UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly periodquarter ended: September 30, 2021March 31, 2022
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ___________ to____________
Commission File Number: 000-55406
NIGHTFOOD HOLDINGS, INC.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 whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | ☐ | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
Indicate the number of shares outstanding of each of the issuer’sregistrant’s classes of common stock, as of the latest practicable date. At November 19, 2021,May 13, 2022, the issuerregistrant had outstanding 86,600,17891,749,831 shares of common stock.
Table of Contents
i
Nightfood Holdings, Inc.
Financial Statements
For the three and nine months ended September 30,March 31, 2022 and 2021 and 2020
Item 1. Financial Statements
1
Nightfood Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2021 | June 30, 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 471,705 | $ | 1,041,899 | ||||
Accounts Receivable (net of allowance of $0 and $0 respectively | 77,429 | 109,589 | ||||||
Inventory | 491,603 | 387,736 | ||||||
Other Current Assets | 37,485 | 33,480 | ||||||
Total Current Assets | 1,078,222 | 1,572,704 | ||||||
Total Assets | $ | 1,078,222 | $ | 1,572,704 | ||||
LIABILITIES AND STOCKHOLDERS’ & EQUITY (DEFICIT) | ||||||||
Current Liabilities | ||||||||
Accounts Payable | $ | 353,696 | $ | 459,703 | ||||
Accrued expenses-related party | - | 3,000 | ||||||
Total Liabilities | $ | 353,696 | $ | 462,703 | ||||
Stockholders’ Equity | ||||||||
Series A preferred stock ($0.001 par value, 1,000,000 shares authorized, and 1,000 issued and outstanding as of September 30, 2021 and June 30, 2021, respectively) | $ | 1 | 1 | |||||
Series B preferred stock ($0.001 par value, 5,000 shares authorized, and 4,227 and 4655 issued and outstanding as of September 30, 2021 and June 30, 2021, respectively) | 4 | 5 | ||||||
Common stock ($0.001 par value, 200,000,000 shares authorized, and 85,090,986 issued and outstanding as of September 30, 2021 and 80,707,459 issued and outstanding as of June 30, 2021, respectively) | 85,091 | 80,707 | ||||||
Additional paid in capital | 26,959,911 | 26,226,159 | ||||||
Accumulated deficit | (26,320,481 | ) | (25,196,871 | ) | ||||
Total Stockholders’ Equity | 724,526 | 1,110,001 | ||||||
Total Liabilities & Stockholders’ Equity | $ | 1,078,222 | $ | 1,572,704 |
March 31, | June 30, | |||||||
2022 | 2021 | |||||||
ASSETS | (Unaudited) | |||||||
Current assets: | ||||||||
Cash | $ | 522,057 | $ | 1,041,899 | ||||
Accounts receivable (net of allowance of $0 and $0, respectively) | 85,113 | 109,589 | ||||||
Inventory | 291,789 | 387,736 | ||||||
Other current asset | 155,771 | 33,480 | ||||||
Total current assets | 1,054,730 | 1,572,704 | ||||||
Total assets | $ | 1,054,730 | $ | 1,572,704 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 180,739 | $ | 459,703 | ||||
Accrued expense - related party | 3,000 | 3,000 | ||||||
Convertible notes payable - net of discounts | 159,580 | |||||||
Total current liabilities | 343,319 | 462,703 | ||||||
Commitments and contingencies | - | |||||||
Stockholders’ deficit: | ||||||||
Series A Stock, ($0.001 par value, 1,000,000 shares authorized, and 1,000 issued and outstanding as of March 31, 2022 and June 30, 2021, respectively) | 1 | 1 | ||||||
Series B Stock, ($0.001 par value, 5,000 shares authorized, and 3,835 and 4,665 issued and outstanding as of March 31, 2022 and June 30, 2021, respectively) | 3 | 5 | ||||||
Common stock, ($0.001 par value, 200,000,000 shares authorized, and 90,931,158 issued and outstanding as of March 31, 2022 and 80,707,467 issued and outstanding as of June 30, 2021, respectively) | 90,932 | 80,707 | ||||||
Additional paid in capital | 28,224,365 | 26,226,159 | ||||||
Accumulated deficit | (27,603,890 | ) | (25,196,871 | ) | ||||
Total Stockholders’ Equity | 711,411 | 1,110,001 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,054,730 | $ | 1,572,704 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-1
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2022 | For the three months ended March 31, 2021 | For the nine months ended March 31, 2022 | For the nine months ended March 31, 2021 | |||||||||||||||||||||
For the three months period ended September 30,2021 | For the three months period ended September 30, 2020 | |||||||||||||||||||||||
Revenues | $ | 114,453 | $ | 126,983 | 127,173 | 96,726 | 321,000 | 270,919 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Cost of products sold | 124,874 | 229,696 | ||||||||||||||||||||||
Selling, general and administrative | 823,254 | 433,330 | ||||||||||||||||||||||
Total Operating Expenses | 948,128 | 663,026 | ||||||||||||||||||||||
Cost of product sold | 146,766 | 102,922 | 359,745 | 443,083 | ||||||||||||||||||||
Selling, general and administrative expense | 313,880 | 374,645 | 1,606,793 | 1,206,938 | ||||||||||||||||||||
Total operating expenses | 460,646 | 477,567 | 1,966,538 | 1,650,021 | ||||||||||||||||||||
Loss from operations | (833,675 | ) | (536,043 | ) | (333,473 | ) | (380,841 | ) | (1,645,538 | ) | (1,379,102 | ) | ||||||||||||
Interest expense – bank debt | - | 337 | - | 337 | - | 1,012 | ||||||||||||||||||
Interest expense – shareholder | - | 83,955 | ||||||||||||||||||||||
Loss on extinguishment of debt upon notes conversion | - | 188,397 | ||||||||||||||||||||||
Interest expense - debt | 21,661 | 53,410 | 26,570 | 248,940 | ||||||||||||||||||||
Interest expense – financing cost | - | - | 270,210 | - | ||||||||||||||||||||
Amortization of debt discount | 78,634 | 210,430 | 90,852 | 787,217 | ||||||||||||||||||||
(Gain)/loss on extinguishment of debt upon notes conversion | - | 56,729 | - | 55,278 | ||||||||||||||||||||
Change in derivative liability | - | (207,524 | ) | - | 1,039,980 | - | 777,202 | |||||||||||||||||
Interest expense – other | - | 322,739 | ||||||||||||||||||||||
Other expense- non cash | - | 19,877 | - | 168,887 | 15,192 | 204,391 | ||||||||||||||||||
Total other expense | 407,781 | 100,295 | 1,529,773 | 402,824 | 2,074,040 | |||||||||||||||||||
Provision for income tax | - | - | ||||||||||||||||||||||
Net loss | $ | (833,675 | ) | $ | (943,824 | ) | ||||||||||||||||||
Net Loss | (433,768 | ) | (1,910,613 | ) | (2,048,362 | ) | (3,453,142 | ) | ||||||||||||||||
Deemed dividend on Series B Stock | 289,935 | - | - | - | 358,657 | - | ||||||||||||||||||
Net loss attributable to common shareholders | $ | (1,123,610 | ) | $ | (943,824 | ) | (433,768 | ) | (1,910,613 | ) | (2,407,019 | ) | (3,453,142 | ) | ||||||||||
Basic and diluted net loss per common share | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.03 | ) | ||||||
Weighted average shares of capital outstanding – basic and diluted | 82,394,547 | 63,442,930 | 89,725,839 | 74,194,855 | 90,899,831 | 68,091,616 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)DEFICIT
For the three and nine months ended September 30,March 31, 2022 and 2021 and 2020
Common Stock | Preferred Stock A | Preferred Stock B | Additional Paid-in | Accumulated | Total Stockholders’ Equity | Common Stock | Preferred Stock A | Preferred Stock B | Additional | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Shares | Par Value | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | 61,796,680 | $ | 61,797 | 1,000 | $ | 1 | $ | 13,088,177 | $ | (17,631,122 | ) | $ | (4,481,147 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for interest | 312,938 | 313 | 36,165 | - | 36,478 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for debt conversion | 2,975,979 | 2,976 | 344,024 | - | 347,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of warrants | 65,711 | 65,711 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on fair value of shares issued upon debt conversion | - | - | 397,532 | - | 397,532 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (943,824 | ) | (943,824 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, three months ended September 30, 2020 | 65,085,597 | $ | 65,086 | $ | 1,000 | $ | 1 | $ | 13,931,609 | (18,574,946 | ) | $ | (4,578,250 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Shares | Par Value | Paid in Capital | Accumulated Deficit | Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 | 80,707,467 | 80,707 | 1,000 | 1 | 4,665 | 5 | 26,226,159 | (25,196,871 | ) | 1,110,001 | 80,707,467 | $ | 80,708 | 1,000 | $ | 1 | 4,665 | $ | 5 | $ | 26,226,159 | $ | (25,196,871 | ) | $ | 1,110,001 | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for