UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal year endedJune 30, 20172019

 

OR

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to __________

 

Commission File Number 333-193347

 

NIGHTFOOD HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 46-3885019
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
   

520 White Plains Road-Suite 500

Tarrytown, New York

 10591
(Address of Principal Executive Offices) (Zip Code)

 

888-888-6444

(Registrant’s telephone number, including area code) 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐   No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐   No ☒

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). files.Yes ☒   No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☐ (Do not check if a smaller reporting company)Smaller reporting company☒
  Emerging growth company☐ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered

Securities registered pursuant to section 12(g) of the Act:

(Title of Class)

(Title of Class)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2017: $1,852,829.2019: $19,434,770.

 

As of September 28, 2017,October 11, 2019, the issuer had 30,399,56755,374,821 shares of its common stock issued and outstanding, par value $0.001 per share.

 

 

 

   

TABLE OF CONTENTS
 
  Page
PART I
 
Item 1.Business1
Item 1A.Risk Factors34
Item 1B.Unresolved Staff Comments89
Item 2.Properties89
Item 3.Legal Proceedings89
Item 4.Mine Safety Disclosures89
   
PART II
   
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities910
Item 6.Selected Financial Data1011
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations1112
Item 7A.Quantitative and Qualitative Disclosures About Market Risk1415
Item 8.Financial Statements and Supplementary Data1416
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure1517
Item 9A.Controls and Procedures1517
Item 9B.Other Information1618
   
PART III
   
Item 10.Directors, Executive Officers and Corporate Governance1719
Item 11.Executive Compensation1820
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters1921
Item 13.Certain Relationships and Related Transactions, and Director Independence1921
Item 14.Principal Accounting Fees and Services2022
   
PART IV
 
Item 15.Exhibits, Financial Statement Schedules2123

 

i

 

 

PART I

 

Forward-Looking Information

 

Certain statements made in this Annual Report involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, technological developments related to business support services and outsourced business processes, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.

 

Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth herein under the headings “Business,“” and “Risk Factors”.

 

ITEM 1. BUSINESS

 

NightFoodNightfood Holdings, Inc. (“we”, “us” “the Company” or “NightFood”“Nightfood”) is a Nevada corporation organized on October 16, 2013 to acquire all of the issued and outstanding shares of NightFood,Nightfood, Inc., a New York corporation (the “Subsidiary”(“Nightfood”) from its sole shareholder, Sean Folkson. All of our operations are conducted by the Subsidiary. We are in the business of manufacturing, marketing and distributing snacks specially formulated and promoted for evening consumption. A large number of Americans consume nighttime snacks that are high in sugar, fat, sodium, and calories; such snacks can impair sleep and also impair health in general. Management believes that our products are unique in the food industry and that there is a substantial market for our products, through online commerce as well as traditional retail distribution.products. Our corporate address is 520 White Plains Road – Suite 500, Tarrytown, New York 10591 and our telephone number is 888-888-6444. We maintain a web site at www.nightfood.com.www.Nightfood.com, along with many additional web properties. Any information that may appear on our web site should not be deemed to be a part of this report.

 

On January 3, 2018, the Registrant formed a new wholly-owned subsidiary to capitalize on opportunities in the marijuana and cbd edibles space. MJ Munchies, Inc. (“Munchies”) was formed as a Nevada corporation with a capital structure of 10,000 shares of common stock. Since formation, Munchies has built an intellectual property portfolio that includes a registered trademark for Half-Baked in the State of California relating to marijuana edibles, a pending federal trademark application with the USPTO for Half-Baked relating to packaged snacks, the federal trademark for The Half Baked Cookie Co., HalfBaked.com, and several other related domain names.

Industry Overview

 

We are an early-stage company that is seeking to establish a market within the snack industry by offering a line of snack foods that are specifically formulated for evening consumption. Based on available figures for 2013 published by SymphonyIRI Group,It is estimated that American consumers spend over $50 Billion annually on snacks consumed at night, and this figure continues to grow. A majority of adults are trying to eat foods and snacks that they understand will prevent or manage health problems and 37% of consumers are willing to pay more for foods with perceived health benefits. Moreover, industry data indicates that the most popular nighttime snack choices include products and categories that are traditionally considered high in calories, and “unhealthy” options, such as cookies, salty snacks (chips, pretzels, and popcorn), ice cream, and candy.


Our Products, Present and Proposed

 

OurNightfood Holdings runs two distinct operating companies, each serving a different market segment with different products.

MJ Munchies, Inc.

MJ Munchies, Inc. is a Nevada corporation formed in January of 2018 to exploit legally compliant opportunities in the CBD and marijuana edibles and related spaces. The Company intends to market some of these new products under the brand name “Half-Baked”. This subsidiary was created during the three months ended March 31, 2018 and its operations have a nominal impact on the financial statements contained herein.

Since inception, MJ Munchies has applied for U.S. Trademark protection for its brand of Half-Baked snacks, currently under development. MJ Munchies also acquired HalfBaked.com. In April, 2018, MJ Munchies entered into an initial productbrand licensing agreement for the Half-Baked mark with a licensed manufacturer of THC-infused edibles in the State of California under which, the licensee manufactured and distributed a small pilot run of Half-Baked branded THC-infused cookies in California. Management continues to seek a suitable licensing partner for the intellectual property the Company has secured.

The Company believes tremendous opportunities currently exist to launch successful and legally compliant products in this space, and that such opportunities will continue to grow over time. No assurance can be given that the patent will be granted, that it will afford meaningful protection to us if granted, or that we will begin actual production of products using the Half-Baked trademark. Even if production begins, we can neither assure market acceptance of our products nor that THC infused edibles will not face ongoing legal challenges.

Nightfood, Inc.

Nightfood, Inc. is the NightFood nutrition bar. NightFooda snack company focused on manufacturing and distribution of ice cream that is formulated to be more appropriate for nighttime consumption. Nightfood’s initial line of products, Nightfood nutrition bars, are made from commercially available ingredients and a proprietary combination of other components in a proprietary process. Duringcurrently being phased out with the course of fiscal 2016, the Company modified its packaging, positioning, and branding, including switching from a 6 count retail pack to a 12 count pack for the bars. The packages are typically merchandised both open and closed, so the consumer can purchase an individual bar, or an entire box of bars.. NightFood® is the first product positioned as a healthier and better alternative to other convenient nighttime snack options. Comparedfocus shifting to the existing popular options, each 140 calorie NightFood® bar is specially formulatednational ice cream rollout.

Nightfood ice cream has been manufactured in eight flavors to satisfy late-night cravings, tackle nighttime hunger,date. These are Full Moon Vanilla, Midnight Chocolate, Cold Brew Decaf, After Dinner Mint Chip, Milk & Cookie Dough, Cherry Eclipse, Bed and Breakfast, and Cookies n’ Dreams. Additional flavors have been developed, both dairy, and non-dairy, for introduction in 2020 based on fewer calories, and with a healthier, more sleep-friendly nutritional profile. We believe that NightFood® bars are an optimal nighttime snack in terms of composition and calories.retailer demand. In addition, the bars containCompany has partnered with celebrities to manufacture and distribute custom flavors. The celebrity partners are Michael Clifford, guitarist of the award-winning, multi-platinum band 5 Seconds of Summer, and Richard Sherman, NFL star who plays for the San Francisco 49ers. These celebrity flavors are in various stages of development at the time of this filing, and Management anticipates both to be on shelf in spring of 2020.

Management believes consumer demand exists for better nighttime snacking options, and that a clinically proven bioactive ingredient called Chocamine®. Chocaminenew consumer category consisting of nighttime specific snacks will emerge in the coming years. This belief is supported by research from major consumer goods research firms such as IRI Worldwide, and Mintel, who identified nighttime specific foods and beverages as one of the “most compelling and category changing trends” for 2017 and beyond.

It is estimated that over $50 billion is spent annually in the United States on snacks that are consumed between dinner and bed. Company management believes that a patented natural cocoa extractsignificant percentage of that consumer spend will move from conventional snacks to nighttime specific snacks in coming years.

Nightfood has established a Scientific Advisory Board consisting of sleep and nutrition experts to drive product formulation decisions, and provide consumer confidence in the brand promise. The first member of this advisory board was Dr. Michael Grandner, Director of the Sleep and Health Research Program at the University of Arizona. Dr. Grandner has been conducting research on the link between nutrition and sleep for over ten years, and he believes improved nighttime nutritional choices can improve sleep, resulting in many short and long-term health benefits. In March of 2018, the Company added Dr. Michael Breus to their Scientific Advisory Board. Breus, known to millions as The Sleep Doctor™, is believed to promote satietybe the Nation’s most trusted authority on sleep. He regularly appears in the national media to educate and craving satisfaction, whileinform consumers so they can sleep better and lead happier, healthier, more productive lives. In July, 2018, we completed our Scientific Advisory Board with the addition of Lauren Broch, Ph.D, M.S. Dr. Broch is a sleep therapist and former Director of Eductation & Training at the Sleep-Wake Disorders Center at Weill Cornell Medical College. Uniquely, Dr. Broch also providinghas a master’s degree in human nutrition. This unique combination allowed her to play an important role in the healthreformulation of our nutrition bars, and relaxation benefitsthe development of chocolate without the caffeine, fat, calories,Nightfood ice cream. These experts work with Company management to ensure Nightfood products deliver on their nighttime-appropriate, and sugars.sleep-friendly promises.


Production

 

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In April of 2016, the Company reached an agreement with RFI Ingredients, LLC, the exclusive manufacturer of Chocamine, which granted the Company, subject to possible future minimum volume requirements, exclusive use of Chocamine in any snack food products formulated and marketed for nighttime consumption.  

Depending upon the success of the NightFood® bar and our available resources,To date, we intend to consider expanding our product line to include formulations with and without sleep aiding bioactive ingredients, nighttime snack products specifically for children, and snacks in different food formats such as cookies, chips, ice cream, etc. In furtherance of our planned expansion of our product offerings, we have entered into an agreement to acquire a company which is licensed to produce FiberOne™ ice cream. See Business-Planned Acquisition However, that agreement has not been completed and its future is uncertain as various deadlines have passed.

Production

We have utilized contract manufacturers for producing our products, packaging for our products, and 3rd party logistics for warehousing and order fulfillment. For our warehousing and logistics, we are currently using Landis Logistics. For our nextOur current ice cream co-packer has capacity to manufacture approximately 400,000 pints of ice cream monthly. Management has had initial conversations with other manufacturing facilities to establish additional production run of nutrition bars, we are currently evaluating various potential manufacturers. We believe that the nature of the market for such services ensures there will be several alternative suppliers available on acceptable terms.capacity as it becomes necessary.

 

Marketing and Distribution

Nightfood ice cream is currently available in 4 major supermarket chains. These are Meijer, Woodman’s, Lowes Foods, and Harris Teeter. The product line has garnered extensive media interest from outlets such as Oprah Magazine, USA Today, The Wall Street Journal, The Washington Post, and more. Consumers seem very enthusiastic about the prospect of a sleep-friendly ice cream. Management is working with these retail partners on various marketing and promotional campaigns to drive trial and repeat purchase at the store level.

 

During FY2017, the Company received purchase orders from its largest retail chain to date, in Meijer supermarkets. NightFood bars are available in both flavors in substantially all Meijer supermarket locations.

Management believes that securing a chain like Meijer can be a tremendous milestone. However, the Company believes the opportunity for most rapid and efficient scaling of revenue is through direct-to-consumer online channels, and that is where we are directing our focus at this time. To that end, the Company has implemented a strategy that it believes will allow for much more significant revenues starting in FY2018.

NightFood 12-packs were made available on Amazon for the first time on June 9, 2017. To date, sales have been promising, and customer reviews have averaged well over 4 stars out of 5. The Company issued a news release on August 23, 2017 that in July 2017, gross direct-to-consumer sales were higher than any other month in Company history, exceeding $10,000. In addition, it was announced that as of August 23, 2017, August revenues to date had already surpassed those of July, 2017.

The Company expects to launch its primary direct-to-consumer sales initiative through a relationship with marketing partner Common Thread Collective (CTC) during late September or early October, 2017.

If successful, the relationship with CTC will allow the Company to get a substantially greater return on each direct-to-consumer advertising dollar, resulting in accelerated revenue growth. . We can give no assurances as to the revenues to be derived from these efforts. Furthermore, any new initiative includes many risks including unanticipated delays.

Competition

 

The nutritional/snack food business is highly competitive and includes such participants as large companies like Mondelez, Nestle S.A. and Quaker Oats and more specialized companies such as Cliff Bar, Quest Nutrition and many smaller companies. Many of these competitors have well established names and products. Management is not aware of any competitor offering snacks targetingNestle recently announced an interest in the nighttime snack occasion, or formulated to satisfy unhealthy nighttime cravings insnacking space with the introduction of a sleep-friendly way.candy-type product called GoodNight. We will initially compete based upon the unique nature of our product. However, other companies, including those with greater name recognition than us and greater resources may seek to introduce products that directly compete with our products. Management believes that if a competitor sought to develop a competing product, it could do so and begin to establish retail distribution in 12-24 months. Based on the current acquisition climate in the consumer goods space, Management believes that successful growth of the Nightfood ice cream line would likely bring acquisition offers from potential competitors before it would actually bring competition on the shelf from those same potential competitors.

 

Intellectual Property Rights

 

We own the registered trademark “NightFood®“Nightfood®” for the nutrition bar/snack/meal replacement category, and have applied for registration for the same mark for ice cream. While this process will take several months, management believes the mark will be granted in due time with no concerns or issues. We believe that itthese marks will prove important to our business. Additionally, we own the domain NightFood.comNightfood.com as well as many other relevant domains such as late-night-snack.com, nighttimesnack.com, and nighttimesnacking.com, as well as NightFood.us, NightFood.net, TryNightFood.com, GetNightFood.com,Nightfood.us, Nightfood.net, TryNightfood.com, GetNightfood.com, NiteFood.com, TryNightFood.com, BuyNightFood.com,TryNightfood.com, BuyNightfood.com, NightSnacking.com, and Night-Food.com. We also own the toll-free number 888-888-NIGHT. We rely on proprietary information as to our formulas and have non-disclosure agreements with our suppliers. In June 2017, after receiving unsolicited inquiries from international distributors in multiple foreign countries, the Company retained the intellectual property law firm Pinnacle IP to assist and consult on matters of international trademark protection for the NightFood brand.

