Summary of Significant Accounting Policies

3 Months Ended

Aug. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Significant Accounting Policies

NOTE 1 - Summary of Significant Accounting Policies

Organization and Basis of Presentation

Maiden Lane Jewelry, Ltd., formerly Romantique Ltd., (“the Company”) was incorporated on September 6, 2012 under the laws of the State of New York. The Company is a wholesaler and manufacturer of jewelry including pendants, bracelets and earrings. We began operations on October 1, 2012 by selling fashion rings, pendants, earrings and bracelets to independent retailers. In December 2012, we commenced a line of bridal (engagement) rings, featuring both settings and diamonds. In February 2014 we began focusing on sales of bridal jewelry featuring uniquely cut stones which in May 2014 we branded as an Aspiri cut diamond.

In the opinion of the Company’s management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the information set forth therein. These financial statements are condensed and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed financial statements should be read in conjunction with the Company’s May 31, 2014 audited financial statements and notes included in Form 10-K filed on September 4, 2014.

Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents. As of August 31, 2014 and 2013, the Company did not have any cash equivalents.

Inventories

Raw materials are stated at the lower of cost or market, with cost determined by specific identification for unique items (such as diamond stones, each with a particular carat weight, color, clarity and cut) and using the first-in, first-out method for generic items or styles (certain semi-mounts and fashion jewelry). Finished goods which we fabricate are stated at the lower of cost or market, with cost determined by specific identification for each component making up the item plus direct labor and other fees (primarily diamond certification).

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets, which is generally five years.

Revenue Recognition

For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB No. 101). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowance, and other adjustments are provided for in the same period the related sales are recorded. Provision for sales returns and allowances that were netted against sales amounted to $93,000 and $43,000 for the three months ended August 31, 2014 and August 31, 2013, respectively.

Concentration of Credit Risks

The Company primarily sells its products to retail jewelers focused on mid-to-high end consumers. Customers typically receive payment terms of ratable monthly payments over 90 to 120 days with exceptions based on credit quality or other terms and conditions. As a result, the Company is exposed to credit risk on its accounts receivable. The Company generally seeks to mitigate such risk by performing credit checks through jeweler trade associations it is a members of, by attending trade shows which selectively invite retailer attendees based on their credit worthiness and by checking references with other jewelers in the industry.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation (“FDIC”) limit of $250,000 at times during the year.

Sales

The Company’s sales are comprised of primarily three major products: Aspiri Cut Rings, Complete Rings and Fashion Jewelry. The Company may also on occasion sell loose stone inventory.

A breakdown of sales for the three months ended August 31, 2014 and August 31, 2013, respectively:

	Three Months Ended August 31,		Three Months Ended August 31,
	2014		2013
	(unaudited)		(unaudited)

Aspiri Cut Rings	45	%	—
Complete Rings (not Aspiri)	34	%	73	%
Fashion Jewelry & Other	21	%	27	%

The three months ended August 31, 2014 had returns of Complete Rings that were not Aspiri Cut Rings as some customers substituted such rings for Aspiri Cut Rings.

Advertising Costs

Advertising and show costs are charged to operations when incurred. Advertising costs during the three months ended August 31, 2014 and August 31, 2013 were $49,000 and $29,000, respectively.

Deferred Income Taxes

The Company accounts for deferred income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Net Income (Loss) Per Share

Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares and dilutive common share equivalents and convertible securities then outstanding.

The following provides a reconciliation of the shares used in calculating the per share amounts for the periods presented:

	Three Months Ended			Three Months Ended
	August 31,			August 31,
	2014			2013
	(unaudited)			(unaudited)

Numerator:
Net Income (Loss)	$	(84,656)		$	126,241
Denominator:
Basic weighted-average shares		10,469,477			10,353,750
Effect of dilutive securities:
Warrants ¹		—	²		—
Convertible Debt ³		—	⁴		37,000
Diluted weighted-average shares		10,469,477			10,390,750
Per Share Income (Loss):
Basic	$	(0.01)		$	0.01
Diluted	$	(0.01)		$	0.01

There are 114,000 warrants issued in connection with $400,000 of unsecured notes at an exercise price of $3.50 per warrant into one share of common stock.

Warrants for the three months ended August 31, 2014 are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

Convertible debt is convertible into 37,000 shares of common stock.

⁴

Convertible debt for the three months ended August 31, 2014 is not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive.

Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. Management uses its best judgment in valuing these estimates, and may, as warranted, solicit external professional advice and other assumptions believed to be reasonable.

Fair Value Measurements

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, or which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities.

The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable and loans and notes payable. These items are determined to be a Level 1 fair value measurement.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and loans payable approximates fair value because of the short maturity of these instruments. The recorded value of long-term debt approximates its fair value as the terms and rates approximate market rates.

Recent Accounting Pronouncements

Management does not believe there would have been a material effect on the accompanying financial statements had any recently issued, but not yet effective, accounting standards been adopted in the current period.

- Definition

The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

Maiden Lane Jewelry, Ltd. 10-Q