services | 518,519 | 519 | 139,481 | 140,000 | 518,519 | 519 | 139,481 | 140,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock from for preferred Series B conversion | 3,865,000 | 3,865 | (773 | ) | (1 | ) | (3,864 | ) | (0 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock from conversion | 3,865,000 | 3,865 | (773 | ) | (1 | ) | (3,864 | ) | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred B issued from private placement | 335 | 0 | 335,000 | 335,000 | 335 | - | 335,000 | 335,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred B issued from private placement- financing cost | (26,800 | ) | (26,800 | ) | (26,800 | ) | (26,800 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed dividends associated with Preferred B | 289,935 | (289,935 | ) | - | 289,935 | (289,935 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (833,675 | ) | (833,675 | ) | (833,675 | ) | (833,675 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, three months ended September 30, 2021 | 85,090,986 | 85,091 | 1,000 | 1 | 4,227 | 4 | $ | 26,959,911 | $ | (26,320,481 | ) | $ | 724,526 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2021 | 85,090,986 | 85,091 | 1,000 | 1 | 4,227 | 4 | 26,959,911 | (26,320,481 | ) | 724,526 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for services | 50,500 | 50 | 15,718 | 15,768 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock from conversion | 1,960,000 | 1,960 | (392 | ) | - | (1,960 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unissued shares previously allocated for services | (41,308 | ) | (41 | ) | 41 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discount on issuance of convertible notes | 931,272 | 931,272 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants issued as financing cost | 170,210 | 170,210 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed dividends associated with warrants related dilutive adjustments | 68,722 | (68,722 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (780,919 | ) | (780,919 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 87,060,178 | 87,060 | 1,000 | 1 | 3,835 | 4 | 28,143,914 | (27,170,122 | ) | 1,060,857 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock from conversion | 2,125,000 | 2,125 | (425 | ) | (1 | ) | (2,124 | ) | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of warrants | 33,067 | 33,067 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for services | 146,980 | 147 | 35,108 | 35,255 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of warrants | 1,600,000 | 1,600 | 14,400 | 16,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (433,768 | ) | (433,768 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | 90,932,158 | $ | 90,932 | 1,000 | $ | 1 | 3,410 | $ | 3 | $ | 28,224,365 | $ | (27,603,890 | ) | $ | 711,411 |
F-3
Common Stock | Preferred Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance, June 30, 2020 | 61,796,680 | $ | 61,797 | 1,000 | $ | 1 | $ | 13,088,177 | $ | (17,631,122 | ) | $ | (4,481,147 | ) | ||||||||||||||
Common stock issued for interest | 312,938 | 313 | 36,165 | - | 36,478 | |||||||||||||||||||||||
Issuance of common stock for debt conversion | 2,975,979 | 2,976 | 344,024 | - | 347,000 | |||||||||||||||||||||||
Issuance of warrants | 65,711 | 65,711 | ||||||||||||||||||||||||||
Loss on fair value of shares issued upon debt conversion | - | - | 397,532 | - | 397,532 | |||||||||||||||||||||||
Net loss | (943,824 | ) | (943,824 | ) | ||||||||||||||||||||||||
Balance, September 30, 2020 | 65,085,597 | 65,086 | 1,000 | 1 | 13,931,609 | (18,574,946 | ) | (4,578,250 | ) | |||||||||||||||||||
Common stock issued for services | 583,914 | 583 | 88,089 | 88,672 | ||||||||||||||||||||||||
Common stock issued for interest | 336,132 | 336 | 24,672 | - | 25,008 | |||||||||||||||||||||||
Issuance of common stock for debt conversion | 2,881,220 | 2,881 | 212,119 | - | 215,000 | |||||||||||||||||||||||
Loss on fair value of shares issued upon debt conversion | - | - | (39,065 | ) | - | (39,065 | ) | |||||||||||||||||||||
Net loss | (598,705 | ) | (598,705 | ) | ||||||||||||||||||||||||
Balance, December 31, 2020 | 68,886,863 | 68,886 | 1,000 | 1 | 14,217,423 | (19,173,651 | ) | (4,887,340 | ) | |||||||||||||||||||
Common stock issued for services | 255,000 | 255 | 43,345 | 43,600 | ||||||||||||||||||||||||
Common stock issued for interest | 1,065,263 | 1,065 | 92,753 | - | 93,818 | |||||||||||||||||||||||
Issuance of common stock for debt conversion | 8,478,045 | 8,478 | 741,522 | - | 750,000 | |||||||||||||||||||||||
Issuance of warrants | 60,844 | 60,844 | ||||||||||||||||||||||||||
Loss on fair value of shares issued upon debt conversion | - | - | 1,507,218 | - | 1,507,218 | |||||||||||||||||||||||
Net loss | (1,910,613 | ) | (1,910,613 | ) | ||||||||||||||||||||||||
Balance, March 31, 2021 | 78,685,171 | $ | 78,685 | 1,000 | $ | 1 | $ | 16,663,105 | $ | (21,084,264 | ) | $ | (4,342,473 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended September 30, 2021 | For the three months ended September 30, 2020 | Nine months ended March 31, 2022 | Nine months ended March 31, 2021 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (833,675 | ) | $ | (943,824 | ) | $ | (2,048,362 | ) | $ | (3,453,142 | ) | ||||
Adjustments to reconcile net loss to net cash used in operations activities: | ||||||||||||||||
Warrants issued for services | 65,711 | 33,067 | 126,555 | |||||||||||||
Warrants issued for financing cost | 170,210 | - | ||||||||||||||
Stock issued for services | 140,000 | 191,023 | 131,944 | |||||||||||||
Amortization of debt discount | - | 322,739 | 90,852 | 787,217 | ||||||||||||
Deferred financing fees and financing cost | - | 45,577 | ||||||||||||||
Deferred financing cost and debt issuance cost | 100,000 | 102,800 | ||||||||||||||
Change in derivative liability | - | (207,524 | ) | - | 777,202 | |||||||||||
Loss on extinguishment of debt upon notes conversion | - | 188,397 | - | 55,278 | ||||||||||||
Non cash expenses | 15,167 | 204,391 | ||||||||||||||
Change in operating assets and liabilities | ||||||||||||||||
Change in accounts receivable | 32,160 | (4,040 | ) | 24,476 | 16,980 | |||||||||||
Change in inventory | (103,907 | ) | 62,221 | 95,947 | (69,309 | ) | ||||||||||
Change in other current assets | (965 | ) | 126,053 | (122,291 | ) | 146,333 | ||||||||||
Change in accounts payable | (106,007 | ) | (81,725 | ) | (278,965 | ) | 107,107 | |||||||||
Change in accrued expenses | (6,000 | ) | 58,256 | (0 | ) | 225,510 | ||||||||||
Net cash used in operating activities | (878,394 | ) | (368,159 | ) | (1,728,876 | ) | (841,134 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Net cash used in investing activities | - | - | ||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from the sale of preferred stock B - net | 308,200 | |||||||||||||||
Proceeds from issuance of Series B Preferred Stock | 308,200 | - | ||||||||||||||
Proceeds from the issuance of debt-net | - | 180,000 | 884,834 | 720,000 | ||||||||||||
Borrowings on line of credit | - | (1,103 | ) | |||||||||||||
Proceeds from exercise warrants | 16,000 | |||||||||||||||
Repayment of short term debt | - | (3,308 | ) | |||||||||||||
Net cash provided by financing activities | $ | 308,200 | $ | 178,897 | 1,209,034 | 716,692 | ||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | $ | (570,194 | ) | $ | (189,262 | ) | ||||||||||
NET (DECREASE) IN CASH AND CASH EQUIVALENTS | (519,842 | ) | (124,442 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | $ | 1,041,899 | $ | 197,622 | 1,041,899 | 197,622 | ||||||||||
Cash and cash equivalents, end of period | $ | 471,705 | $ | 8,360 | $ | 522,057 | $ | 73,180 | ||||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||||||
Cash Paid For: | ||||||||||||||||
Interest | $ | - | $ | 337 | $ | - | $ | 675 | ||||||||
Income taxes | $ | - | $ | - | ||||||||||||
Summary of Non-Cash Investing and Financing Information: | ||||||||||||||||
Initial derivative liability and debt discount accounted | $ | - | $ | 126,029 | $ | - | $ | 512,993 | ||||||||
Derivative liability reclassed to loss on extinguishment of debt upon notes conversion | $ | - | $ | 189,257 | ||||||||||||
Stock issued for conversion of debt | $ | - | $ | 347,000 | $ | - | $ | 1,314,298 | ||||||||
Stock Issued for Interest | $ | - | $ | 36,478 | $ | - | $ | 153,334 | ||||||||
True-up adjustment in debt discount and derivative liability | $ | - | $ | 37,360 | $ | - | $ | 37,360 | ||||||||