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Personnel

 

WeNightfood currently havehas no employees except Sean Folkson, our President and CEO,CEO. Through vendor and Peter Leighton,consultant relationships, Nightfood has dozens of people contributing to our VP of Marketing who is currently serving the companyoperations and efforts on a part-timeregular basis. Should we be successful in executing our business plan, we anticipate hiring additional employees in the future to assist with various company functions. We rely on consultants and outsourced servicesHowever, we also expect to continue to strategically outsource significantly to accomplish work that might otherwise be done by employees in a large establishedmore traditional company.

 

Customers

 

In FY 2017, one customer, KeHE Distributing, made up 87%2019, sales were concentrated among a handful of customers that each accounted for over 10% of our revenue. We expect this type of revenue concentration to continue as our business model involves selling large quantities of ice cream wholesale to large accounts (major supermarket chains, national distribution organizations), who then sell to the consumer. With more widespread distribution, the concentration would decrease to some extent.

 

Possible Planned AcquisitionDEVELOPMENT PLANS

 

On November 25, 2016 we executed and delivered a Plan of Reorganization Including Option to Acquire (the “Plan”) by and among the Registrant, Hook Group, LLC (“Hook”) and Suffield Foods. LLC (“Suffield”). The Plan contemplates our acquiring an equity interest in and potentially merging Hook and its subsidiary Suffield with and into a wholly owned subsidiary of the Registrant. Pursuant to the Plan, we have agreed to use its best efforts to invest up to $9,000,000 in Hook in exchange for preferred equity in Hook. The Plan contemplated an investment in Hook by the Registrant in tranches over approximately 18 months. The Plan provided that any time after we had invested $7,500,000 in Hook, we may request a merger of Hook with and into our wholly owned subsidiary, Fiber One™ Ice Cream, Inc., in exchange for the Hook members receiving a 50% shareholder interest in us. Such merger would be subject to shareholder approval by us. Hook is a licensee of General Mills Marketing, Inc. and holds the right to manufacture and distributeNightfood has eight ice cream under the Fiber One™ brand name. We are seekingflavors already in ongoing production, and an additional ten products have been developed or in late stages of development. These include two custom celebrity flavors, four new ice cream flavors, and four non-dairy flavors. Management has done preliminary research on CBD infused ice cream, current FDA guidelines do not permit CBD to raise funds through the sale of equity to meet our obligations under the Plan, but has obtained limited commitments for funding. If funding isbe used as an additive in food, and Management does not realized, the Plan may not go into effect. The forgoing is a summary of the Plan and is qualified in its entirety by the Plan, which is an exhibit hereto. We anticipate, based on discussions with Hook management, that the Planbelieve such products will be amended to change the amount and timing of capital investments due thereunder to require a smaller investment by us prior to the merger. However, there is no written agreementallowed under FDA guidelines for such amendment and we cannot give assurance that the acquisition with Hook will occur. At this time there is no enforceable agreement for completion of this transaction and we are pursuing other avenues for future revenues. Therefore the consummation of this acquisition is presently not likely.several quarters.

 

ITEM 1A. RISK FACTORS

 

You should carefully consider the following factors in evaluating our business, operations and financial condition. The occurrence of any the following risks could have a material adverse effect on our business, financial condition and results of operations.

 

Risks Related to Our Business

 

We have had limited operations and require substantial additional funds to execute our business plan.We have had limited operations and have not yet established significant traction in the marketplace. We generated revenue of $21,644$352,172 in the year ended June 30, 2017,2019, and $24,918$196,742 in the year ended June 30, 2016. Because our capital resources have been limited, we have been unable to provide sufficient advertising and marketing support for the product at retail, resulting in limited revenues.2018. Unless we are able to continue to leverage our status as a public company into effective fundraising to fund our capital requirements, we will not be able to execute on our business plan and purchasers of our stock will be likely to lose their investment.


During FY2017, the majority of our revenue was derived from one distributor.We believe we have established that there is consumer interest for a better nighttime snack option. We have not yet definitively identified a way to market and sell our snack products either at retail or direct to consumer in a manner that is predictably profitable, nor have we yet identified the proper elements of support at retail that will drive consistent consumer purchase behavior.

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Our independent auditorsregistered public accounting firm have expressed doubt about our ability to continue as a going concern.We received a report on our financial statements for the years ended June 30, 20172019 and June 30, 20162018 from our independent registered public accounting firm that includes an explanatory paragraph and a footnote stating that there is substantial doubt about our ability to continue as a going concern due to its losses and negative net worth. Inclusion of a “going concern qualification” in the report of our independent accountants may have a negative impact on our ability to obtain financing and may adversely impact our stock price in any market that may develop.

 

We remain uncertain of our proposed products’ market acceptance.Although management firmly believes that snacks designed for evening consumption is a viable niche market with a potential for attractive returns for investors, this belief is largely based on preliminary sales and marketing data through platforms such as Amazon and Facebook. We have not conducted any formal marketing studies. Our limited resources preclude us from doing so.Facebook, as well as industry awards, industry research, and consumer feedback. If management is wrong in its belief and there is an insufficient market for our products, it is likely we will fail and investors will lose their investment.

  

Our ability to hire additional personnel is important to the continued growth of our business.Our continued success depends upon our ability to attract and retain a group of motivated marketing and business support professionals. Our growth may be limited if we cannot recruit and retain a sufficient number of people. We cannot guarantee that we will be able to hire and retain a sufficient number of qualified personnel.

 

We may face substantial competition.Competition in all aspects of the functional food industry is intense. We will compete against both large conglomerates with substantial resources and smaller companies, including new companies that might be formed with resources similar to our own. Competitors may seek to duplicate the perceived benefits of our products in ways that do not infringe on any proprietary rights that we can protect. As a result we could find that our entire marketing plan and business model is undercut or made irrelevant by actions of other companies under which we have no control. We cannot promise that we can accomplish our marketing goals and as a result may experience negative impact upon our operating results.

 

Our success depends to a large extent upon the continued service of key managerial employees and our ability to attract and retain qualified personnel.Specifically, we are highly dependent on the ability and experience of our key employee, Sean Folkson, our president and CEOCEO. We have a consulting agreement with Mr. Folkson. The loss of Mr. Folkson would present a significant setback for us and could impede the implementation of our business plan. There is no assurance that we will be successful in acquiring and retaining qualified personnel to execute our current plan of operations.

Our proposed acquisition of Hook Group, LLC (“Hook”) is not certain and even if it occurs, profit therefrom is also uncertain.In November 2016 we entered into an agreement providing for us to acquire Hook, the licensee of General Mills for FiberOne™ ice cream. The agreement calls for us to make substantial investments in Hook and is dependent on our being able to maintain and renew Hook’s license with General Mills as well as the market acceptance of Hook’s proposed products. If we cannot raise funding satisfactory to Hook to complete the acquisition, if Hook were to lose the license with General Mills, or if we are unable to successfully market Fiber One™ ice cream products, we will not realize any return in our investment in Hook and our results will be adversely affected. At this time there is no enforceable agreement for completion of this transaction and we are pursuing other avenues for future revenues. Therefor the consummation of this acquisition is presently not likely.

 

The ability of our officersofficer to control our business will limit minority shareholders’ ability to influence corporate affairs. As of the date of this report, our president, Sean Folkson, owned 16,433,56816,733,568 shares (directly and through trusts, includes 2.6including 2,680,000 million shares owned by a trust controlled by Mr. Folkson’s wife. Mr.(Mr. Folkson disclaims beneficial ownership of these shares).   Also, asIn addition to his ownership of the datecommon stock, Mr. Folkson owns 1,000 shares of this report our Vice President Peter Leighton owned 4,000,000 shares. These two shareholders representSeries A Preferred Stock (“A Stock”) which votes with the common stock and has an aggregate of approximately 69.5 %100,000,000 votes. Accordingly, Mr. Folkson controls over 90% of our 29,384,432 issued and outstanding shares.the voting power in the Company. Because of theirhis stock ownership, our officersMr. Folkson will be in a position to continue to elect our board of directors, decide all matters requiring stockholder approval and determine our policies. The interests of our president may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of officers and directors and other business decisions. The minority shareholders would have no way of overriding decisions made by our president. This level of control may also have an adverse impact on the market value of our shares because he may institute or undertake transactions, policies or programs that result in losses, may not take any steps to increase our visibility in the financial community and/ or may sell sufficient numbers of shares to significantly decrease our price per share.

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If we do not receive additional financing we will not be able to execute our planned expansionexpansion.. Over the next  6-12 months, we believe we will require approximately $1,000,000$1,500,000 - $2,000,000$2,500,000 in debt or equity financing to affect a planned expansion of our operations and roll out of our existing and any future products.Nightfood ice cream. Management believes that it will be able to raise the required funds, however this may not prove to be the case. As of the date of this filing,June 30, 2019, we have $650,250had $1,748,000 in outstanding convertible promissory notes. We also have an Equity Credit Line in the amount of $5,000,000.$5,000,000, which we could access under certain circumstances. However the utilization of such forms of capital raising can be extremely dilutive to our present shareholders.See ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – Liquidity.

 

We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes-Oxley Act of 2002.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our annual report our assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year. We have not yet completed our assessment of the effectiveness of our internal control over financial reporting. We would incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.

 

We do not have a sufficient number of employees and consultants to segregate responsibilities and are presently unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees, and this may impair our ability to effectively comply with Section 404 of the Sarbanes-Oxley Act.We currently do not have any employees and rely on our CEO, Sean Folkson and our Vice President/CMO Peter Leighton to perform all executive functions. Peter Leighton will be assisting us on a part time basis. Accordingly, we cannot segregate duties to provide sufficient review of our financial activity. During the course of our testing of our financial procedures, we may identify other deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly. Our officers’ lack of experience in accounting and financial matters may make our efforts to comply more difficult and cause us to hire consultants to assist him cutting into our resources.

  

Implications of Being an Emerging Growth Company.As a company with less than $1.0 billion in revenue during its last fiscal year, we qualify as an “emerging growth company” as defined in the JOBS Act. For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. These provisions include:

 

●a requirement to have only two years of audited financial statements and only two years of related Management’s Discussion and Analysis included in an initial public offering registration statement;

 

●an exemption to provide less than five years of selected financial data in an initial public offering registration statement;

 

●an exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal controls over financial reporting;

 

●an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

 

●an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; and

 

●reduced disclosure about the emerging growth company’s executive compensation arrangements.

5

An emerging growth company is also exempt from Section 404(b) of Sarbanes Oxley which requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. Similarly, as a Smaller Reporting Company we are exempt from Section 404(b) of the Sarbanes-Oxley Act and our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until such time as we cease being a Smaller Reporting Company.

 

As an emerging growth company, we are exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.

 

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We would cease to be an emerging growth company upon the earliest of:

 

●In our fiscal year ended June 30, 2020,2021,

 

●the first fiscal year after our annual gross revenues are $1 billion or more,

 

●the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or

 

●as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

  

Risks Related to Our Common Stock

 

Commencing August 21, 2015 we began trading under the Symbol NGTF on the OTC Markets. There had been very little trading activity of our stock for some time. In April of 2017, the Company secured a listing onmoved to the OTCQB, and in August of 2017 an investor awareness campaign was initiated to communicate news of recent company developments and milestones to a broader range of stock market investors. On October 23, 2017, we were advised that our stock had been moved from the OTCQB to the OTCPink marketplace. The Company did not believe the change in OTC Market tiers had any material positive or negative impact on Company operations or the stock price. However, in January, 2019, we determined that it was in the interest of our shareholders to be on the OTCQB and were reinstated on February 11, 2019. Trading volume has increased significantly in the last eighteen months, but there can be no assurances that significant public trading will ever develop or, if it develops, that it will be maintained. Our stock is likely to continue to be subject to significant price fluctuations.

 

In addition, our common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for the common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception, and general economic and market conditions.conditions. No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock. Because of the anticipated low price of the securities, many brokerage firms may not be willing to effect transactions in these securities. Any purchasers of our securities should be aware that any market that develops in our stock will likely be subject to the penny stock restrictions.restrictions.”

  

Our board of directors is authorized to issue shares of preferred stock, which may have rights and preferences detrimental to the rights of the holders of our common shares.We are authorized to issue up to 1,000,000 shares of preferred stock, $0.001 par value. On July 11, 2018, we filed a Certificated of Designation for a class of preferred stock designated Class A Super Voting Preferred Stock (“A Stock”). There are 10,000 shares of A Stock designated. Each share of such stock shall vote with the common stock and have 100,000 votes. A Stock has no conversion, dividend or liquidation rights. Accordingly, the holders of A Stock will, by reason of their voting power be able to control the affairs of the Registrant. The foregoing is only a summary of the certificate of designation for the A Stock, which has been filed as an exhibit to our Current Report on Form 8-K filed July 17, 2018. We have issued 1,000 shares of A Stock to Sean Folkson, giving him 100,000,000 votes in all matters requiring a vote of holders of our Common Stock and effective voting control over our affairs. As of the date of this report, we have not issued any other shares of preferred stock and have no plans to do so. Our preferred stock may bear such rights and preferences, including dividend and liquidation preferences, as the Board of Directors may fix and determine from time to time. Any such preferences may operate to the detriment of the rights of the holders of the common stock being offered hereby.

6


Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability that may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.Our articles of incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. This indemnification policy could result in substantial expenditures by us, which we will be unable to recoup.

 

We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of whichthese factors is arewould likely to materially reduce the market and price for our shares, if such a market ever develops.

