		-	0	%
	2	$	66,420	14	%	$	7,776	8	%
		$	257,670	54	%	$	7,776	8	%

The Company sells to both domestic and international customers. For the six months ended June 30, 2014 and June 30, 2013, revenues generated through transactions with international customers amounted to approximately 17.2% (9.8 % India, 6.7% Canada, 0.7 % other) and 42% (39.7% Hong Kong, 2.3% other) respectively, of the Company’s total revenues respectively.

NAC currently purchases all of its drive components from one supplier. The loss of this supplier could cause delays and a possible loss of sales which would affect operating results adversely.

Fair value measurements

Fair value measurements

The carrying amounts reported in the consolidated balance sheets for accounts receivable and payables, inventory and debt are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and, if applicable, the stated rate of interest is equivalent to rates currently available.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:

Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3: inputs to the valuation methodology are unobservable and significant to the fair value.

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of June 30, 2014.

	Amount		Level 1		Level 2		Level 3
Embedded conversion derivative liability	$	2,186,371	$	-	$	-	$	2,186,371

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

Balance at May 31, 2012	$	-
Fair value of embedded conversion derivative liability at issuance		341,897
Unrealized derivative loss included in other expense		1,844,474
Balance at June 30, 2014	$	2,186,371

The fair value of the derivative liability is calculated at the time of issuance and the Company records a derivative liability for the calculated value. The derivative liability is marked to market at each reporting period and changes in the fair value of the derivative liability are recorded in other income (expense) in the consolidated statements of operations.

The following are the assumptions used for derivative instruments valued using the Black-Scholes option pricing model:

	At issuance			At June 30, 2014
Market value of stock on measurement date	$	0.55		$	2.00
Risk-free interest rate		0.11	%		0.11	%
Dividend yield		0	%		0	%
Volatility factor		64	%		167	%
Term		1 year			0.83 year

Recently adopted accounting pronouncements

Recently adopted accounting pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.