Common stock issued for preferred stock conversion | $ | 3,865 | $ | - | $ | 7,950 | $ | - | ||||||||
Deemed dividend associated with Preferred Stock B | $ | 289,935 | $ | - | ||||||||||||
Deemed dividend associated with preferred stock B and warrants dilutive adjustment | $ | 358,657 | $ | - | ||||||||||||
Debt and warrants discount accounted on convertible notes | $ | 931,272 | $ | - |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
Nightfood Holdings, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Nightfood Holdings, Inc. (“we”, “us” “the Company” or “Nightfood”) is a Nevada corporation organized on October 16, 2013 to acquire all of the issued and outstanding shares of Nightfood, Inc., a New York corporation from its sole shareholder, Sean Folkson. All of our operations are conducted by our Subsidiaries (Nightfood, Inc. and MJ Munchies, Inc.)
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, along with many
1. | Description of Business | Nightfood Holdings, Inc. (“we”, “us” “the Company” or “Nightfood”) is a Nevada corporation organized on October 16, 2013 to acquire all of the issued and outstanding shares of Nightfood, Inc., a New York corporation from its sole shareholder, Sean Folkson. All of our operations are conducted by our Subsidiaries (Nightfood, Inc. and MJ Munchies, Inc.) 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, along with several additional web properties. Any information that may appear on our web site should not be deemed to be a part of this report.
The Company’s fiscal year end is June 30. |
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).
Interim Financial Statements
These unaudited condensed consolidated financial statements for the three months ended September 30, 2021, and 2020, respectively, reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the accounting principles generally accepted in the United States of America.
These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal years ended June 30, 2021, and 2020, respectively, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed with the United States Securities and Exchange Commission on October 13, 2021. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three months ended September 30, 2021 are not necessarily indicative of results for the entire year ending June 30, 2022.
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). |
These unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2022 and 2021, respectively, reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the accounting principles generally accepted in the United States of America. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal years ended June 30, 2021 and 2020, respectively, which are included in the Company’s June 30, 2021 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on October 13, 2021. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited consolidated financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three and nine months ended March 31, 2022, are not necessarily indicative of results for the entire fiscal year ending June 30, 2022. The Company made certain reclassifications to prior period amounts to conform with the current year’s presentation. These reclassifications did not have a material effect on |
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 depreciation and amortization, the valuation for non-cash issuances of common stock, and the website, income taxes and contingencies, valuing convertible |
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. The Company places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. |
Fair Value of Financial Instruments
F-6
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 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. Although not traditionally thought of by many as “advertising costs”, the Company includes expenses related to graphic design work, package design, website design, domain names, and product samples in the category of “advertising costs”. The Company recorded advertising costs of |
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 |
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 |
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. |
Revenue Recognition
The Company generates its revenue by selling its All sources of revenue are recorded pursuant to FASB Topic 606 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 the entity satisfies a performance obligation. In addition, this revenue generation requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. |
F-7
The Company frequently offers sales discounts and promotions to supermarket customers through various programs such as rebates, temporary price reductions, product coupons, and other trade activities. This is standard practice for consumer products in the competitive and price-sensitive supermarket space. The Company records these activities as a reduction of gross sales as part of the calculation to arrive at reported net revenue. 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. |
Management reviewed ASC 606-10-32-25 which states “Consideration payable to a customer includes cash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase the entity’s goods or services from the customer). Consideration payable to a customer also includes credit or other items (for example, a coupon or voucher) that can be applied against amounts owed to the entity (or to other parties that purchase the entity’s goods or services from the customer). An entity shall account for consideration payable to a customer as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service (as described in paragraphs 606-10-25-18 through 25-22) that the customer transfers to the entity. If the consideration payable to a customer includes a variable amount, an entity shall estimate the transaction price (including assessing whether the estimate of variable consideration is constrained) in accordance with paragraphs 606-10-32-5 through 32-13.” |
If the consideration payable to a customer is a payment for a distinct good service, then in accordance with ASC 606-10-32-26, the entity should account for it the same way that it accounts for other purchases from suppliers (expense). Further, “if the amount of consideration payable to the customer exceeds the fair value of the distinct good or service that the entity receives from the customer, then the entity shall account for such an excess as a reduction of the transaction price. If the entity cannot reasonably estimate the fair value of the good or service received from the customer, it shall account for all of the consideration payable to the customer as a reduction of the transaction price.” |
a) The entity recognizes revenue for the transfer of the related goods or services to the customer. | ||
b) The entity pays or promises to pay the consideration (even if the payment is conditional on a future event). That promise might be implied by the entity’s customary business practices.” |
Management reviewed each arrangement to determine if each fee paid is for a distinct good or service and should be expensed as incurred or if the Company should recognize the payment as a reduction of revenue. |
The Company recognizes revenue upon shipment based on meeting the transfer of control criteria. The Company has made a policy election to treat shipping and handling as costs to fulfill the contract, and as a result, any fees received from customers are included in the transaction price allocated to the performance obligation of providing goods with a corresponding amount accrued within cost of sales for amounts paid to applicable carriers. |
Concentration of Credit Risk
F-8
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 |
Beneficial Conversion Feature
For conventional convertible debt where the rate of conversion is below market value, the Company records any |
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. |
Beneficial Conversion Feature – Series B Preferred Stock (deemed dividend):
Each share of B Preferred has a liquidation preference of $1,000 and has no voting rights except as to matters pertaining to the rights and privileges of the B Preferred. Each share of B Preferred is convertible at the option of the holder thereof into (i) 5,000 shares of the Registrant’s common stock (one share for each $0.20 of liquidation preference) (the “Conversion Shares”) and (ii) 5,000 common stock purchase warrants, expiring April 16, 2026 (the “Warrants”). The Warrants have an initial exercise price of $0.30 per share.