 

Any market that develops in shares of our common stock will be subject to the penny stock restrictions that are likely to create a lack of liquidity and make trading difficult or impossible.Until our shares of common stock qualify for inclusion in the NASDAQ system, if ever, the trading of our securities, if any, will be in the over-the-counter market which is commonly referred to as the OTCBB as maintained by OTCMarkets.com. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of our securities.

 

SEC Rule 15g-9 (as most recently amended and effective on September 12, 2005) establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. This classification severely and adversely affects the market liquidity for our common stock. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:

 

●the basis on which the broker or dealer made the suitability determination, and

 

●that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

  

Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if and when our securities become publicly traded. In addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find it difficult to sell their securities. Recently, several brokerage firms and clearing firms have adopted special “house rules” which make it more difficult for their customers to hold or trade low priced stock and these rules may make it difficult for our shareholders to sell their stock.

7


We do not intend to pay dividends on our common stock.We have not paid any dividends on our common stock to date and there are no plans for paying dividends on the common stock in the foreseeable future. We intend to retain earnings, if any, to provide funds for the implementation of our business plan. We do not intend to declare or pay any dividends in the foreseeable future. Therefore, there can be no assurance that holders of our common stock will receive any additional cash, stock or other dividends on their shares of our common stock until we have funds which the Board of Directors determines can be allocated to dividends.

 

If a market develops for our shares, sales of our shares relying upon rule 144 may depress prices in that market by a material amount. 25,053,43216,733,568 of the outstanding shares of our common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted securities for a prescribed period may, under certain conditions, sell their shares as a result of revisions to Rule 144 which became effective on or about February 15, 2008, there is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days) after the restricted securities have been held by the owner for a period of six months. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop.

 

Any trading market that may develop may be restricted by virtue of state securities “Blue Sky” laws to the extent they prohibit trading absent compliance with individual state laws. These restrictions may make it difficult or impossible to sell shares in those states. Although trading activity in our stock has increased recently, generally there is a limited public market for our common stock, and there can be no assurance that an active and regular public market will develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as “Blue Sky” laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because our securities have not been registered for resale under the “Blue Sky” laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state “Blue Sky” law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. These restrictions prohibit the secondary trading of our common stock. Accordingly, investors should consider the secondary market for our securities to be a limited one. 

 

Recent issuances of convertible promissory notes may have a negative impact on the trading prices of our common stock.Commencing in March 2017, we have entered into $530,000$5,214,703 principal amount of promissory notes with various lenders.lenders since our inception of which $1,748,000 was outstanding as of June 30, 2019. These notes are convertible six to twelve months after issuance into free trading shares of our common stock, with certain limitations, at conversion prices below the then market price of our common stock. While we intend to repay theseThese notes before they arehave been converted by using other funds we may obtain, including funds received under the EPA, no assurance can be givenon a continual basis for approximately 24 months. It is possible such conversions and that we will be successful in these efforts. Anyfuture conversions of these notes are likely tohave and can have a negative effect on the market for our common stock and may cause dilution to our common stockholders.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Description of Property

 

We currently store our inventory in third party warehouses and fulfillment centers a fulfillment center at a cost of approximately $200$1,000 per month which is part of our shipping and packing relationship.month. We believe that our properties are adequate for our current needs and that alternative similar or additional space could be found in the vicinity of our present property at similar cost should the need arise. 

 

ITEM 3. LEGAL PROCEEDINGS

 

There are no current, past, pending or threatened legal proceedings or administrative actions either by or against the issuer that could have a material effect on the issuer’s business, financial condition, or operations.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

8


PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

MARKET INFORMATION

 

As of April 10, 2017 ourOur common stock is quoted on the OTCQB Market under the symbol “NGTF”. Our common stock had previously been quoted on the under the same symbol on the OTCPink Market which is sponsored and operated by OTCMarkets, Inc. The OTCQB Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information.NGTF.

 

The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCMarkets. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

The last reported price was $.149$0.26 on October 2, 2017.

11, 2019.

 

Period Ending June 30, 2017 High  Low 
September 30, 2016 $0.24  $0.10 
December 31, 2016  0.50   0.08 
March 31, 2017  0.22   0.05 
June 30, 2017  0.39   0.10 
         
Period Ending June 30, 2016:        
September 30, 2015  1.40   0.85 
December 31, 2015  2.10   1.45 
March 31, 2016  2.10   0.85 
June 30, 2016  1.05   0.05 

Period Ending June 30, 2019 High  Low 
September 30, 2018 $0.42  $0.25 
December 31, 2018  0.36   0.16 
March 31, 2019  0.92   0.17 
June 30, 2019  0.77   0.30 
        ��
Period Ending June 30, 2018:        
September 30, 2017 $0.34  $0.12 
December 31, 2017  0.27   0.06 
March 31, 2018  0.69   0.09 
June 30, 2018  0.56   0.20 

 

HOLDERS

 

The approximate number of stockholders of record at June 30, 20172019 is 115.193. The number of stockholders of record does not include beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.

 

DIVIDEND POLICY

 

No dividends have ever been declared by the Board of Directors on our common stock. Our losses do not currently indicate the ability to pay any cash dividends, and we do not have the intention of paying cash dividends on our common stock in the foreseeable future.

We do not have any equity compensation plans. The Company entered into a revised Consulting Agreement with A.S. Austin Company with compensation consisting of warrants to purchase up to 300,000 shares of the Company common stock at a price of $.75 per share. The warrants expire on October 6, 2021 or five years from the date the contract was executed. The Company also issued 40,000 warrants to SkyBridge Ventures, LLC on August 10, 2017, each warrant give SkyBridge the right to purchase one share of common stock at $.20 per share, with a cashless exercise provision. The warrants expire August 10, 2022. The Company has the right to redeem the warrants prior to November 30, 2017 for $16,000.

9


RECENT SALES OF UNREGISTERED SECURITIES

 

In the twelve months ending June 30, 2017, 100,0002019, 84,389 shares were issued to one investorsan investor for $10,000$50,000 in cash ($0.10(at $0.59 per share). No underwriter participated in the foregoing transactions, and no underwriting discounts or commissions were paid, nor was any general solicitation or general advertising conducted. The securities bear a restrictive legend and stop transfer instructions are noted on our stock transfer records. These shares were issued in offerings under Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended. The company also compensated vendors and consultants with 1,097,500483,808 shares in lieu of payment of $186,000,$345,656, along with the issuance of 25,000667,959 shares in lieu of interest payments of $5,000.$95,805. These issuances were exempt from registration under section 4(1) of the Securities Act as sales by an issuer not involving a public offering. During the twelve months ended June 30, 2017,2019, we issued $430,000 principal amount convertible promissory notes9,247,414 shares of common stock as consideration for the conversion of debt with a fair value of $1,327,953 to 6 investorsone investment entity. The Company also issued 281,957 shares for $351,500.certain accounts payable liabilities valued at $63,850 and issued 400,000 shares of stock related to Mr. Folkson executing warrants valued at $120,000. These issuances were exempt from registration under Section 4 (1) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

 

As of June 30, 2017,2019, we had no compensation plans under which our equity securities were authorized for issuance.

 

PENNY STOCK REGULATION

 

Shares of our common stock have been and will likely continue to be subject to rules adopted the SEC that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the SEC, which contains the following:

 

 ●a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
   
 ●a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities’ laws;
   
 ●a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the “bid” and “ask” price;
   
 ●a toll-free telephone number for inquiries on disciplinary actions;
   
 ●definitions of significant terms in the disclosure document or in the conduct of  trading in penny stocks; and
   
 ●such other information and is in such form (including language, type, size and format), as the SEC shall require by rule or regulation.

 

Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:

 

 ●the bid and offer quotations for the penny stock;
   
 ●the compensation of the broker-dealer and its salesperson in the transaction;
   
 ●the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
   
 ●monthly account statements showing the market value of each penny stock held in the customer’s account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.

10

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

The following discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with our audited financial statements and related notes thereto included elsewhere in this report.

 

OVERVIEW

 

We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions could be incorrect. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances. Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include the following:

 

We are a snack development, marketing and distribution company relying on our unique product, unique productproducts, positioning, and our marketing expertiseteam to develop and market nutritional/snack foods that are appropriate for evening snacking. Our first product iswas the NightFoodNightfood nutrition bar, currently availablemanufactured in two flavors (Cookies n’ Dreams, and Midnight Chocolate Crunch). Management may choose to discontinue the nutrition bars in the near future to have additional resources available for the ice cream rollout, which we believe offers a much larger market opportunity.

During calendar 2018, the Company began development of Nightfood ice cream. Having seen the success in the marketplace of “better-for-you” ice cream brands such as Halo Top, Enlightened, and others, Management believes consumers will be receptive to a line of ice cream that has some similar benefits to those newly successful brands, as well as a sleep-friendly nutritional profile.

With our team of sleep experts, and a leading ice cream research and development team, eight flavors of Nightfood ice cream were developed and bought to market, with the initial production run occurring in January 2019. Nightfood is unique among all other products in the market in that our ice cream was developed with better sleep in mind. Knowing millions of Americans eat ice cream before bed on any given night, Management tasked our team of sleep and nutrition experts with formulating an ice cream that would be more appropriate for nighttime consumption, while delivering better taste and texture than what is currently found in the other “better-for-you” brands.

Compared to regular ice cream, Nightfood is formulated with less fat, less sugar, fewer calories, plus certain minerals, digestive enzymes, and amino acids recommended by our sleep experts.

Nightfood quickly secured distribution in one of the nation’s leading supermarket chains, obtaining a commitment before the first production run had commenced. In early February of 2019, it was announced that Nightfood had won the 2019 Product of the Year Award in the ice cream category in a Kantar innovation survey of over 40,000 consumers.

During the first half of 2019, Nightfood secured distribution in three additional top-50 supermarket chains, won more industry awards, and was featured in The Wall Street Journal, USA Today, The Washington Post, Fox Business News, and many more media outlets.

 

We believe that over the next several years, a subset of consumers will begin to shift their night snacking behavior towards snacks that are formulated to be more “sleep friendly” compared to what is currently being consumed by much of the population. As research continues to explore the links between nutrition and sleep, and consumers continue to seek healthier snacks in general, we expect a category to emerge within the marketplace that we call “nighttime nutrition”.

The first major nutrition brands have just started to explore the viability of a nighttime nutrition category as Gatorade® announced in March of 2016 that they’ve begun exploring development of a nighttime yogurt for athletes.

Unlike the Gatorade initiative, NightFood seeks to deliver better night snacks to mainstream consumers and not hardcore athletes.

 

American consumers spend over $50 Billion annually on snacks consumed at night, and this figure continues to grow. A majority of adults are trying to eat foods and snacks that they understand will prevent or manage health problems and 37% of consumers are willing to pay more for foods with perceived health benefits. Moreover, industry data indicates that the most popular nighttime snack choices include products and categories that are traditionally considered high in calories, and “unhealthy” options, such as cookies, salty snacks (chips, pretzels, and popcorn), ice cream, and candy.

 

Our firstIn addition to consumer research giants Mintel and IRI supporting the idea that night-specific snacks represented an opportunity for growth and innovation within the snack space, major consumer goods companies have also recently indicated they believe in the category. Doug Munk, Director of New Business Ventures for Nestle USA recently stated publicly that Nestle’s research indicates “…people are looking to replace some of their junk foods before they go to sleep with something that is a little better.”

Management believes Nestle’s interest in the space, including the test launch of a direct-to-consumer snack product on Amazon called “GoodNight”, represents early validation for the NightFoodcategory concept. While Management continues to iterate on products, distribution, and marketing, the team steadfastly believes that nighttime nutrition bar, is a billion dollar category in the making. And, as early is it in the launch of Nightfood ice cream, at this moment, Nightfood is clearly the undisputed leading brand in the night snacking category.

DEVELOPMENT PLANS

With Nightfood ice cream currently available in 200-300 supermarkets acrossfour of the top-50 supermarket chains in the United States, including the Meijer supermarket chain.Management is working to simultaneously secure additional distribution opportunities, while also nurturing revenue and consumer growth in our existing points of distribution.

 

The Company in select supermarkets, grocery stores,During the course of 2019, additional distribution relationships were established with regional ice cream distributors and nutrition stores, primarily in and around New York City, select stores in the southeastern US, and the Market Street supermarket chain in Texas, which is a divisionnon-traditional retailers, with varying degrees of Albertson’s.

After testing of the direct to consumer market, The Company is moving forward with a direct to consumer sales initiative with an established and reputable online marketing agency known as Common Thread Collective (CTC). The Company believes direct to consumer sales, both through its proprietary commerce site, and through the Amazon commerce platform, can be rapidly scaled and can achieve profitability at scale. CTC has a track record of establishing successful direct to consumer campaigns for lifestyle brands, and is optimistic and confident that they can help the Company achieve our online sales goals.

DEVELOPMENT PLANS

Longer-term, assuming that we have established sufficient traction with our initial product, the NightFood nutrition bar, the companysuccess. Management will continue to evaluatework within the industry to identify opportunities to introducegrow the Nightfood brand. Outlets such as hotels, college campus bookstores, and other nighttime specific snack productsnon-traditional outlets could develop into relevant elements of our distribution mix in the snack formats already popular with consumers suchnear future as cookies, chips,the brand continues to grow awareness and ice cream. Detailed discussions with distributors of snacks in specific popular nighttime formats have already taken place, although no new product format launches are imminent as of the time of this filing.distribution infrastructure.

   

12

11

 

   

Mention scientific advisory board here, assuming we have somebody on the board before filing. Agreed

It has been established that the nutritional profile of any food can be evaluated and formulated for what we call “sleep-friendliness”, and therefore optimized as a better nighttime snack option.

INFLATION

 

Inflation can be expected to have an impact on our operating costs. A prolonged period of inflation could cause a general economic downturn and negatively impact our results. However, the effect of inflation has been minimal over the past three years.

 

SEASONALITY

 

We do not believe that our business will be seasonal to any material degree.

 

Critical Accounting Policies 

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, deferred compensation and contingencies. We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances. These estimates allow us to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

We believe the following accounting policies are our critical accounting policies because they are important to the portrayal of our financial condition and results of operations and they require critical management judgments and estimates about matters that may be uncertain. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected.

 

RESULTS OF OPERATIONS

 

Fiscal Year ended June 30, 20172019 Compared to Fiscal Year ended June 30, 20162018

 

Revenue

 

For the twelve months ended June 30, 2017,2019, we had revenues of $21,644$352,172 compared to the twelve months ended June 30, 20162018 when we had revenues of $24,918.$196,742. This increase in revenue resulted from the introduction of Nightfood ice cream during the second half of fiscal 2019. The introduction of our ice cream, which delivers a higher gross margin than our nutrition bars, also resulted in a gross margin of 52% for the year ending June 30, 2019 compared to 41% for the year ending June 30, 2018. The company also provided certain sales discounts and allowances of $9,462$11,201 for the year ended June 30, 2017,2019, compared to $22,681$6,642 for the year ended June 30, 2016.2018.

 

Operating Expenses

 

Our operating expenses for the twelve months ended June 30, 20172019 were $733,458$2,263,722 compared to $743,247$2,034,790 for the twelve months ended June 30, 2016.2018. Cost of product sold was $190,251 for the year ended June 30, 2019 compared to $116,158 for the year ended June 30, 2018. This is due to higher revenues generated in Fiscal 2019. Total Advertising & Promotion for the year ended June 30, 2019 was $732,297 compared to $189,352 for the year ended June 30, 2018. This increase was due primarily to certain licensing and marketing fees, along with marketing partnerships. Paid advertising spend decreased from $115,133 in the year ended June 30, 2018 to $105,855 for the year ended June 30, 2019. Expenses related to the construction of the website for Nightfood Ice Cream, and the costs for package design and print preparation were $78,232 for the year ended June 30, 2019 compared to packaging design and web design costs of $139 for the year ended June 30, 2018. Product sample expense was $30,206 for the year ended June 30, 2019 compared to $0 for the year ended June 30, 2018. Much of this expense was the cost of shipping ice cream, in coolers and on dry ice via FedEx, to media outlets and influencers. For the year ended June 30, 2019, professional fees were $781,178 compared to $1,177,318 for the year ended June 30, 2019. This decrease was largely due to the completion of Company efforts to consolidate all debt with one lender during the course of fiscal 2018. This consolidation was completed On July 2, 2018.

 

Net Loss

 

For the twelve months ended June 30, 2017,2019, we had a net loss of $915,417$4,598,343 compared to the twelve months ended June 30, 20162018 when we had a net loss of $726,596.$5,239,493.

 

InventoryCustomers

In FY 2019, two customers made up more than 10% of our revenue. In FY 2018, no individual customer made up more than 10% of our revenues.


LIQUIDITY AND CAPITAL RESOURCES

 

As of June 30, 2017, we had approximately $95,865 worth of product in inventory, compared to $121,706 worth of product in inventory as of June 30, 2016.

Customers

In FY 2017, one customer, KeHE distributors, made up over 87% of revenues.

12

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2017,2019, we had cash on hand of $14,326,$30,142, accounts receivable of $382 net of allowances,$45,086, and inventory value of $95,865.$406,439. As of June 30, 2018, we had cash on hand of $48,440, accounts receivable of $0, and inventory value of $103,209. The increase in accounts receivable is due to an increase in overall sales activity relating to the launch of Nightfood ice cream, and a larger percentage of our sales resulting from wholesale orders compared to the prior year. The increase in inventory is due largely to the build-up of ice cream inventory to meet anticipated demand. During the twelve month period ended June 30, 2017,2019, we raised $10,001$50,000 through the private sale of our common stock.

 

As of June 30, 2019, we had accounts payable of $496,809 compared to $215,782 on June 30, 2018. This increase is due primarily to certain marketing partnerships, slotting fees, and inventory production.

GOING CONCERN

Since our inception, we have sustained operating losses. During the twelve months ended June 30, 2017,2019, we incurred a net loss of $915,417$4,598,343 and had a total stockholders’ deficit of $471,029.$2,472,605.

 

The Company has limited available cash resources and we do not believe our cash on hand will be adequate to satisfy our ongoing working capital needs. The Company is continuing to raise capital through private placement of our common stock, debt, and the use of $497,500 of convertible debt to finance the Company’s operations, of which it can give no assurance of successsuccess. However, we believe that our current capitalization structure, combined with the continued expansion in distribution,of operations, will enable us to achieve successful financings to continue our growth.

 

Even if the Company is successful in raising additional funds, the Company cannot give any assurance that it will, in the future, be able to achieve a level of profitability from the sale of its products to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

During the twelve months ended June 30, 20172019, net cash used in operating activities totaled $1,567,227 compared to $1,757,638 for the twelve months ended June 30, 2018

During the twelve months ended June 30, 2019 and 20162018 respectively, there was not any net cash provided from investing activities.

 

During the twelve months ended June 30, 2017,2019, net cash aggregating $397,829$1,548,928 was provided by financing activities, which represents net proceeds of $10,001$50,000 from private sales of our common stock $414,250including issuance of warrants, $1,602,005 from the issuance of convertible debt $21,984 in advances by shareholders($102,077 of which was offset by repaymentsused to shareholders of $44,989,repay older debt), and required principal payments of $3,417$1,000 of our bank loan. During the twelve months ended June 30, 2018, net cash aggregating $1,791,752 was provided by financing activities, which represents net proceeds of $60,000 from private sales of our common stock including issuance of warrants, $2,316,093 from the issuance of convertible debt ($581,250 of which was used to repay older debt), and required principal payments of $2,096 of our bank loan. 

 

From our inception in January 2010 through June 30, 2017,2019, we have generated an accumulated deficit of approximately $3,381,221.$13,219,059. Assuming we raise additional funds and continue operations, it is possible we expect tocould incur additional operating losses during the course of fiscal 20182020 and possibly thereafter. We plan to continue to pay or satisfy existing obligation and commitments and finance our operations, as we have in the past, primarily through the sale of our securities and other forms of external financing until such time that we are able to generate sufficient funds from the sale of our products to finance our operations, of which we can give no assurance.

On November 25, 2016, the company entered into a material definitive agreement. On that date, the company executed and delivered a Plan of Reorganization Including Option to Acquire (the “Plan”) by and among the Registrant, Hook Group, LLC (“Hook”) and Suffield Foods. LLC (“Suffield”). The Plan contemplates the Registrant acquiring an equity interest in and potentially merging Hook and its subsidiary Suffield with and into a wholly owned subsidiary of the Registrant. As of the date of this filing, the agreement has not formally been terminated by the parties, however, at this time, the consummation of this acquisition is not likely.

 

Funds on hand are not sufficient to fund our operations and we intend to rely on debt and the sale of stock in private placements to increase liquidity and, we anticipate deriving additional revenue from product sales in fiscal 2018,2020, but we cannot at this time quantify the amount. If we are unable to raise cash through the sale of our stock, we may be required to severely restrict our operations.

 

As of February 8, 2017, we entered into two agreements with Black Forest, an Equity Purchase Agreement (the “EPA”) and a Registration Rights Agreement (the “RRA”). The two agreements were filed as exhibits to the Registrant’s Current Report on Form 8-K dated February 8, 2017, and this Registration Statement is being filed in order for us to fulfill our obligations under the RRA. The following summary is qualified in its entirety by reference to such exhibits to our Form 8-K. On August 24, 2017, the Company issued aits first and, to date, only “put notice” to Black Forest and delivered to Black Forest 264,085 shares of common stock in exchange for $30,000. The Company may continue to make use of this EPA from time to time, at its discretion.


In February, March and May 2017,During Fiscal Year 2019, the Company entered into convertible promissory notes with several lendersone lender with principal totaling $430,000 and realized net proceeds$1,602,005, of $354,000 Among thesewhich $102,077 of the funds received were used to pay off older notes, were promissory notes totaling $120,000as the Company has now successfully consolidated 100% of convertible debt with Black Forest which notesone lender. We consider our relationship with this lender to be excellent. They have been assigned to a third party that is not affiliated with Black Forest.

13

providing financing for operations for over twenty-four months, and have had conversion rights for over twenty-four months as well through acquisition of older debt. The agreements required us to file a registration statement for the common stock underlying the EPA. Subject to various limitations set forth in the EPA, Black Forest, after effectiveness of such registration statement, will be required to purchase up to $5,000,000 worthlender has an understanding of our common stock at a price equal to 85% of the market price as determined under the EPA. The EPA providescapital needs for volume limitations on the amount of shares that Black Forest must purchase at any time and provides that we will be paid for the common stock upon electronic delivery of the shares to Black Forest. To date we have raised a net of $28,260.50 through the EPA. No assurance can be given as to the total amount we will raise through the EPA.

If funds raised through the EPA are not sufficient to fund our operations, we intend to rely on the sale of stock in private placements, and the issuance of more debt, to increase liquidity. If we are unable to raise cash through the sale of our stock, we may be required to severely restrict ourfuture operations.

 

Effective May 6, 2015, the Company entered into a consulting agreement with Sean Folkson. The agreement iswas retroactive to January 1st, 2015. In exchange for services provided to the Company by Folkson, the Company has agreed to pay Folkson $6,000 monthly. This compensation expense started accruing on January 1, 2015, and will continue to accrueaccrued on a monthly basis untilthrough June of 2018.

In June of 2018, and again in June of 2019, the company isCompany entered into updated consulting agreements with Folkson, which included a modified compensation structure. Each new Consulting Agreement contained the identical cash compensation allowance of $6,000 monthly. In addition, Folkson would earn Warrants with a strike price of $.50 or $1 when the Company hit certain revenue milestones. All Warrants earned under Folkson’s current agreement would convert into restricted shares, shall carry a cashless provision, and must be exercised within 90 days of the filing of the 10Q or 10K on which such revenues are reported.

In December, 2017, Folkson elected to purchase 80,000 warrants to acquire shares of NGTF stock with a strike price of $.20 and a term of 36 months. To acquire these warrants Folkson paid $.15 per warrant, totaling $12,000, treated as a $12,000 reduction to the amount owed to Folkson. In November, 2018, Folkson exercised an existing warrant option and received 400,000 shares of our common stock in exchange for a $120,000 reduction in the amount of accrued consulting fees he was owed. This activity resulted in a position to pay Folkson. Asdecrease in related party accruals of the date of this filing, no payments have been made to Folkson against this accrual.$164,000.

 

OFF-BALANCE SHEET TRANSACTIONS

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

GOING CONCERN

The Company’s independent auditors believe it necessary to include a going concern footnote in their audit report. The Company has included an explanatory paragraph in the notes to the financial statement for the year ended June 30, 2017 with respect to Company’s ability to continue as a going concern.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements required by Item 8 are presented in the following order:

 

TABLE OF CONTENTS

 

Report of Independent Registered Public Accounting FirmF-2
  
Consolidated Balance Sheets as June 30, 20172019 and June 30, 20162018F-3
  
Consolidated Statements of Operations for years ended June 30, 20172019 and June 30, 20162018F-4
  
Consolidated Statements of Changes in Stockholders Deficit as of June 30, 20172019 and June 30, 20162018F-5
  
Consolidated Statements of Cash Flows for years ended June 30, 20172019 and June 30, 20162018F-6
  
Notes to Consolidated Financial StatementsF-7

14


 

Nightfood Holdings, Inc.

 

Consolidated Financial Statements

 

NightFood Holdings, Inc.

Financial Statements

For the years ended June 30, 20172019 and June 30, 20162018

 

 

 

 

F-1

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm

 

ToThe Stockholders and the Board of Directors and
Stockholders of NightFood

Nightfood Holdings, Inc. and Subsidiaries

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of NightFoodNightfood Holdings, Inc. (theand Subsidiaries (collectively, the “Company”) as of June 30, 20172019 and 20162018, and the related consolidated statements of operations, and comprehensive loss, changes in stockholders’ equitydeficit and cash flows for each of the two years in the period ended June 30, 2017. These consolidated2019, and the related notes (collectively referred to as the “consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States)statements”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as ofat June 30, 20172019 and 20162018, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2017,2019, in conformity with accounting principlesU.S. generally accepted in the United States of America.accounting principles.

The Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has incurredsuffered recurring losses from operations, will require additional capital to fund its current operating plan, and generated negative cash flows from its operating activities. These raisehas stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plans with respect toregarding these matters are also described in Note 1 to the consolidated financial statements.3. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that mightmay result from the outcome of this uncertainty.

 

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/RBSM LLP

We have served as the Company’s auditor since 2014.

New York, NY

October 3, 2017

15, 2019

F-2


NightFoodNightfood Holdings, Inc.