Based on the guidance in ASC 470-20-20, the Company determined that a beneficial conversion feature existed, as the effective conversion price for the Series B Preferred Stock at issuance was less than the fair value of the common stock which the preferred shares are convertible into. A beneficial conversion feature based on the relative fair value on the date of issuances for the Series B Preferred Stock and warrants was $289,935 and $-0- during the three months ended September 30, 2021 and 2020, respectively.
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. The debt issuance costs paid to the third party consultant was directly expensed as incurred. |
Equity Issuance Costs
The Company accounts for costs related to the issuance of equity as a charge to Paid in Capital and records
the equity transaction net of issuance costs.
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 Trinomial Tree 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 derivative liability under the line item “change in derivative liability”. |
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 Trinomial Tree 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. |
F-9
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. The Company has adopted ASU 2017-11, Earnings per share (Topic 260), provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. If a down round feature on the conversion option embedded in the note is triggered, the Company will evaluate whether a beneficial conversion feature exists, the Company will record the amount as a debt discount and will amortize it over the remaining term of the debt. If the down round feature in the warrants that are classified as equity is triggered, the Company will recognize the effect of the down round as a deemed dividend. While the Company currently has no plans to attempt to pay dividends for the foreseeable future to any stockholders, such a deemed dividend would reduce the income available to common stockholders in the hypothetical scenario where a dividend were to be contemplated. |
Stock-Based Compensation
The Company accounts for share-based awards issued to employees in accordance with FASB ASC 718. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. Additionally, share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value. The Company applies ASC 718, “Equity Based Payments to Non-Employees”, with respect to options and warrants issued to non-employees. |
Customer Concentration
During the nine months ended March 31, 2022, the Company had one customer account for approximately 30% of the gross sales. One other customer accounted for approximately 23% of gross sales, and two other customers accounted for between 10 and 15% of gross sales. During the nine months ended March 31, 2021, the Company had one customer account for approximately 37% of the gross sales. One other customer accounted for approximately 23% of gross sales, and one other customer accounted for over 11% of gross sales. During the three months ended |
Vendor Concentration | During the three-month period ended March 31, 2022, no vendors accounted for more than 9% of our operating expenses. During the nine-month period ended March 31, 2022, no vendor accounted for more than 9% of our operating expenses. During the three-month period ended March 31, 2021, no vendors accounted for more than 14% of our operating expenses. During the nine-month period ended March 31, 2021 no vendor accounted for more than 8%. |
Receivables Concentration
As of |
Income/Loss Per Share
Net income/loss per share data for both the three |
Reclassification
F-10
Impairment of Long-lived Assets | The Company accounts for long-lived assets in accordance with the provisions of FASB Topic 360, Accounting for the Impairment of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During the three- and nine-months periods ended March 31, 2022 and 2021, there were no impairments on intangible assets. |
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
In August 2020, the FASB issued ASU 2020-06 to simplify the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure requirements to increase transparency. For SEC filers, excluding smaller reporting companies, this update is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. For all other entities, this update is effective for fiscal years beginning after December 15, 2023, including interim periods therein. The Company believes the adoption of this guidance |
The Company will continue to monitor these and other emerging issues to assess any potential future impact on its financial statements. |
3. Going Concern
3. | 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 |
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. For the |
While most of the Company’s internal financial model scenarios project it The Company believes that |
Because the business has limited operating history and sales, no certainty of continuation can be stated. 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 will again be 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 long-term. |
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 for one year from the date the financials are issued. 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. |
F-11
There is still potential uncertainty resulting from the outbreak of the novel coronavirus (COVID-19) (the “Pandemic”), including |
From both public statements, and conversations between Nightfood |
The Company has experienced no |
It is possible that the fallout from the |
More directly, |
Additionally, with more consumers shopping online, both for delivery or at-store pickup, the opportunity for supermarket shoppers to learn about new brands |
It is impossible to know what the future holds with regard to the It is difficult to know if the |
4. Accounts receivable
4. | The Company’s accounts receivable |
5. InventoriesF-12
5. | Inventory consists of the following at |
As of | As of | |||||||
September 30, 2021 | June 30, 2021 | |||||||
Inventory:Finished Goods - Ice Cream | $ | 412,702 | $ | 338,368 | ||||
Inventory:Ingredients | $ | 42,792 | $ | 14,760 | ||||
Inventory:Packaging | $ | 60,512 | $ | 59,010 | ||||
Inventory:Allowance for Unsaleable Invent | $ | (24,403 | ) | $ | (24,402 | ) | ||
Total Inventory | $ | 491,603 | $ | 387,736 |
Inventories are stated at the lower of cost or 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.
6. Other current assets
March 31, 2022 | June 30, 2021 | |||||||
Finished goods – ice cream | $ | 172,736 | $ | 338,369 | ||||
Raw material – ingredients | 47,021 | 14,760 | ||||||
Packaging | 72,032 | 59,010 | ||||||
Allowance for unsaleable | - | (24,403 | ) | |||||
TOTAL | $ | 291,789 | $ | 387,736 |
6. | Other current assets | Other current assets consist of the following vendor deposits at |
September 30, 2021 | June 30, 2021 | |||||||
Other Current Assets | ||||||||
Deposits | $ | 37,485 | $ | 33,480 | ||||
TOTAL | $ | 37,485 | $ | 33,480 |
March 31, 2022 | June 30, 2021 | |||||||
Vendor deposits – Other | $ | 155,771 | $ | 33,480 | ||||
TOTAL | $ | 155,771 | $ | 33,480 |
7. Other Current Liabilities
7. | Other Current Liabilities | ● | Other current liabilities consist of the following at March 31, 2022 and June 30, 2021, |
Other current liabilities consist of the following at September 30, 2021 and June 30, 2021:
September 30, 2021 | June 30, 2021 | |||||||
Other Current Liabilities | ||||||||
Accrued Consulting Fees (related party) | $ | - | $ | 3,000 | ||||
TOTAL | $ | - | $ | 3,000 |
March 31, 2022 | June 30, 2021 | |||||||
Accrued consulting fees – related party | $ | 3,000 | 3,000 | |||||
TOTAL | $ | 3,000 | 3,000 |
8. Convertible Notes Payable
8. | Convertible Notes Payable | ● | Convertible Notes Payable consist of the following at |
On April 30, | |||
The fair value of the $225,000 Notes was calculated using the Black-Scholes pricing model at $287,174, with the following assumptions: risk-free interest rate of 2.24%, expected life of 1 year, volatility of 202%, and expected dividend yield of zero. Because the fair value of the note exceeded the net proceeds from the $225k Notes, a charge was recorded to “Financing cost” for the excess of the fair value of the note, for a net charge of $62,174. This note has been successfully retired via conversions into shares as of June 30, |
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $225,000 Notes was calculated using the Black-Scholes pricing model at $287,174, with the following assumptions: risk-free interest rate of 2.24%, expected life of 1 year, volatility of 202%, and expected dividend yield of zero. Because the fair value of the note exceeded the net proceeds from the $225k Notes, a charge was recorded to “Financing cost” for the excess of the fair value of the note, for a net charge of $62,174. This note has been successfully retired via conversions into shares as of June 30, 2021.