CONSOLIDATED BALANCE SHEETS

 

 June 30, June 30,  June 30, June 30, 
 2017  2016  2019 2018 
          
ASSETS          
          
Current assets:             
Cash $14,326  $5,481  $30,142 $48,440 
Accounts receivable (net of allowance of $0 and $22,681, respectively)  382   1,358 
Accounts receivable (net of allowance of $0 and $0, respectively) 45,086 - 
Inventories  95,865   121,706  406,439 103,209 
Other current assets  3,491   1,400   1,000  3,210 
Total current assets  114,064   129,945   482,667  154,859 
             
Total assets $114,064  $129,945  $482,667 $154,859 
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT             
Current liabilities:             
Accounts payable $205,961  $165,441  $496,809 $215,782 
Accrued expense-related party  180,000   108,000  33,974 197,974 
Convertible notes payable-net of debt discounts and unamortized beneficial conversion feature  151,020   -  1,117,741 633,870 
Fair value of derivative liabilities  44,022   -  1,306,748 1,765,187 
Short-term borrowings  3,096   4,290   -  1,000 
Advance-related party  -   1,000 
Advance from Shareholders  995   23,000 
Total current liabilities  585,094   301,731  2,955,272 2,813,813 
        
Long term borrowings  -   2,222 
             
Commitments and contingencies  -   -  - - 
             
Stockholders’ deficit:             
Common stock, ($0.001 par value, 100,000,000 shares authorized, and 29,724,432 issued and outstanding as of June 30, 2017 and 28,501,932 outstanding as of June 30, 2016, respectively)  29,724   28,502 
Common stock, ($0.001 par value, 200,000,000 shares authorized, and 53,773,856 issued and outstanding as of June 30, 2019 and 42,608,329 outstanding as of June 30, 2018, respectively) 53,774 42,608 
Preferred stock, ($0.001 par value, 100,000,000 shares authorized, and 1,000 issued and outstanding as of June 30, 2019 and 0 outstanding as of June 30, 2018, respectively) 1 - 
     
Additional paid in capital  2,880,467   2,263,294  10,692,679 5,919,152 
Accumulated deficit  (3,381,221)  (2,465,804)  (13,219,059)  (8,620,714)
Total stockholders’ deficit  (471,030)  (174,008)  (2,472,605)  (2,658,954)
Total Liabilities and Stockholders’ Deficit $114,064  $129,945  $482,667 $154,859 

 

The accompanying notes are an integral part of these audited consolidated financial statements

F-3


NightFoodNightfood Holdings, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

  For the  For the 
  Year  Year 
  Ended  Ended 
  June 30,
2017		  June 30,
2016		 
       
Revenues $21,644  $24,918 
         
Operating expenses        
Cost of product sold  31,798   104,712 
Advertising and promotional  12,319   110,751 
Selling, general and administrative  239,856   73,545 
Professional Fees  449,485   454,240 
         Total operating expenses  733,458   743,247 
         
Loss from operations  (711,814)  (718,329)
         
Other expenses        
Interest expense – bank debt  714   1,267 
Interest expense – shareholder  5,501   7,000 
Amortization expense  153,366   - 
Change in fair value of derivative liability  44,022   - 
         Total other expenses  203,603   8,267 
         
Provision for income tax  -   - 
         
Net loss $(915,417) $(726,596)
         
Basic and diluted net loss per common share  (0.03)  (0.03)
         
Weighted average shares of capital outstanding – basic and diluted  29,020,192   27,524,987 

  For the  For the 
  Year  Year 
  Ended  Ended 
  June 30,
2019		  June 30,
2018		 
       
Revenues $352,172  $196,742 
         
Operating expenses        
Cost of product sold  190,251   116,158 
Advertising and promotional  732,297   189,352 
Selling, general and administrative  559,996   551,962 
Professional Fees  781,178   1,177,318 
Total operating expenses  2,263,722   2,034,790 
         
Loss from operations  (1,911,550)  (1,838,048)
         
Other expenses        
Interest expense – bank debt  -   223 
Interest expense – shareholder  95,805   20,487 
Interest expense – other  83,223   221,730 
Change in fair value of derivative liability  712,627   954,999 
Amortization of Beneficial Conversion Feature  1,794,359   2,193,891 
Other Expense  779   10,115 
Total other expenses  2,686,793   3,401,445 
         
Provision for income tax  -   - 
         
Net loss $(4,598,343) $(5,239,493)
         
Basic and diluted net loss per common share $(0.09) $(0.15)
         
Weighted average shares of capital outstanding – basic and diluted 47,827,114  35,544,034 

 

The accompanying notes are an integral part of these audited consolidated financial statements

F-4


NightFoodNightfood Holdings, Inc.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Years ended June 30, 20172019 and 20162018

 

  Common Stock   Additional
Paid-in		  Accumulated  Total Stockholders’ 
  Shares  Par Value  Capital  Deficit  Deficit 
Balance, July 1, 2015  26,588,588  $ 26,589  $1,666,832   $(1,739,208) $ (45,788)
Common stock issued for services  829,344   829   293,046   -   293,875 
Common stock issued as part of loan agreement  20,000   20   6,980   -   7,000 
Common Stock issued for cash  1,064,000   1,064   296,436   -   297,500 
Net loss  -   -   -   (726,596)  (726,596)
Balance, June  30, 2016  28,501,932   28,502   2,263,294   (2,465,804)  (174,008)
Common stock issued for services  1,097,500   1,098   185,703   -   186,800 
Common stock issued as part of loan agreement  25,000   25   4,975   -   5,000 
Common Stock issued for cash  100,000   100   9,900   -   10,000 
Beneficial Conversion Feature for debt discount  -   -   416,596   -   416,596 
Net loss  -   -   -   (915,417)  (915,417)
Balance, June 30, 2017  29,724,432  $29,724  $2,880,467  $(3,381,221) $(471,029)

  Common Stock  Preferred Stock  Additional
Paid-in		  Accumulated  Total Stockholders’ 
  Shares  Par Value  Shares  Par Value  Capital  Deficit  Deficit 
Balance, July 1, 2017  29,724,432  $29,725          $2,880,467  $(3,381,221) $(471,029)
Common stock issued for services  2,658,455   2,658           551,695   -   554,353 
Common stock issued for interest  270,382   270           20,217   -   20,487 
Common Stock issued for cash  464,085   464           59,536   -   60,000 
Issuance of warrants  -   -           20,759   -   20,759 
Issuance of common stock for debt  9,490,975   9,491           565,127   -   574,618 
Beneficial Conversion Feature for debt discount  -   -           1,821,351   -   1,821,351 
Net loss  -   -           -   (5,239,493)  (5,239,493)
Balance, June 30, 2018  42,608,329   42,608   -   -   5,919,152   (8,620,714)  (2,658,954)
Common stock issued for services  483,808   484   1,000   1   345,172   -   345,657 
Common stock issued for interest  667,959   668           95,137   -   95,805 
Common stock issued for cash  84,389   84           49,916   -   50,000 
Common stock issued for accounts payable  281,957   282           63,568       63,850 
Issuance of warrants  400,000   400           164,426   -   164,826 
Issuance of common stock for debt  9,247,414   9,248           1,318,705   -   1,327,953 
Beneficial Conversion Feature for debt discount  -   -           2,736,601   -   2,736,601 
Net loss  -   -   -   -   -   (4,598,343)  (4,598,343)
Balance, June 30, 2019  53,773,856  $53,774   1,000   1  $10,692,677  $(13,219,059) $(2,472,605)

 

The accompanying notes are an integral part of these audited consolidated financial statements

F-5


NightFoodNightfood Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

  For The
Year
Ended
June 30,
2017		  For The
Year
Ended
June 30,
2016		 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(915,417) $(726,596)
Adjustments to reconcile net loss to net cash used in operations activities:        
 Stock issued for services  186,800   293,875 
 Amortization of debt discount and deferred financing fees  153,366   - 
 Change in derivative liability  44,022   - 
 Stock issued as part of loan agreement  5,000   7,000 
 Increase in sales allowance  -   9,758 
Change in operating assets and liabilities:        
     Accounts receivable  977   23,411 
     Inventories  25,841   (74,770)
     Other current assets  (2,091)  3,686 
     Accounts payable  40,519   68,220 
     Accrued expenses  72,000   72,000 
         
Net cash used in operating activities  (388,984)  (323,415)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from the sale of common stock  10,001   297,500 
Proceeds from the issuance of debt-net  414,250   - 
Advance from shareholders  21,984   19,000 
Repayment to shareholders  (44,989)  - 
Repayment of related party advance  (3,417)  (3,663)
Net cash provided by financing activities  397,829   312,837 
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  8,845   (10,578)
         
Cash and cash equivalents, beginning of year  5,481   16,059 
Cash and cash equivalents, end of year $14,326  $5,481 
         
Supplemental Disclosure of Cash Flow Information:        
Cash Paid For:        
Interest $1,214  $1,267 
Income taxes $-  $- 

Summary of Non-Cash Investing and Financing Information:

Debt discount due to beneficial conversion feature

 $430,000  $- 
Value of embedded derivative liabilities $101,511  $- 

  For The
Year
Ended
June 30,
2019		  For The
Year
Ended
June 30,
2018		 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(4,598,343) $(5,239,494)
Adjustments to reconcile net loss to net cash used in operations activities:        
Stock issued for services  345,656   554,353 
Amortization of debt discount and deferred financing fees  1,794,359   2,776,811 
Warrants issued for services  44,826   20,759 
Change in derivative liability  795,699   88,329 
Stock issued for interest  95,805   20,487 
Change in operating assets and liabilities:        
Accounts receivable  (45,086)  382 
Inventories  (303,230)  (7,344)
Other current assets  2,210   282 
Accounts payable  344,878   9,823 
Accrued expenses  (44,001)  17,974 
         
Net cash used in operating activities  (1,567,227)  (1,757,638)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from the sale of common stock  50,000   60,000 
Proceeds from the issuance of debt-net  1,602,005   2,316,093 
Repayment of convertible debt  (102,076)  (581,250)
Repayment of short-term debt  (1,000)  (2,096)
Advance from shareholders  -   10,800 
Repayment of related party advance  -   (11,795)
Net cash provided by financing activities  1,548,929   1,791,752 
         
NET INCREASE IN CASH AND CASH EQUIVALENTS  18,298   34,114 
         
Cash and cash equivalents, beginning of year  48,440   14,326 
Cash and cash equivalents, end of year $30,142  $48,440 
         
Supplemental Disclosure of Cash Flow Information:        
Cash Paid For:        
Interest $95,805  $30,564 
Income taxes $-  $- 
Summary of Non-Cash Investing and Financing Information:        
Debt discount due to beneficial conversion feature $1,482,314  $1,559,886 
Value of embedded derivative liabilities $1,327,953  $574,618 

 

The accompanying notes are an integral part of these audited consolidated financial statements

F-6


NightFoodNightfood Holdings, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.Description of
Business		NightFoodNightfood Holdings, Inc. (the “Company”) is a Nevada Corporation organized October 16, 2013 to acquire all of the issued and outstanding shares of NightFood,Nightfood, Inc., a New York Corporation from its sole shareholder, Sean Folkson.  All of its operations are conducted by the subsidiary, NightFood,its two subsidiaries: Nightfood, Inc. The Company’s(“Nightfood”) and MJ Munchies, Inc.( “Munchies”).   Nightfood’s business model is to manufacture and distribute snack productsice cream specifically formulated for nighttime snacking to help consumers satisfy nighttime cravings in a better, healthier, more sleep friendly way.  Munchies has acquired a portfolio of intellectual property around the brand name Half-Baked, and is seeking to license such property to operating partners in the CBD and marijuana space.

 

  ●The Company’s fiscal year end is June 30.
    
  ●The Company currently maintains its corporate address in Tarrytown, New York. 

 

2.Summary of
Significant
Accounting Policies		●Management is responsible for the fair presentation of the Company’s financial statements, prepared in accordance with U.S. generally accepted accounting principles (GAAP).

 

 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 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. Estimates are used in the determination of beneficial conversion features, derivative liabilities, depreciation and amortization, the valuation for non-cash issuances of common stock, and the website, income taxes and contingencies, among others.
Beneficial Conversion Feature●

For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

Debt Issue Costs●The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as amortization of debt discount.
Original Issue Discount●If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Valuation of Derivative Instruments●ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.

Reclassification

●

The Company may make certain reclassifications to prior period amounts to conform with the current year’s presentation. These reclassifications did not have a material effect on its consolidated statement of financial position, results of operations or cash flows.

Recent Accounting Pronouncements

The Company reviews all of the Financial Accounting Standard Board’s updates periodically to ensure the Company’s compliance of its accounting policies and disclosure requirements to the Codification Topics.

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, to establish ASC Topic 606, (ASC 606). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition and most industry-specific guidance throughout the Industry Topics of the Codification. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall: Recognition and Measurements of Financial Assets and Financial Liabilities. The standard will be effective for us beginning January 1, 2019. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017, to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.

The standard will be effective for us beginning July 1, 2019. The standard may have a material impact on our balance sheets in the future if we entered into new leases, but will not have a material impact on our statement of operations. The most significant impact will be the recognition of ROU assets and lease liabilities for operating leases. We are currently evaluating the impact of this standard on our financial statements, including accounting policies, processes, and systems.

The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements.


Derivative Financial Instruments●

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.

    
 Cash and Cash Equivalents●The Company classifies as cash and cash equivalents amounts on deposit in the banks and cash temporarily in various instruments with original maturities of three months or less at the time of purchase.
    
 Fair Value of Financial Instruments●Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
    
 Inventories●Inventories consisting of packaged food items and supplies are stated at the lower of cost (FIFO) or market,net realizable value, including provisions for spoilage commensurate with known or estimated exposures which are recorded as a charge to cost of sales during the period spoilage is incurred.  The Company has no minimum purchase commitments with its vendors.  
    
 Advertising Costs●Advertising costs are expensed when incurred and are included in advertising and promotional expense in the accompanying statements of operations.  Included in this category are expenses related to public relations, investor relations, new package design, website design, design of promotional materials, cost of trade shows, cost of products given away as promotional samples, and paid advertising.  The Company incurred advertising costs of $12,319$732,297 and $110,751$189,352 for the years ended June 30, 20172019 and 2016,2018, respectively.

 Income Taxes●The Company has not generated any taxable income, and, therefore, no provision for income taxes has been provided.
    
  ●Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with FASB Topic 740, “Accounting for Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits 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, and for tax loss and credit carry-forwards. 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 Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not.

 

F-7

  ●A valuation allowance has been recorded to fully offset the deferred tax asset even though the Company believes it is more likely than not that the assets will be utilized.
    
  ●The Company’s effective tax rate differs from the statutory rates associated with taxing jurisdictions because of permanent and temporary timing differences as well as a valuation allowance.

 

F-9

 Revenue Recognition●The Company generates its revenue from products sold from traditional retail outlets along with items distributed from the Company’s and other customer websites.

 

  ●All sources of revenue isare recorded pursuant to FASB Topic 605606 Revenue Recognition, to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when persuasive evidencethe entity satisfies a performance obligation. In addition, this revenue generation requires disclosure of arrangement exists, deliverythe nature, amount, timing, and uncertainty of services has occurred, the fee is fixed or determinablerevenue and collectability is reasonably assured.cash flows arising from contracts with customers.
    
  ●

The Company occasionally offers sales incentives through various programs, consisting primarily of advertising related credits. The Company records advertising related credits with customers as a reduction to revenue as no identifiable benefit is received in exchange for credits claimed by the customer.

The Company revenue from contracts with customers provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company incurs costs associated with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment activities and recognizes these costs at the same time that it recognizes the underlying product revenue. As this policy election is in line with the Company’s previous accounting practices, the treatment of shipping and handling activities under FASB Topic 606 did not have any impact on the Company’s results of operations, financial condition and/or financial statement disclosures.

The adoption of ASC 606 did not result in a change to the accounting for any of the Company’s revenue streams that are within the scope of the amendments. The Company’s services that fall within the scope of ASC 606 are recognized as revenue as the Company satisfies its obligation to the customer.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updates revenue recognition guidance relating to contracts with customers. This standard states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard is effective for annual reporting periods, and interim periods therein, beginning after July 1, 2018. The Company adopted ASU 2014-09 and its related amendments (collectively known as “ASC 606”) during the first quarter of fiscal 2019 using the full retrospective method

 

 Concentration of Credit Risk●Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions.  At various times during the year, the Company may exceed the federally insured limits.  To mitigate this risk, the Company places its cash deposits only with high credit quality institutions.  Management believes the risk of loss is minimal.  At June 30, 20172019 and 20162018 the Company did not have any uninsured cash deposits.
    
 Beneficial Conversion Feature●

For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount.

 

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

    
 Debt Issue Costs●The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as amortization of debt discount.
    
 Original Issue Discount●If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as amortization of debt discount. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
    
 Valuation of Derivative Instruments●

ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment. 


 Derivative Financial Instruments●

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fairfair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.

F-8

  

3.Going Concern●The Company’s financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business.  Because the business is new and has limited operating history and relatively few sales, no certainty of continuation can be stated.

 

  ●Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations.

 

4.Accounts receivable●The Company’s accounts receivable arise primarily from the sale of the Company’s snack products. On a periodic basis, the Company evaluates each customer account and based on the days outstanding of the receivable, history of past write-offs, collections, and current credit conditions, writes off accounts it considers uncollectible. With most of our retail and distribution partners, invoices will typically be due in 30 or 45 days. The Company does not accrue interest on past due accounts and the Company does not require collateral. Accounts become past due on an account-by-account basis. Determination that an account is uncollectible is made after all reasonable collection efforts have been exhausted. The Company has alsonot provided certainany sales allowances of $0 and $22,681 as offor June 30, 20172019 and June 30, 2016,2018, respectively.
    
5.Customer Concentrations●During the year ended June 30, 2017, one customer (KeHE Distributors)2019, two customers accounted for approximately 87%greater than 10% of revenues.revenues

 

6.Inventories●Inventories consists of the following at June 30, 2019 and 2018.

 

   2017  2016 
 Finished Goods $87,676  $113,517 
 Packaging  8,189   8,189 
 TOTAL $95,865  $121,706 

  2019  2018 
Finished Goods-bars $30,800  $96,116 
Finished Goods-ice cream  346,229   - 
Raw materials - ingredients  25,477   - 
Packaging  3,933   7,093 
TOTAL $406,439  $103,209 

 

   Inventories are stated at the lower of cost (FIFO) or market.net realizable value. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions and the products relative shelf life. Write-downs and write-offs are charged to loss on inventory write down.
    
7.Other Current Liabilities●Other current liabilities consist of the following at June 30, 2019 and 2018.

 

   2017  2016 
 Accrued consulting fees – related party $180,000  $108,000 
          
 TOTAL $180,000  $108,000 

  2019  2018 
Accrued consulting fees – related party $33,974  $197,974 
         
TOTAL $33,974  $197,974 
F-9

8.Convertible Notes Payable●Convertible Notes Payable consist of the following at June 30, 2017,2019 and 2018.

 

   

On FebruarySeptember 8, 2017, the Company issued $32,500entered into a convertible promissory note and a security purchase agreement dated September 8, 2017 and funded on September 12, 2017, in convertible notes to an investor group.the amount of $222,750. The lender was Eagle Equities, LLC. The notes have a maturity of six (6) monthsSeptember 8, 2018 and interest rate of 8% per annum and are convertible at a price of 80% of the average closing bid prices on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion.

On March 16, 2017 the Company issued $75,000 in convertible notes to an investor group. The notes have a maturity of one (1) year and interest rate of 12% per annum and are convertible at a price of 50% of the average closing bid priceslowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital.  As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

   

On March 20,November 6, 2017, the Company issued $80,000entered into a convertible promissory note and a security purchase agreement dated November 6, 2017, in convertible notes to an investor group.the amount of $48,647. The lender was Eagle Equities, LLC. The notes have a maturity of nine (9) months and interest rate of 12% per annum and are convertible at a price of 60% of the average closing bid prices on the primary trading market on which the Company’s Common Stock is then listed for the twenty-five (25) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash.

On March 23, 2017 the Company issued $87,500 in convertible notes to an investor group. The notes have a maturity of six (6) monthsNovember 6, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the average closing bid priceslowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

   

On May 10,November 6, 2017, the Company issued $80,000entered into a convertible promissory note and a security purchase agreement dated November 6, 2017, in convertible notes to an investor group.the amount of $45,551. The lender was Eagle Equities, LLC. The notes have a maturity of nine (9) monthsNovember 6, 2018 and interest rate of 12% per annum and are convertible at a price of 60% of the average closing bid prices on the primary trading market on which the Company’s Common Stock is then listed for the twenty-five (25) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash.

On May 16, 2017 the Company issued $75,000 in convertible notes to an investor group. The notes have a maturity of one (1) year and interest rate of 12%8% per annum and are convertible at a price of 50% of the average closing bid priceslowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

    

On November 15, 2017, the Company entered into a convertible promissory note a security purchase agreement dated November 15, 2017, in the amount of $75,000. The lender was Eagle Equities, LLC. The notes have a maturity of November 15, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.


On December 27, 2017, the Company entered into a convertible promissory note and a security purchase agreement dated December 27, 2017, in the amount of $60,000. The lender was Eagle Equities, LLC. The notes have a maturity of December 27, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On January 10, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated January 10, 2018, in the amount of $110,000. The lender was Eagle Equities, LLC. The notes had a maturity of January 10, 2019 and interest rate of 8% per annum and was convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock was then listed for the twenty (20) trading days immediately prior to conversion.

This note has been successfully retired

On January 31, 2018, the Company received funding in conjunction with a convertible promissory note and a security purchase agreement dated September 8, 2017, in the amount of $210,000. The lender was Eagle Equities, LLC. The notes have a maturity of September 8, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion.

This note has been successfully retired.

On March 2, 2018, the Company received funding in conjunction with a convertible promissory note and a security purchase agreement dated November 15, 2017, in the amount of $75,000. The lender was Eagle Equities, LLC. The notes have a maturity of November 15, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.


On March 2, 2018, the Company received funding in conjunction with a convertible promissory note and a security purchase agreement dated December 27, 2017, in the amount of $60,000. The lender was Eagle Equities, LLC. The notes have a maturity of December 27, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On March 2, 2018, the Company received funding in conjunction with a convertible promissory note and a security purchase agreement dated March 2, 2018, in the amount of $115,000. The lender was Eagle Equities, LLC. The notes have a maturity of March 2, 2019 and interest rate of 8% per annum and are convertible at a price of 70% of the lowest closing bid on the primary trading market on which the Company’s Common Stock is then listed for the ten (10) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On April 10, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated April 10, 2018, in the amount of $62,500. The lender was Eagle Equities, LLC. The notes have a maturity of April 10, 2019 and interest rate of 8% per annum and are convertible at a price of 60% of the lowest closing bid price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On April 30, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated April 30, 2018, in the amount of $225,000. The lender was Eagle Equities, LLC. The notes have a maturity of April 30, 2019 and interest rate of 8% per annum and are convertible at a price of 60% of the lowest closing bid price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.
On June 5, 2018, the Company received cash in conjunction with a convertible promissory note and Securities Purchase Agreement dated June 5, 2018.  The note was in the amount of in the amount of $210,000. The lender was Eagle Equities, LLC. The notes have a maturity of June 6, 2019 and interest rate of 8% per annum and are convertible at a price of 60% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.


On June 18, 2018, the Company received cash in conjunction with a convertible promissory note and Securities Purchase Agreement dated October 18, 2017. The note was in the amount of in the amount of $52,500. The lender was Eagle Equities, LLC. The notes have a maturity of October 18, 2018 and interest rate of 8% per annum and are convertible at a price of 50% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty (20) trading days immediately prior to conversion.

This note has been successfully retired.

On June 18, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated June 18, 2018, in the amount of $52,000. The lender was Eagle Equities, LLC. The notes have a maturity of June 18, 2019 and interest rate of 8% per annum and are convertible at a price of 60% of the lowest closing bid price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On July 2, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated July 12, 2018, in the amount of $207,000. The lender was Eagle Equities, LLC. The notes have a maturity of July 12, 2019 and interest rate of 8% per annum and are convertible at a price of 60% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $1,134.

On August 2, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated August 2, 2018, in the amount of $107,005. The lender was Eagle Equities, LLC. The notes have a maturity of August 2, 2019 and interest rate of 8% per annum and are convertible at a price of 60% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On September 7, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated September 7, 2018, in the amount of $78,000. The lender was Eagle Equities, LLC. The notes have a maturity of September 7, 2019 and interest rate of 8% per annum and are convertible at a price of 65% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.

This note has been successfully retired.

On October 5, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated October 5, 2018, in the amount of $104,000. The lender was Eagle Equities, LLC. The notes have a maturity of October 5, 2019 and interest rate of 8% per annum and are convertible at a price of 65% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $0.


This note has been successfully retired.

On November 16, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated November 16, 2018, in the amount of $130,000. The lender was Eagle Equities, LLC. The notes have a maturity of November 16, 2019 and interest rate of 8% per annum and are convertible at a price of 65% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $48,795.
On December 18, 2018, the Company entered into a convertible promissory note and a security purchase agreement dated December 18, 2018, in the amount of $130,000. The lender was Eagle Equities, LLC. The notes have a maturity of December 18, 2019 and interest rate of 8% per annum and are convertible at a price of 65% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $60,425.
On January 28, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated January 28, 2019, in the amount of $234,000. The lender was Eagle Equities, LLC. The notes have a maturity of January 28, 2020 and interest rate of 8% per annum and are convertible at a price of 65% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $131,528.
On February 14, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated February 14, 2019, in the amount of $104,000. The lender was Eagle Equities, LLC. The notes have a maturity of February 14, 2020 and interest rate of 8% per annum and are convertible at a price of 70% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $56,821.

On April 29, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated April 29, 2019, in the amount of $208,000. The lender was Eagle Equities, LLC. The notes have a maturity of April 29, 2020 and interest rate of 8% per annum and are convertible at a price of 70% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $141,204.

On June 11, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated June 11, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of June 11, 2020 and interest rate of 8% per annum and are convertible at a price of 70% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the fifteen (15) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash. The Company also determined there was a beneficial conversion feature (BCF) as a result of the intrinsic value between the effective exercise price and the market price. The BCF is included in additional paid in capital. As of June 30, 2019, the BCF was $227,713.


   Below is a reconciliation of the convertible notes payable as presented on the Company’s balance sheet as of June 30, 2017:2019:

 

 Convertible notes payable issued $430,000 
 Unamortized Amortization of debt discount and beneficial conversion feature  (278,980)
 Balance at June 30, 2017 $151,020 

Convertible notes payable issued as of June 30, 2018 $633,870 
Convertible notes payable issued as of June 30, 2019  1,602,005 
Unamortized amortization of debt and beneficial conversion feature  311,895 
Notes paid  (102,076)
Notes converted into shares of common stock  (1,327,953)
Balance at June 30, 2019 $1,117,741 

 

F-10

9.Derivative Liability 

Due to the variable conversion price associated with some of these convertible promissory notes disclosed in Note 8 above, the Company has determined that the conversion feature is considered a derivative liability for instruments which are convertible and have not yet been settled. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives on the date they are deemed to be derivative liabilities.

  

   During the year ended June 30, 2017,2019, the Company recorded a loss in fair value of derivative $44,022.$712,627. The Company will measure the fair value of each derivative instrument in future reporting periods and record a gain or loss based on the change in fair value.

  

10.Short and long term borrowings 

On November 24, 2010, the Company entered into a Small Business Working Capital Loan with a well-established Bank. The loan is personally Guaranteed by the Company’s Chief Executive Officer, which is further Guaranteed for 90% by the United States Small Business Administration (SBA).

  

   The term of the loan is seven years until full amortization and currently carries an 8.50%9.75% interest rate, which is based upon Wall Street Journal (“WSJ”) Prime 4.005.00 % Plus 4.75% and is adjusted quarterly. Monthly principal payments are required during this 84 month period.

 

   June 30, 2017  June 30, 2016 
 Bank Loan $3,096  $6,513 
 Total borrowings  3,096   6,513 
 Less: current portion  (3,096)  (4,291)
 Long term debt $-  $2,222 

  June 30,
2019		  June 30,
2018		 
Bank Loan $0  $1,000 
Total borrowings  0   1,000 
Less: current portion  0  (1,000)
Long term debt $-  $- 

  

   Interest expense for the years ended June 30, 20172019 and 2016,2018, totaled $0 and $714, and $1,267, respectively. This liability was satisfied during the 2018 fiscal year.

F-11

 

11.Stockholders’ Deficit●On October 16, 2013, the NightFood,Nightfood, Inc. became a wholly-owned subsidiary of NightFoodNightfood Holdings, Inc. Accordingly, the stockholders’ equity has been revised to reflect the share exchange on a retroactive basis.