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $104,000 Notes was calculated using the Black-Scholes pricing model at $90,567, with the following assumptions: risk-free interest rate of 2.53%, expected life of 1 year, volatility of 136%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $104k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of September 30, 2020, and June 30, 2020, the debt discount was $0 and $0, respectively. $50,000 of the note has been successfully retired via conversion into shares during the year ended June 30, 2020 and $54,000 of the note has been successfully retired via conversion into shares during the three months ended September 30, 2020.The Company fair valued the notes as of conversion date and accounted for a loss on conversion of $4,098 included under line item “Loss on debt extinguishment upon note conversion, net” during 2020 fiscal year and accounted for a loss on conversion of $36,242.F-13
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $208,000 Notes was calculated using the Black-Scholes pricing model at $170,098, with the following assumptions: risk-free interest rate of 2.42%, expected life of 1 year, volatility of 118%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $208k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of September 30, 2020, and June 30, 2020, the debt discount was $0 and $0, respectively. $208,000 of the note has been successfully retired via conversion into shares during the three months ended September 30, 2020. The Company fair valued the notes as of conversion date and accounted for a loss on conversion of $109,561 included under line item “Loss on debt extinguishment upon note conversion, net”.
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $240,217, with the following assumptions: risk-free interest rate of 2.05%, expected life of 1 year, volatility of 16%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $300k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of September 30, 2020 and June 30, 2020, the debt discount was $0 and $46,726, respectively. The Company fair valued the notes as of conversion date and accounted for a loss on conversion of $42,595 included under line item “Loss on debt extinguishment upon note conversion, net”.
On July 5, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated July 5, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of July 5, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $239,759, with the following assumptions: risk-free interest rate of 1.98%, expected life of 1 year, volatility of 118%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the 300k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $2,627, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021.
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $104,000 Notes was calculated using the Black-Scholes pricing model at $90,567, with the following assumptions: risk-free interest rate of 2.53%, expected life of 1 year, volatility of 136%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $104k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of September 30, 2020, and June 30, 2020, the debt discount was $0 and $0, respectively. $50,000 of the note has been successfully retired via conversion into shares during the year ended June 30, 2020 and $54,000 of the note has been successfully retired via conversion into shares during the three months ended September 30, 2020.The Company fair valued the notes as of conversion date and accounted for a loss on conversion of $4,098 included under line item “Loss on debt extinguishment upon note conversion, net” during 2020 fiscal year and accounted for a loss on conversion of $36,242. |
On August 8, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated August 8, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of August 8, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $254,082, with the following assumptions: risk-free interest rate of 1.79%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $300k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021, and June 30, 2020 the debt discount was $0 and $26,452, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021.
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $208,000 Notes was calculated using the Black-Scholes pricing model at $170,098, with the following assumptions: risk-free interest rate of 2.42%, expected life of 1 year, volatility of 118%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $208k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of September 30, 2020, and June 30, 2020, the debt discount was $0 and $0, respectively. $208,000 of the note has been successfully retired via conversion into shares during the three months ended September 30, 2020. The Company fair valued the notes as of conversion date and accounted for a loss on conversion of $109,561included under line item “Loss on debt extinguishment upon note conversion, net”. |
On August 29, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated August 29, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of August 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $234,052, with the following assumptions: risk-free interest rate of 1.75%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $300,000 Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021, and June 30, 2020 the debt discount was $0 and $37,833, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021.
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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $240,217, with the following assumptions: risk-free interest rate of 2.05%, expected life of 1 year, volatility of 16%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $300,000 Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of September 30, 2020 and June 30, 2020, the debt discount was $0 and $46,726, respectively. The Company fair valued the notes as of conversion date and accounted for a loss on conversion of $42,595included under line item “Loss on debt extinguishment upon note conversion, net”. |
On September 24, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated September 24, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC. The notes have a maturity of September 24, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $150,000 Notes was calculated using the Black-Scholes pricing model at $118,009, with the following assumptions: risk-free interest rate of 1.78%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $150k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $27,482, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021.
On November 7, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated November 7, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC. The notes have a maturity of November 7, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $150,000 Notes was calculated using the Black-Scholes pricing model at $121,875, with the following assumptions: risk-free interest rate of 1.58%, expected life of 1 year, volatility of 122%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $150k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $43,074, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021.
F-14
On December 31, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated December 31, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC. The notes have a maturity of December 31, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $150,000 Notes was calculated using the Black-Scholes pricing model at $189,172, with the following assumptions: risk-free interest rate of 1.59%, expected life of 1 year, volatility of 115%, and expected dividend yield of zero. Because the fair value of the note exceed the net proceeds from the $150k Notes, $39,172 was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $75,205, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021.
On July 5, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated July 5, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of July 5, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $239,759, with the following assumptions: risk-free interest rate of 1.98%, expected life of 1 year, volatility of 118%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the 300k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0and $2,627, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021. | |||
On August 8, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated August 8, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of August 8, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $254,082, with the following assumptions: risk-free interest rate of 1.79%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $300k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021, and June 30, 2020 the debt discount was $0 and $26,452, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021. |
On February 6, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated February 6, 2020, in the amount of $200,000. The lender was Eagle Equities, LLC. The notes have a maturity of February 6, 2021 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $200,000 Notes was calculated using the Black-Scholes pricing model at $156,061, with the following assumptions: risk-free interest rate of 1.51%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. As of September 30, 2020 and June 30, 2020, the debt discount was $54,728 and $94,064, respectively. On February 26, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated February 26, 2020, in the amount of $187,000. The lender was Eagle Equities, LLC. The notes have a maturity of February 6, 2021 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 convertible note qualifies for derivative accounting and bifurcation under ASC “Derivatives and Hedging.” The fair value of the $200,000 Notes was calculated using the Black-Scholes pricing model at $156,061, with the following assumptions: risk-free interest rate of 1.51%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $94,064, respectively. . This note has been successfully retired via conversions into shares as of June 30, 2021.
On April 30, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated April 30, 2020, in the amount of $205,700. This note carried an Original Discount of 10% or $18,700 which was included in interest expense at the time of valuation. The lender was Eagle Equities, LLC. The notes have a maturity of April 30, 2021 and interest rate of 8% per annum and are convertible at a price of 78% of the lowest closing bid 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $205,700 Notes was calculated using the Black-Scholes pricing model at $128,369, with the following assumptions: risk-free interest rate of 0.16%, expected life of 1 year, volatility of 106%, and expected dividend yield of zero. This note was settled as part of a debt settlement with Eagle Equities, LLC in conjunction with the Nightfood Holdings, Inc. financing/refinancing in April 2021.
On June 23, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated June 23, 2020, in the amount of $205,700. This note carried an Original Discount of 10% or $18,700 which was included in interest expense at the time of valuation. The lender was Eagle Equities, LLC. The notes have a maturity of June 23, 2021 and interest rate of 8% per annum and are convertible at a price of 78% of the lowest closing bid 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $205,700 Notes was calculated using the Black-Scholes pricing model at $132,236, with the following assumptions: risk-free interest rate of 0.18%, expected life of 1 year, volatility of 108%, and expected dividend yield of zero. The Company accounted for a loss on refinancing of 25,722 for unamortized of discount included under line item “Loss on debt extinguishment upon note conversion, net”.
On August 29, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated August 29, 2019, in the amount of $300,000. The lender was Eagle Equities, LLC. The notes have a maturity of August 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $300,000 Notes was calculated using the Black-Scholes pricing model at $234,052, with the following assumptions: risk-free interest rate of 1.75%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $300,000Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021, and June 30, 2020 the debt discount was $0 and $37,833, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021. | |||
On September 24, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated September 24, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC. The notes have a maturity of September 24, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $150,000 Notes was calculated using the Black-Scholes pricing model at $118,009, with the following assumptions: risk-free interest rate of 1.78%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $150k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $27,482, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021. |
F-15
This note was settled as part of a debt settlement with Eagle Equities, LLC in conjunction with the Nightfood Holdings, Inc. financing/refinancing in April 2021.