  

  ●The Company is authorized to issue One Hundred Million (100,000,000)(200,000,000) shares of $0.001 par value per share Common Stock. Holders of Common Stock are each entitled to cast one vote for each Share held of record on all matters presented to shareholders. Cumulative voting is not allowed; hence, the holders of a majority of the outstanding Common Stock can elect all directors. Holders of Common Stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available therefore and, in the event of liquidation, to share pro-rata in any distribution of the Company’s assets after payment of liabilities. The Board of Directors is not obligated to declare a dividend and it is not anticipated that dividends will be paid unless and until the Company is profitable. Holders of Common Stock do not have pre-emptive rights to subscribe to additional shares if issued by the Company. There are no conversion, redemption, sinking fund or similar provisions regarding the Common Stock. All of the outstanding Shares of Common Stock are fully paid and non-assessable and all of the Shares of Common Stock offered thereby will be, upon issuance, fully paid and non-assessable. Holders of Shares of Common Stock will have full rights to vote on all matters brought before shareholders for their approval, subject to preferential rights of holders of any series of Preferred Stock. Holders of the Common Stock will be entitled to receive dividends, if and as declared by the Board of Directors, out of funds legally available, and share pro-rata in any distributions to holders of Common Stock upon liquidation. The holders of Common Stock will have no conversion, pre-emptive or other subscription rights. Upon any liquidation, dissolution or winding-up of the Company, assets, after the payment of debts and liabilities and any liquidation preferences of, and unpaid dividends on, any class of preferred stock then outstanding, will be distributed pro-rata to the holders of the common stock. The holders of the common stock have no right to require the Company to redeem or purchase their shares. Holders of shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.

  ●The Company has 29,724,43253,773,856 and 28,501,93242,608,329 shares of its $0.001 par value common stock issued and outstanding as of June 30, 20172019 and 20162018 respectively.
    
  ●During the year ended June 30, 2017:2019:

 

  ●the Company sold 100,00084,389 shares of common stock for cash proceeds of $10,000,$50,000,
●

and issued 483,808 shares of common stock for services with a fair value of $345,656,

and issued 281,957 shares of common stock for payment of certain accounts payable liabilities with a fair value of $63,850,

and issued 400,000 shares of common stock for the exercise of warrants valued at $120,000,

    
  ●and issued 1,097,500667,959 shares of common stock for servicesin consideration of interest payments with a fair value of $186,800.$95,805,
    
  ●

and issued 25,0009,247,414 shares of common stock as partconsideration for convertible debt with a fair value of $1,327,953.

Preferred Stock

On July 9th 2018 the Company was authorized to issue One Hundred Thousand (1,000,000) shares of $0.001 par value per share Preferred Stock. Of the 1,000,000 shares 100,000 shares are designated as a loan agreement valued at $5,000.Series A preferred Stock Holders of Common Stock are each entitled to cast 1,000,000 votes for each Share held of record on all matters presented to shareholders.

In addition to his ownership of the common stock, Mr. Folkson owns 1,000 shares of our Series A Preferred Stock (“A Stock”) which votes with the common stock and has an aggregate of 100,000,000 votes.

 

  Dividends
   
  ●The Company has never issueddeclared dividends.

 

  Warrants

  ●

The Company entered intofollowing is a revised Consulting Agreement with A.S. Austin Company with compensation consisting of warrants to purchase up to 300,000 sharessummary of the CompanyCompany’s outstanding common stock purchase warrants.  A portion of the 500,000 warrants shown below at aan exercise price of $.75 per share. $.15 have not  yet vested.  These warrants were issued as compensation for a four-year advisory agreement.  150,000 warrants vested on July 24, 2018, another 150,000 on July 24, 2019, another would vest 150,000 on July 24, 2020, and the remaining 50,000 on July 24, 2021, should advisor complete the term of his engagement.

The aggregate intrinsic value of the warrants expire on October 6, 2021 or five years from the date the contract was executed.as of June 30, 2019 is $318,450.

   Outstanding at  Issued / (exercised)     Outstanding 
Exercise Price  June 30,
2018		  

in
2019

  Expired  June 30,
2019		 
$0.15   500,000       -   500,000 
$0.20   105,000       -   105,000 
$0.30   500,000   (400,000)  -   100,000 
$0.40   -   150,000   -   150,000 
$0.75   300,000   -   -   300,000 
     1,405,000   (250,000)  -   1,155,000 

 

  Options
   
  ●The Company has never issued options.

 

12.Related Party Transactions●

The Company received cash from Mr. Folkson,During the Company’s Chief Executive Officer and related party, $0 and $1,000 in 2017 and 2016, respectively, to supplement the Company’s working capital. These short term advances have all been repaid.

Additionally, five of the Company’s shareholders also loaned funds to the Company of $21,984 and repayments of $44,989 for those loans, and other preexisting loans, were completed during the twelve month periodfiscal year ended June 30, 2017.

2019 Mr. Folkson exercised his warrant option and received 400,000 shares of our common stock valued at $120,000.

 

  ●During the third quarter 2015, Mr. Folkson began accruing a consulting fee of $6,000 per month which the aggregate of $72,000 and $72,000 is reflected in professional fees and presented in the accrued expenses – related party for 20172019 and 20162018 respectively.

 

F-12

  ●The original consulting agreement for Mr. Folkson had a term of one year, and then converted into a month to month effective January 1, 2016. ThisA new twelve month consulting agreement canwas entered into for Mr. Folkson effective July 1, 2019, which paid Folkson the same $6,000 monthly consulting fee.  In addition, the Company made bonuses available to Folkson upon the Company hitting certain revenue milestones of$1,000,000 in a quarter and $3,000,000 in a quarter.   Achieving those milestones would earn Folkson warrants with a $.50 and $1 strike price which would need to be terminated afterexercised within 90 days of the initial term, upon thirty (30) day notice by either party.respective quarterly or annual filing

 

13.Income TaxA reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:

 

   June 30, 
   2017  2016 
        
 Statutory U.S. federal rate  (34.0)%  (34.0)%
 Permanent differences  6.9%  13.8%
 Valuation allowance  27.1%  20.2%
 Provision for income tax expense(benefit)  0.0%  0.0%
  June 30, 
  2019  2018 
       
Statutory U.S. federal rate  (21.00)%  (34.0)%
Effect of higher U.S. Federal statutory tax rate  -%  13.02%
State income taxes (net of federal tax benefit)  (7.00)%  (6.0)%
Permanent differences  6.70%  26.15%
Valuation allowance  (21.3)%  6.10%
True up of net operating loss  -%  (5.27)%
   0.0%  0.0%

  

  The tax effects of the temporary differences and carry forwards that give rise to deferred tax assets consist of the following:

 

   2017  2016 
 Deferred tax assets:      
 Net operating loss carry-forwards $591,837  $344,107 
 Total deferred tax assets $591,837  $344,107 
          
 Valuation allowance  (591,837)  (344,107)
 Net deferred tax asset $-  $- 

  2019  2018 
Deferred tax assets:        
Net operating loss carry-forwards $

1,155,359

   882,793 
         
Valuation allowance  (1,155,359)  (882,793)
Net deferred tax asset $-  $- 

 

  

At June 30, 20172019 the Company had estimated U.S. federal net operating losses of approximately $2,660,000$ 5,307,000 for income tax purposes whichpurposes. $ 2,614,000 will expire between 20322031 and 2037.2037 while the balance of the tax operating loss can be carried forward indefinitely. For financial reporting purposes, the entire amount of the net deferred tax assets has been offset by a valuation allowance due to uncertainty regarding the realization of the assets. The net change in the total valuation allowance for the year ended June 30, 20172019 was an increase of $311,242.$329,033. The Company follows FASC 740-10-25 P which requires a company to evaluate whether a tax position taken by the company will “more likely than not” be sustained upon examination by the appropriate tax authority. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

 

The Company may not be able to utilize the net operating loss carryforwards for its US income taxes in future periods should it experience a change in ownership as defined in Section 382 of the Internal Revenue Code (“IRC”). Under section 382, should the Company experience a more than 50% change in its ownership over a 3 year period, the Company would be limited based on a formula as defined in the IRC to the amount per year it could utilize in that year of the net operating loss carryforwards.

 

As of June 30, 20172019 the Company had not performed an analysis to determine if the Company was subject to the provisions of Section 382. The Company is subject to U.S. federal income tax including state and local jurisdictions. Currently, no federal or state income tax returns are under examination by the respective taxing jurisdictions.

 

The Company’s accounting policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company has not accrued interest for any periods.

The Company has not filed its federal and state income tax returns for the fiscal years ended June 30, 2018, June 30, 2017 and 2016 respectively, however it believes due to the reported losses there is no material liability outstanding.

F-13

14.Fair Value of Financial InstrumentsCash and Equivalents, Receivables, Other Current Assets, Short-Term Debt, Accounts Payable, Accrued and Other Current Liabilities.
   
  The carrying amounts of these items approximated fair value.
   
  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting Standards Board (“FASB”) ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).
   
  Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
   
  Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
   
  Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
   
  The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities are described below:

  Fiscal 2019 Fair Value Measurements 
  Level 1  Level 2  Level 3  Total Fair
Value		 
Assets            
Other assets $-  $-  $-  $- 
Total $-  $-  $-  $- 
Liabilities                
Short and long-term debt $   $-  $1,748,000  $1,748,000 
Total $        $-  $1,748,000  $1,748,000 

 

F-14

  Fiscal 2018 Fair Value Measurements 
  Level 1  Level 2  Level 3  Total Fair
Value		 
Assets            
Other assets $-  $-  $-  $- 
Total $-  $-  $-  $- 
Liabilities                
Short and long-term debt $    $-  $1,576,024  $1,576,024 
Total $        $-  $1,576,024  $1,576,024 

 

15.Net Loss per Share of Common Stock●The Company has adopted FASB Topic 260, “Earnings per Share,” which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year.  Basic net loss per common share is based upon the weighted average number of common shares outstanding during the period. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. However, shares associated with convertible debt, stock options and stock warrants are not included because the inclusion would be anti-dilutive (i.e. reduce the net loss per common share).  There were no anti-dilutive instruments.


   2017  2016 
 Numerator - basic and diluted loss per share net loss $(915,417) $(726,596)
       
 Net loss available to common stockholders $(915,417) $(726,596)
          
 Denominator – basic and diluted loss per share – weighted average common shares outstanding  29,020,192   27,524,987 
 Basic and diluted earnings per share $(0.03) $(0.03)
  2019  2018 
Numerator - basic and diluted loss per share net loss $(4,598,343) $(5,239,494)
         
Net loss available to common stockholders $(4,598,343) $(5,239,494)
         
Denominator – basic and diluted loss per share – weighted average common shares outstanding  47,827,114   35,544,034 
Basic and diluted earnings per share $(0.09) $(0.15)

 

16.Subsequent Events

●

On July 31, 2017,5, 2019 the Company entered into a convertible promissory note aand security purchase agreement dated July 31, 2017 and funded on August 1, 2017,July 5, 2019, in the amount of $100,000.$300,000. The lender was Labrys Fund, LP.  As part of this transaction, the Company issued Labrys a block of 400,650 “Commitment Shares”.  These shares, although issued to Labrys, are to be returned to the Company should the Company pay off the note prior to the 6 month maturity date.  In September of 2017, to facilitate the issuance of additional operating capital, the Company and Labrys agreed that Labrys shall be entitled to keep 100,000 of the 400,650 Commitment Shares in the event of a timely retirement of the debt.Eagle Equities, LLC.

    
  ●On August 4, 2017, the Company entered into a consulting agreement with AJO Capital, Inc. to provide services relating to business development and general business consulting.  As compensation for services, AJO will receive 500,000 shares of Company common stock.
●On August 10, 2017, the Company entered into a Forbearance Agreement with SkyBridge Ventures LLC, whereby the date of conversion eligibility for a $35,000 note held by SkyBridge was changed from August 8, 2017 to September 12, 2017.  
●          On August 10, 2017, the Company entered into a consulting agreement with a consultant to assess business continuity planning and business insurance needs.  As compensation for services, the consultant will receive 10,000 shares of Company common stock
●          On August 24, 2017, a shareholder loaned the company $10,000. As compensation for making this loan, the shareholder received 10,000 shares of Company common stock, and is entitled to $2,000 interest.  This advance was secured by a promissory note from the company to the shareholder whereby the company has until February 24, 2018 to repay the principal and interest.
●On August 24, 2017, the Company sold 264,085 shares of common stock to Black Forest Capital, LLC, pursuant to the $5,000,000 Equity Purchase Agreement entered into during February of 2017.  Gross proceeds from this sale totaled $30,000, equating to a share price of $.1136 per share.

F-15

●        On September 8, 20172019 the Company entered into a convertible promissory note aand security purchase agreement dated September 5, 2017 and funded on September 12, 2017,August 8, 2019, in the amount of $75,000. The lender was JSJ Investments, Inc.
●On September 8, 2017, the Company entered into a convertible promissory note a security purchase agreement dated September 8, 2017 and funded on September 12, 2017, in the amount of $218,750.$300,000. The lender was Eagle Equities, LLC.
    
  ●On September 12, 2017August 29, 2019 the Company successfully retiredentered into a convertible promissory note and security purchase agreement dated March, 16, 2017 and held by EMA Financial, LLC,funded August 29, 2019, in the original principal amount of $75,000.$300,000. The lender was Eagle Equities, LLC.
    
  ●On September 13, 2017, theAugust 27, 2019, The Company filed a certificateissued 199,640 shares to 22 influencers and consultants. 23,256 of amendment to its certificatethese shares were issued as payment in lieu of incorporation which increased the number of shares of common that it is authorized to issue from 100,000,000 to 200,000,000. The amendment was previously approved by Company directors and the holders of a majority of the issued and outstanding shares.cash.  

 
●On September 17, 2017,30, 2019, The Company issued 93,762 shares to 5 influencers, vendors and consultants for services

●On September 24, 2019 the Company entered into ana convertible promissory note and security purchase agreement with Dr. Michael Grandner whereby Grander has agreeddated and funded September 24, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC.

●Subsequent to serve the Company in a scientific advisory role.  Dr. Grander is the Directorend of the Sleep and Health Research Program at the University of Arizona.  He is Certified in Behavioral Sleep Medicine by the American Board of Sleep Medicine, and is a consultant to Major League Baseball, the NCAA, the U.S. Olympic Team, FitBit, among other corporate clients.  As compensation for his services, Dr. Grander received warrants to purchase up to 500,000 shares of Company common stock at $.15 per share.  The warrants have a cashless provision.
●On September 26, 2017,Fiscal Year, noteholder Eagle Equities converted $7,500$337,000 of principal and $30$26,597.56 of interest of an outstanding notenotes to stock. The average conversion price in these transactions was at a price of $.075 per share.  100,400$.22175. 1,519,753 shares were issued to the noteholder in this transaction.these transactions.

 

F-16

 

ITEM 9. CHANGES AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None

  

ITEM 9A. CONTROLS AND PROCEDURES

 

The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a,et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s Chief Executive Officer (principal executive officer and principal financial officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

The term internal control over financial reporting is defined as a process designed by, or under the supervision of, the issuer’s Chief Executive Officer, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

●Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

 

●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

 

●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

 

Our Chief Executive Officer does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the registrant have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

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Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our chief executive officer concluded that our disclosure controls and procedures were not effective at June 30, 20172019 due to the lack of accounting and management personnel, as well as insufficient funds to fully engage necessary legal and compliance resources. We will consider hiring additional employees when we obtain sufficient capital.

 

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

 

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorization of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of our internal control over financial reporting at June 30, 2017.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on that assessment under those criteria, our management has determined that, at June 30, 2017,2019, our internal control over financial reporting was not effective due to a lack of resources.

 

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the exemption provided to issuers that are not “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

Changes in Internal Controls over Financial Reporting. There were no changes in the internal controls over our financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

 

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Our officers and directors are as follows:

 

Name Age Position(s)
Sean Folkson 4849 President, Chief Executive Officer and Director
Peter Leighton55VP Marketing and Chief Marketing Officer

 

Term and Family Relationships

 

Our director currently has a term which will end at our next annual meeting of the stockholders or until successors are elected and qualify, subject to their prior death, resignation or removal. Officers serve at the discretion of the Board of Directors.

 

No family relationships exist among our officers, directors and consultants.

 

Business Experience

 

Sean Folkson was elected president, CEO and a director upon formation of the Company.Sean Folkson has been CEO and President of our subsidiary NightFood,Nightfood, Inc., a New York corporation, since its formation in January 2010. From 2004 to 2009 he served as president of Specialty Equipment Direct, Inc. which is an online marketer of flooring maintenance equipment which he founded. In 1998 he founded AffiliatePros.com, Inc. a company engaged in assisting its clients with internet marketing which operated through 2008. Mr. Folkson received a B.A. in Business Administration with a concentration in marketing from S.U.N.Y Albany in 1991.

Peter Leightonwas appointed Vice President Marketing and Chief Marketing Officer upon the formation of the Company. Peter Leighton holds a BA in marketing from the University of Florida. For over 25 years he has been engaged in marketing and management for functional foods, biotech and turnaround companies. Since 2001 Mr. Leighton has been the founding partner of Copernican Associates, LLOC a consulting firm offering B to B and B to C services in various segments. From 2007 to 2010 he was CEO of Advana Science, Inc., a developer of OTC consumer products and was VP Marketing of Natrol, Inc., an OTC supplement manufacturer from 2002 to 2004. From February 2014 through March 2015, Mr. Leighton served as Vice President – Product Strategy for Complete Nutrition Holdings, Inc., a company involved in operating and franchising high end nutritional product stores. He continues to serve the Company on a part time basis.

 

Legal Proceedings

 

No officer, director, or persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings that would be material to an evaluation of our management.

 

Code of Ethics

 

We have determined that due to our early stage of development and our small size, the present adoption of a code of ethics is not appropriate. If we grow we will adopt a suitable code of ethics.

 

CORPORATE GOVERNANCE

 

Committees

 

Our board of directors currently only has one member and consequently does not currently have a compensation committee or nominating and corporate governance committee. If our board of directors were to significantly increase in size, we will consider the appropriateness of committees.

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Audit Committee and Financial Expert

 

Presently, the board of directors acts as the audit committee. The board of directors does not have an audit committee financial expert. The board of directors has not yet recruited an audit committee financial expert to join the board of directors because we have only recently commenced a significant level of financial operations.

 

Director Independence

 

Our sole director is not deemed independent because he is our majority shareholder, CEO and sole full-time employee.

 

Section 16(a) Beneficial Ownership of Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own beneficially more than 10% of our common stock to file reports of ownership and changes in ownership of such common stock with the SEC, and to file copies of such reports with us. Based solely upon a review of the copies of such reports filed with us, we believe that during the fiscal year ended June 30, 20172018 such reporting persons complied with the filing requirements of Section 16(a). Neither Mr. Folkson nor Mr. Leighton have engaged in any purchases or sales of our common stock since we became subject to the reporting requirements of the Securities Exchange Act of 1934, as amended that were not reported on a Form 4.

 

ITEM 11. EXECUTIVE COMPENSATION

 

SUMMARY COMPENSATION TABLE

 

The following table sets forth the cash and non-cash annual remuneration of our CEO and director during our past two fiscal years:

  

Name and Principal
Position		 Year  Salary  Bonus  Stock
Awards		  Option
Awards		  Non-Equity
Incentive
Plan
Compensation		  Nonqualified
Deferred
Compensation
Earnings		  All Other
Compensation		  Total 
Sean Folkson,*  2017  $0  $0  $0  $0  $0  $0  $72,000  $72,000 
CEO  2016  $0  $0  $0  $0  $0  $0  $72,0001  $72,000 

Name and Principal
Position		 Year  Salary  Bonus  Stock
Awards		  Option
Awards		  Non-Equity
Incentive
Plan
Compensation		  Nonqualified
Deferred
Compensation
Earnings		  All Other
Compensation		  Total 
Peter Leighton,  2017  $0  $0  $0  $0  $0  $0  $0  $0 
CMO  2016  $0  $0  $0  $0  $0  $0  $0  $0 
Name and Principal
Position		 Year  Salary  Bonus  Stock
Awards		  Option
Awards		  Non-Equity
Incentive
Plan
Compensation		  Nonqualified
Deferred
Compensation
Earnings		  All Other
Compensation		  Total 
Sean Folkson,*  2019  $0  $0  $0  $0  $0  $0  $72,000  $72,000 
CEO  2018  $0  $0  $0  $0  $0  $0  $72,0001 $72,000 

  

*To date,Mr. Folkson’s fee of $6,000 monthly began accruing on January 1, 2015. Prior to that, Mr. Folkson hashad worked for the Company for several years and had never taken any fees or salary. Although the accrual began on January 1, 2015, the first payment was not receivedmade until November 28, 2017, at which time Folkson had worked for 35 months under the Agreement without any payment as a resultpayments having been made. During fiscal 2019, Mr. Folkson was paid $106,000 in cash toward the balance owed to him and used $120,000 of his accrued consulting agreement. All compensation continuesfees to accrue.exercise 400,000 common stock warrants at $.30 per share. A $33,974 balance remains owed to Mr. Folkson as of June 30, 2019.

 

The Company has not paid and has no present plan to give any compensation other than cash and the granting of shares of common stock. The Company does not have any Stock Option Plan or other equity compensation plans.

 

Employment Agreements

  

A consulting agreement exists between Mr. Folkson and the Company, whereby Mr. Folkson receives $6,000 in consulting fees each month, beginning January, 2015. As the company has not had sufficient funds to date to pay Mr. Folkson, these fees have accrued and will continue to accrue until such time as

In June of 2018, the Company has sufficient fundsentered into a new consulting agreement with Folkson, which included a modified compensation structure. The new Consulting Agreement contains the identical cash compensation allowance of $6,000 monthly. In addition, Folkson would earn Warrants with a strike price of $.50 when the Company hit certain revenue milestones. A similar agreement was entered into by the parties with a term starting on July 1, 2019.

In addition, in December, 2017, Folkson elected to issue payment in part or in full. 

purchase 80,000 warrants to acquire shares of NGTF stock with a strike price of $.20 and a term of 36 months. To acquire these warrants Folkson paid $.15 per warrant, totaling $12,000, treated as a $12,000 reduction to the amount owed to Folkson.

 

Termination of Employment

 

There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person named in the Summary Compensation Table set forth above that would in any way result in payments to any such person because of his or her resignation, retirement or other termination of such person’s employment with us.

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OUTSTANDING EQUITY AWARDS

 

STOCK OPTIONS.

 

No grants of stock options or stock appreciation rights were made during the year ended June 30, 2016.2018. We have no stock options outstanding.

 

LONG TERM INCENTIVE PLANS.

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.

  

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The information in the following table sets forth the beneficial ownership of our shares of common stock (our only class of voting securities) as of September 28, 2017,27, 2018, by: (i) our officers and directors; (ii) all officers and directors as a group; (iii) each shareholder who beneficially owns more than 5% of any class of our voting securities, including those shares subject to outstanding options.

 

Name and address of owner Amount owned Percent of class  Amount owned Percent of class 
             
Sean Folkson
c/o Nightfood Holdings, Inc.
520 White Plains Road – Suite 500
Tarrytown, NY 10691		  16,433,568   54.1%  16,433,568   37.5%
                
Peter Leighton
c/o Nightfood Holdings, Inc.
White Plains Road – Suite 500
Tarrytown, NY 10691		  4,000,000   13.2%
                
All officers and directors as a group (2 persons)  20,433,568   67.2%
        
        
        
        
        
All officers and directors as a group (1 person)  16,433,568   37.5%

 

Changes in Control

 

Our management is not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

  

The Company was incorporated on October 16, 2013 and upon our organization we issued 20,000,000 shares of common stock to the Company’s founder, President and CEO in exchange for all of the issued and outstanding common stock of Night Food, Inc., a New York corporation. During October and December 2013, Mr. Folkson assigned 4,000,000 shares of his common stock to Peter Leighton as compensation in connection with his joining the Company and an aggregate of 104,500 shares to 35 persons as gifts. Mr. Folkson had advanced an aggregate of $134,517 to us to fund our operations, and had previously been shown on our financial statements as a Note Payable. This note has since been converted to equity as outlined below. Our sole director is not deemed independent because he is our majoritysingle largest shareholder CEO and sole full-time employee.our CEO.

 

The Company received cash from Mr. Folkson, the Company’s Chief Executive Officer and related party, $0 and $1,000 in 2017 and 2016, respectively, to supplement the Company’s working capital. These short term advances have all been repaid.

The Company did not receive any funds from Mr. Folkson, the Company’s Chief Executive Officer and related party, during the fiscal years ended 2019 and 2018, respectively.


A consulting agreement exists between Mr. Folkson and the Company, whereby Mr. Folkson receives $6,000 in consulting fees each month, beginning January, 2015.   In June of 2018, the Company entered into a new consulting agreement with Folkson, which included a modified compensation structure. The new Consulting Agreement contains the identical cash compensation allowance of $6,000 monthly. In addition, Folkson would earn Warrants with a strike price of $.50 when the Company hit certain revenue milestones. A similar agreement was entered into by the parties with a term starting on July 1, 2019.

 

In addition, in December, 2017, Folkson elected to purchase 80,000 warrants to acquire shares of NGTF stock with a strike price of $.20 and a term of 36 months. To acquire these warrants Folkson paid $.15 per warrant, totaling $12,000, treated as a $12,000 reduction to the amount owed to Folkson.

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Additionally, five of the Company’s shareholders also loaned funds to the Company of $21,984 and repayments of $44,989 for those loans, and other preexisting loans, were completed during the twelve month period ended June 30, 2017.

During the third quarter 2015, Mr. Folkson began accruing a consulting fee of $6,000 per month which the aggregate of $72,000 and $72,000 is reflected in professional fees and presented in the accrued expenses – related party for 2017 and 2016 respectively.
The consulting agreement for Mr. Folkson had a term of one year, and then converted into a month to month effective January 1, 2016. This agreement can be terminated after the initial term, with thirty (30) days notice by either party.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Audit Fees

 

The aggregate fees billed for the fiscal years ended June 30, 20172019 and 20162018 for professional services rendered by the principal accountant for the audit of our annual financial statements and quarterly review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $32,500$29,500 and $18,000$32,500 respectively.

 

Tax Fees

 

For the fiscal years ended June 30, 20172019 and 2016,2018, for professional services related to tax compliance, tax advice, and tax planning work by our principal accountants, we incurred expenses of $0 and $0 respectively.

 

All Other Fees

  

None. 

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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

  

Exhibit No. Description
3.1 Certificate of Incorporation*
3.2 Bylaws*
3.3Certificate of Designation A Stock***
4.1 Subscription Agreements*
4.2 Specimen Stock Certificate*
10.1 Lease Receipt and terms and conditions**
21.1 Subsidiaries of the Registrant NightFood,Nightfood, Inc. a 100% owned New York corporation*
31.1 Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
32.1 Section 1350 certification of Chief Executive Officer
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

  

*Incorporated by reference to like numbered exhibit to the Registrant’s registration Statement on Form S-1 File Number 333-193347

 

**Incorporated by reference to the Registrant’s annual report on Form 10-K for Fiscal Year ended June 30, 20152017

 

***21Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 10-K, filed July 17, 2018  


SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 NightFoodNightfood Holdings, Inc.
   
October 3, 201715, 2019By:/s/ Sean Folkson
  

Sean Folkson, Chief Executive Officer

(Principal Executive, Financial, and
Accounting Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the date indicated.

 

Signature Title Date
     
/s/ Sean Folkson President, Chief Executive Officer and Director October 3, 201715, 2019
Sean Folkson (principal executive, financial and accounting officer)  

 

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