On August 12, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated August 12, 2020, in the amount of $205,700. This note carried an Original Discount of 10% or $18,700 which was included in interest expense at the time of valuation. The lender was Eagle Equities, LLC. The notes have a maturity of August 12, 2021 and interest rate of 8% per annum and are convertible at a price of 78% of the lowest closing bid 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $205,700 Notes was calculated using the Black-Scholes pricing model at $126,029, with the following assumptions: risk-free interest rate of 0.13%, expected life of 1 year, volatility of 101%, and expected dividend yield of zero. This note was settled as part of a debt settlement with Eagle Equities, LLC in conjunction with the Nightfood Holdings, Inc. financing/refinancing in April 2021.
On November 7, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated November 7, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC. The notes have a maturity of November 7, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $150,000 Notes was calculated using the Black-Scholes pricing model at $121,875, with the following assumptions: risk-free interest rate of 1.58%, expected life of 1 year, volatility of 122%, and expected dividend yield of zero. Because the fair value of the note did not exceed the net proceeds from the $150k Notes, no charge was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $43,074, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021. |
On December 31, 2019, the Company entered into a convertible promissory note and a security purchase agreement dated December 31, 2019, in the amount of $150,000. The lender was Eagle Equities, LLC. The notes have a maturity of December 31, 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $150,000 Notes was calculated using the Black-Scholes pricing model at $189,172, with the following assumptions: risk-free interest rate of 1.59%, expected life of 1 year, volatility of 115%, and expected dividend yield of zero. Because the fair value of the note exceed the net proceeds from the $150k Notes, $39,172 was recorded to “Financing cost” for the excess of the fair value of the note. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $75,205, respectively. This note has been successfully retired via conversions into shares as of June 30, 2021. |
On February 6, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated February 6, 2020, in the amount of $200,000. The lender was Eagle Equities, LLC. The notes have a maturity of February 6, 2021 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $200,000 Notes was calculated using the Black-Scholes pricing model at $156,061, with the following assumptions: risk-free interest rate of 1.51%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. As of September 30, 2020 and June 30, 2020, the debt discount was $54,728 and $94,064, respectively. On February 26, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated February 26, 2020, in the amount of $187,000. The lender was Eagle Equities, LLC. The notes have a maturity of February 6, 2021 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 convertible note qualifies for derivative accounting and bifurcation under ASC “Derivatives and Hedging.” The fair value of the $200,000 Notes was calculated using the Black-Scholes pricing model at $156,061, with the following assumptions: risk-free interest rate of 1.51%, expected life of 1 year, volatility of 113%, and expected dividend yield of zero. As of June 30, 2021 and June 30, 2020, the debt discount was $0 and $94,064, respectively. . This note has been successfully retired via conversions into shares as of June 30, 2021. | |||
On April 30, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated April 30, 2020, in the amount of $205,700. This note carried an Original Discount of 10% or $18,700 which was included in interest expense at the time of valuation. The lender was Eagle Equities, LLC. The notes have a maturity of April 30, 2021 and interest rate of 8% per annum and are convertible at a price of 78% of the lowest closing bid 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $205,700 Notes was calculated using the Black-Scholes pricing model at $128,369, with the following assumptions: risk-free interest rate of 0.16%, expected life of 1 year, volatility of 106%, and expected dividend yield of zero. This note was settled as part of a debt settlement with Eagle Equities, LLC in conjunction with the Nightfood Holdings, Inc. financing/refinancing in April 2021. |
F-16
On June 23, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated June 23, 2020, in the amount of $205,700. This note carried an Original Discount of 10% or $18,700 which was included in interest expense at the time of valuation. The lender was Eagle Equities, LLC. The notes have a maturity of June 23, 2021 and interest rate of 8% per annum and are convertible at a price of 78% of the lowest closing bid 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $205,700 Notes was calculated using the Black-Scholes pricing model at $132,236, with the following assumptions: risk-free interest rate of 0.18%, expected life of 1 year, volatility of 108%, and expected dividend yield of zero. The Company accounted for a loss on refinancing of $25,722 for unamortized of discount included under line item “Loss on debt extinguishment upon note conversion, net”. |
This note was settled as part of a debt settlement with Eagle Equities, LLC in conjunction with the Nightfood Holdings, Inc. financing/refinancing in April 2021. | |||
On August 12, 2020, the Company entered into a convertible promissory note and a security purchase agreement dated August 12, 2020, in the amount of $205,700. This note carried an Original Discount of 10% or $18,700 which was included in interest expense at the time of valuation. The lender was Eagle Equities, LLC. The notes have a maturity of August 12, 2021 and interest rate of 8% per annum and are convertible at a price of 78% of the lowest closing bid 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 convertible note qualifies for derivative accounting and bifurcation under ASC 815, “Derivatives and Hedging.” The fair value of the $205,700 Notes was calculated using the Black-Scholes pricing model at $126,029, with the following assumptions: risk-free interest rate of 0.13%, expected life of 1 year, volatility of 101%, and expected dividend yield of zero. This note was settled as part of a debt settlement with Eagle Equities, LLC in conjunction with the Nightfood Holdings, Inc. financing/refinancing in April 2021. | |||
On December 10, 2021, the Company entered into a definitive securities purchase agreement (the “Securities Purchase Agreement or Transaction”) with certain accredited and institutional investors (the “Purchasers”) for the purchase and sale of an aggregate of: (i)$1,086,956.52 in principal amount of Original Issue Discount Senior Secured Convertible Notes (the “Notes”) for $1,000,000 (representing a 8% original issue discount) (“Purchase Price”) and (ii) warrants to purchase up to 4,000,000 shares of the Company’s common stock (the “Warrants”) in a private placement (the “Offering”). Each note featured an 8% original issue discount, resulting in net proceeds to the Company of $500,000 for each of the two notes. The Notes have a maturity of December 10, 2022, an interest rate of 8% per annum, and are convertible at a fixed price of $.25 per share of Company common stock, with provisions for conversions at a fixed price of $.20 per share of Company common stock should the closing trading price of our common stock be below $.20 per share after June 10, 2022, subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Debentures do not have any price protection or price reset provisions with respect to future issuances of securities. These notes are secured by Company assets as well as by a personal stock pledge from CEO Sean Folkson. The Notes have provisions allowing for repayment at any time at 115% of the outstanding principal and interest within the first three months, and 120% of the outstanding principal and interest at any time thereafter. | |||
The Warrants are initially exercisable at 0.25 per share and, are subject to cashless exercise after six months if the shares underlying the Warrants are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. |
F-17
In connection with Securities Purchase Agreement, the Company will issue to the Placement Agent (as defined below), an aggregate of 878,260 Common Stock purchase warrants (“PA Warrants”). The PA Warrants are substantially similar to the Warrants. The fair value of the PA Warrants at issuance was estimated to be $170,210 based on a risk-free interest rate of 1.25%, an expected term of 5 years, an expected volatility of 142.53% and a 0% dividend yield. | |||
Spencer Clarke Holdings LLC (“Placement Agent”) acted as the placement agent, in connection with the sale of the securities pursuant to the Securities Purchase Agreement. Pursuant to an engagement agreement entered into by and between the Company and the Placement Agent, the Company agreed to pay the Placement Agent a cash commission of $100,000. Pursuant to the discussion above, the Company also issued an aggregate of 878,260 PA Warrants to the Placement Agent. The gross proceeds received from the Offering were approximately $1,000,000. The cash Placement Agent fees of $100,000 was paid separately. Also, the Company reimbursed the lead Purchaser $15,192 for legal fees, which was deducted from the required subscription amount to be paid. The Company evaluated all of the associated financial instruments in accordance with ASC 815 Derivatives and Hedging. Based on this evaluation, the Company has determined that no provisions required derivative accounting. In accordance with ASC 470- Debt, the Company first allocated the cash proceeds to the loan and the warrants on a relative fair value basis, secondly, the proceeds were allocated to the beneficial conversion feature. |
● | Below is a reconciliation of the convertible notes payable as presented on the Company’s balance sheet as of |
Convertible Notes payable | Principal $ | Debt Discount $ | Net Value $ | |||||||||||||||||||||
Principal $ | Debt Discount $ | Net Value $ | ||||||||||||||||||||||
Balance at June 30, 2020 | $ | 2,935,400 | $ | (605,211 | ) | $ | 2,330,189 | $ | 2,935,400 | $ | (605,211 | ) | $ | 2,330,189 | ||||||||||
Convertible notes payable issued during the fiscal year ended June 30, 2021 | 822,800 | 822,800 | ||||||||||||||||||||||
Convertible notes payable issued during fiscal year ended June 30, 2021 | 822,800 | 822,800 | ||||||||||||||||||||||
Notes converted into shares of common stock | (1,433,000 | ) | (1,433,000 | ) | (1,433,000 | ) | (1,433,000 | ) | ||||||||||||||||
Debt discount associated with new convertible notes | (512,993 | ) | (512,993 | ) | (512,993 | ) | (512,993 | ) | ||||||||||||||||
Amortization of debt discount | 814,769 | 814,769 | 814,769 | 814,769 | ||||||||||||||||||||
True-up adjustment in debt discount and derivative liability | (37,360 | ) | (37,360 | ) | (37,360 | ) | (37,360 | ) | ||||||||||||||||
Notes retired due to refinancing | (2,325,200 | ) | 340,795 | (1,984,405 | ) | (2,325,200 | ) | 340,795 | (1,984,405 | ) | ||||||||||||||
Balance at June 30, 2021 | $ | - | $ | - | $ | - | - | - | - | |||||||||||||||
Change | - | - | - | |||||||||||||||||||||
Balance at September 30, 2021 | $ | - | $ | - | $ | - | ||||||||||||||||||
Convertible notes payable issued during six months ended December 31, 2021 | 1,086,957 | 1,086,957 | ||||||||||||||||||||||
Debt discount associated with new convertible notes | (1,018,229 | ) | (1,018,229 | ) | ||||||||||||||||||||
Amortization of debt discount | 90,852 | 90,852 | ||||||||||||||||||||||
Balance at March 31, 2022 | $ | 1,086,957 | $ | (927,377 | ) | $ | 159,580 |
All notes were successfully retired atAmortization related to debt discount expense for the nine months ended March 31, 2022 and 2021, totaled $90,852 and $787,216, respectively and amortization expense for the three months ended March 31, 2022 and 2021, totaled $78,634 and $210,429 respectively.
As of March 31, 2022 and June 30, 2021.2021, the unamortized portion of debt discount was $927,377 and $0, respectively.
Interest expense for the nine months ended March 31, 2022 and 2021, totaled $26,570 and $267,640, respectively, and interest expense for the three months ended SeptemberMarch 31, 2022 and 2021, totaled $21,661 and $72,110, respectively.
F-18
As of March 31, 2022 and June 30, 2021, the accrued interest related to convertible notes was $26,570 and 2020 totaled $0, and $322,739, respectively.
9. |
Change in derivative liability for the nine months ended March 31, 2022 and 2021, totaled $0 and $777,202, respectively and change in derivative liability for the three months ended March 31, 2022 and 2021, totaled $0 and $1,039,980, respectively. As of March 31, 2022, and June 30, 2021, the derivative liability related to convertible notes was $0 and $0, respectively.
F-19
F-20
F-21
F-24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENT INFORMATION
Certain statements made in this Quarterly Report on Form 10-Q 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. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “should,” “plan,” “project,” “will” and other words of similar meaning. 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 Quarterly Report on Form 10-Q 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 under the headings “Business” and “Risk Factors” within our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as well as the other information set forth herein.
OVERVIEW
What you eat before bed matters. Nightfood
Research indicates that humans are biologically hard-wired to load up on sweets and fats at night. Loading a surplus of calories (fuel) into the body before the long nightly fast is believed to be an outdated survival mechanism from our hunter-gatherer days. Unfortunately, while modern consumers know this type of consumption isn’t necessary for survival, willpower also weakens at As a result, over 85% of adults report snacking regularly between dinner and bed, resulting in an estimated 700 million nighttime snack occasions weekly, and an annual spend on night snacks of over $50 billion. Because of our hard-wired
In recent years, billions of dollars of consumer spend have shifted to better-for-you versions of
Almost half of all snacking takes place between dinner and bed. Nutrition is an important part of sleep-hygiene because what one eats at night impacts sleep.
2 As the pioneers of the
Management believes latent consumer demand exists for better nighttime snacking options, and that a new consumer category, consisting of nighttime specific snacks,
Nightfood has established a highly credentialed 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
Management envisions the Nightfood brand ultimately as a “platform brand”, meaning future snack offerings are expected to be introduced that would
Compared to regular ice cream, Nightfood is formulated with more tryptophan, more vitamin B6, more calcium, magnesium, and zinc, more protein and more prebiotic fiber. Nightfood also contains less fat, less sugar, and fewer calories than traditional ice cream, and is lactose free.
Each new Nightfood snack format would be expected to deliver sleep-friendly snacking in a way that is most appropriate for that format. For example, Nightfood chips would not necessarily contain significantly more tryptophan than other brands of chips but may be more sleep-friendly in other ways.
In
In November of 2021, Nightfood Nightfood has received media coverage in outlets such as The Today Show, Oprah Magazine, The Rachael Ray Show, Food Network Magazine, The Wall Street Journal, USA Today, The Washington Post, Fox Business News, and many more media outlets.
3
RECENT EVENTS - DEVELOPMENT PLANS
Hotel Distribution In pioneering the nascent sleep-friendly nighttime snacking category, Nightfood is in the process of executing a strategic pivot. The Company is temporarily shifting growth focus away from the crowded, expensive, and highly competitive supermarket vertical while targeting brand, revenue, and category growth through national hotel distribution. According to The American Hotel & Lodging association, there are an estimated 56,000 hotels in the United States (this does not include motels, which are estimated at approximately 34,000 locations). By contrast, Supermarket News recently reported that there are approximately 26,000 traditional supermarkets in the United Sates. The five largest hotel companies combine for over 26,000 hotel locations in the United States. Management believes this significant concentration, and the fact that corporate-level relationships have been established with two of these five global hotel companies, can lead to significant distribution gains in coming months. Management believes Nightfood is uniquely advantaged over other snack brands in the potentially lucrative hospitality vertical due to an inherent and implied obligation that exists for hotels to support better sleep for their guests. Nightfood was invited to participate in a 2021 retail pilot test of Nightfood pints for sale in hotel lobby shops, initiated and conducted by a large and prestigious international hospitality company. That test was declared a success by that international hospitality company in summer of 2021, and Nightfood ice cream pints are As of the On April 22, 2022, it was announced that the Company had secured “recommended brand” status with Remington Hotels. Remington is a leading hotel management company which manages 121 hotels across 28 states, and representing 25 brands, including On April 25, 2022, the Company announced a new corporate-initiated retail pilot test of Nightfood ice cream pints by a second global hotel company, with thousands of locations in the United States. Management believes a successful test could lead to distribution
The Company also recently
In preparing for the projected increase in volume, the Company is in the process of onboarding two new ice cream pint production facilities to replace the contract manufacturer that has produced Nightfood ice cream pints to date. As the majority of Nightfood ice cream pint sales in coming quarters project to be concentrated on the two flavors in hotel distribution (Cookies n’ Dreams and Midnight Chocolate), the Company is engaging a manufacturer with high-speed production lines that can produce double the product daily of our previous manufacturer. The initial production run at that facility is tentatively scheduled for the week of June 6, 2022. The other facility is expected to be used for other pint flavors and ice cream novelties and is expected to come online during July or August. The Company does not expect any disruption to inventory or supply as a result of these planned transitions. The unit economics of hotel distribution project to be materially superior to the economics of operating in the supermarket space. Line items such as slotting fees, advertising, and price promotions (both to consumers and the trade) make the supermarket vertical a much more expensive, and less profitable, place to do business compared to hotels. 4 Based on the results from the 2021 test, we anticipate that distribution of our ice cream pints in approximately 4,000 hotel locations would bring the company to profitability. Should we succeed in securing hotel distribution for additional snack formats, we would expect an increase in hotel revenue per property, meaning fewer properties would be needed to reach break-even.
To take maximum advantage of the opportunity presented by Nightfood’s expected widespread hotel distribution, We have already received confirmation of interest from decision makers at a major hotel chain in testing and adding additional these Nightfood snack formats currently under development. It is believed that securing distribution for such additional snack formats in our hotel properties would help the Company
In addition to
Nightfood is currently available in approximately 300 supermarkets, including Jewel-Osco (Chicagoland), Rouses Markets (New Orleans & Gulf Coast), Central Market (Dallas, Fort Worth, Austin, San Antonio, Houston), and Metropolitan Market, Market of Choice and Northwest Grocers in the Pacific Northwest. We have shifted our primary focus to hotel distribution We continue to work with our long-term partners at these select supermarket chains to devise and test programs that can drive supermarket growth. SLOTTING FEES Slotting fees are fees occasionally charged by supermarkets and certain retail distributors to add a new product into their product assortment. Accounting standards require exclusion on the
Additional supermarket
In some cases, slotting fees, also called “new item placement fees” or “new item placement allowances” can be nominal. In other situations, slotting fees for certain retail and distribution partners could run hundreds of thousands of dollars.
INFLATION
5
As an early-stage and growing brand, the full impact of seasonality on our
CORONAVIRUS (COVID-19)
From both public statements, and conversations between Nightfood management and current and former executives from certain global food and beverage conglomerates, it has been affirmed to
The
Additionally, with more consumers shopping online, both for delivery or at-store pickup, the opportunity for shoppers to learn about new brands We experienced some Pandemic-related delays to our national hotel rollout. However, hotel sales testing conducted by a leading global hotel brand showed strong sales velocities in hotel lobby shops during early and mid-2021. As the testing itself was conducted during the Pandemic, we are of the belief that strong sales can be expected as the rollout is executed. We do not expect significant hotel shutdowns or reductions in hotel occupancy the likes of which were seen in the early and middle part of 2020, unless the Pandemic again surges through new variants or for other reasons.
It is impossible to know what the future holds with regard to the
6
RESULTS OF OPERATIONS FOR THE THREE MONTH
For the three months ended
We expect that our Gross Sales attributable to supermarket sales will be lower in the next few quarters due to having been rotated out of Walmart and the fact that Grocery Outlet sales are episodic in nature. However, we expect that anticipated hotel expansion will offset the loss of these sales, resulting in higher gross sales and net revenues in future quarters. To quantify, gross sales to Walmart totaled $44,330 during the three months ended
For the three months ended For the three months ended March 31 2022 and 2021, Selling, General, and Administrative expenses decreased to $313,880 from $374,645. This decrease was largely due to decreases in certain consulting fees related to capital formation and marketing activities. For the three months ended March 31 2022 and 2021, total Operating Expenses decreased to $460,646 from $487,567. This is due largely to the decrease in Selling General, and Administrative expenses mentioned in the previous paragraph. For the three months ended March 31 2022 and 2021, total Other Expenses decreased to $100,295 from $1,548,474. A large component of the other expenses category from 2021 is expenses related to financing events. For the three months ended March 31 2022 and 2021 we incurred net losses of $433,768 and $1,910,613, respectively. This decrease in net losses is due largely the absence in the current quarter of expenses that existed in the previous year related to the financing event in April, 2021. 7 RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED MARCH 31, 2022 and 2021. For the nine months ended March 31, 2022 and 2021 we had Gross Sales of $470,019 and 643,359 and Net Revenues of $321,000 and $270,919, respectively, and incurred an operating loss of $1,645,538 and $1,379,102, respectively.
The decrease in Gross Sales, is largely due to the fact that we had fewer traditional supermarket points of distribution ordering product during the nine months ended March 31, 2022 due to being rotated out of Harris Teeter and Shaw’s, as well as decreased promotional activity at the point of purchase. While Nightfood ice cream was available in Walmart stores during the nine months ended March 31, 2022, the majority of product the Company sold to Walmart occurred during the three month period from April 1, 2021 through June 30, 2021, and We expect that our Gross Sales attributable to supermarket sales will be lower in the next few quarters due to having been rotated out of Walmart and the fact that Grocery Outlet sales are episodic in nature. However, we expect that anticipated hotel expansion will offset the loss of these sales, resulting in higher gross sales and net revenues in future quarters. Furthermore, the hotel sales project to be significantly more profitable on a per unit basis, as sales are expected to be conducted at full wholesale pricing, and line items such as slotting, advertising, and pricing promotions project to be greatly reduced or entirely eliminated. For the nine months ended March 31, 2022, and 2021, Cost of Product Sold decreased to
For the nine months ended March 31, 2022, and 2021, Total Operating Expenses increased to $1,966,538 from $1,650,021. This is due largely to the increase For the nine months ended For the nine months ended March 31, 2022, and 2021 we incurred net losses of $2,048,362 and $3,453,142 respectively. This decrease in net losses is due largely the absence in the
Customers
During the
During the three months ended March 31, 2022, the Company had one customer account for approximately 44% of the gross sales. During the three months ended March 31, 2021, one customer accounted for approximately 36% of the gross sales while three other customers accounted for over
8
LIQUIDITY AND CAPITAL RESOURCES
As of While most of the Company’s internal financial model scenarios project it reaching profitability early in Fiscal 2023, cash on hand does not project to be adequate to satisfy the Company’s mid-range working capital needs to get it both to profitability and also cash flow positive. As a result, the Company anticipates raising capital early in Fiscal 2023.
The Company believes
Because the business has limited operating history and sales, no certainty of continuation can be stated. 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 will again be 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 long-term.
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
Since our inception, we have sustained operating losses. During the During the
During the
During the
From our inception in January 2010 through
Assuming we raise additional funds and continue operations, we expect to incur additional operating losses during the next We intend to rely on the sale of stock and the issuance of new debt, to fund our operations. If we are unable to raise cash through the sale of our stock, we may be required to severely restrict our operations. 9
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates, including those related to allowance for doubtful accounts, allowance for inventory write-downs and write offs, deferred income taxes, provision for contractual obligations and our ability to continue as a going concern. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No report required.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of
As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.
Changes in internal controls over financial reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. 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 the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
10
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not engaged in any litigation at the present time, and management is unaware of any claims or complaints that could result in future litigation. Management will seek to minimize disputes with its customers but recognizes the inevitability of legal action in today’s business environment as an unfortunate price of conducting business.
ITEM 1A. RISK FACTORS.
Not required for smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three months ended
During the three months ended
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
11
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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