| NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis
of Presentation The
accompanying financial statements were prepared in conformity with generally accepted accounting principles in the United States
of America ("US GAAP"). Principles
of Consolidation The
consolidated financial statements include the accounts of Banjo & Matilda, Inc. ("Banjo" or "the Company")
and its wholly owned subsidiaries Banjo & Matilda Pty Ltd. and Banjo & Matilda USA, Inc., collectively referred to as
the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation. Exchange
Gain (Loss) During
the year ended June 30, 2016, the transactions of the Company were denominated in US Dollars. Some transactions were denominated
in AUD and British pounds for the sales made outside US and for rent paid for the Australian store. Such transactions were converted
to US$ on the date of transaction and the exchange gains or losses were recorded in the statement of operations. During the year
ended June 30, 2015, the transactions of the Company were denominated in foreign currency and were recorded in Australian dollar
(AUD) at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different
foreign exchange rates applied when the foreign currency assets and liabilities are settled. Foreign
Currency Translation and Comprehensive Income (Loss) During
the year ended June 30, 2016, the transactions of the Company were denominated in US Dollars. All the transactions which were
denominated in other currencies were converted to US$ on the date of settlement and the exchange gains and losses were recorded
in the statement of operations. No change was recorded in the comprehensive income (loss). During the year ended June 30, 2015,
the accounts of the Company were maintained, and its financial statements were expressed, in AUD. Such financial statements were
translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at
the balance sheet date, stockholder's equity is translated at the historical rates and income statement items are translated at
the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency
rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded
as a gain or loss on foreign currency transaction in the statements of operations. The resulting translation adjustments are reported
under other comprehensive income as a component of shareholders' equity. There were no significant fluctuations in the exchange
rate for the conversion of AUD to USD after the balance sheet date. Use
of Estimates The
preparation of financial statements in conformity with US GAAP requires management to make certain 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. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability
of long-term assets. Reportable
Segment The
Company has one reportable segment. The Company's activities are interrelated and each activity is dependent upon and supportive
of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single
global business. Revenue
Recognition Revenue
is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers
and subsequently remitted to governmental authorities. Cost
of Sales Cost
of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping,
importation duties and charges, third party royalties, and product sampling. Operating
Overhead Expense Operating
overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services,
and meetings and travel. Income
Taxes The
Company utilizes FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The
Company follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740). When
tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while
others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing
authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties
are classified in selling, general and administrative expenses in the statements of income. At
June 30, 2016 and 2015, the Company had not taken any significant uncertain tax positions on its tax returns for period ended
June 30, 2015 and prior years or in computing its tax provision for 2016. Management has considered its tax positions and believes
that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon
examination. The Company is subject to examination by U.S. Federal and State tax authorities from the period ended June 30, 2012
to the present, generally for three years after they are filed. The
Company has been behind in filing its payroll tax returns and sales tax returns. The Company has recorded $6,318 as penalties
for the late payment of taxes in the accompanying financials. Concentration
of Credit Risk Financial
instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables
arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions.
The Company has a diversified customer base across many markets, predominantly Australia, United States of America, United Kingdom,
Europe and the Middle East. The Company controls credit risk related to accounts receivable through credit approvals, credit limits
and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding
the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts
receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company's
Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk. Risks
and Uncertainties The
Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated
with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange
rates and the volatility of public markets. Contingencies Certain
conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such
contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings
that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates
the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought. If
the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates
that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material
would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees,
in which case the guarantee would be disclosed. Cash
and Equivalents Cash
and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less. At June 30, 2016 and 2015, the Company had $11,056 and $362,668 in cash in Australia
and in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks
on its cash in bank accounts. Allowance
for Doubtful Accounts The
Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves. The allowances for doubtful accounts as of June
30, 2016 and June 30, 2015 are $147,870 and $140,870 respectively. Inventory Inventories
are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories
with the market value and allowance is made to write down inventories to market value, if lower. As of June 30, 2016 and June
30, 2015, the Company had outstanding balances of Finished Goods Inventory of $102,427 and $174,792 respectively. For
the years ended June 30, 2016 and June 30, 2015, a reserve for Estimated Inventory Charges in the amount of $17,258 was established. Property,
Plant & Equipment Property
and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of
the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows: computer software
developed or acquired for internal use, three to 10 years; computer equipment, two to three years; buildings and improvements,
five to 15 years; leasehold improvements, two to 10 years; and furniture and equipment, one to five years. As
of June 30, 2016 and June 30, 2015, Plant and Equipment consisted of the following:
June 30 June 30
2016 2015
Property, plant & equipment $ 31,378 $ 29,044
Accumulated depreciation $ (19,402 ) $ (16,905 )
$ 11,976 $ 12,139 Depreciation
was $2,497 and $522 for the years ended June 30, 2016 and 2015, respectively. Fair
Value of Financial Instruments For
certain of the Company's financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts
payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.
ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments
held by the Company. ASC Topic 825, "Financial Instruments," defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying
amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a
reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their
expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows: Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, "Distinguishing Liabilities
from Equity," and ASC 815. As
of June 30, 2016 and 2015, the Company did not identify any assets and liabilities that are required to be presented on the balance
sheet at fair value. Earnings
Per Share (EPS) Basic
EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include
the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock
options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for
the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock
method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted
method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at
the time of issuance, if later). The
following table sets for the computation of basic and diluted earnings per share for years ended June 30, 2016 and 2015:
June 30 June 30
Basic and diluted 2016 2015
Net (loss) income $ (1,115,977 ) $ (2,004,722 )
Weighted average number of shares in computing basic and diluted net (loss) income
Basic 58,772,431 40,510,007
Diluted 58,772,431 40,510,007
Net (loss) income per share basic and diluted
Basic $ (0.02 ) $ (0.05 ) Intangible
Assets The
Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each
asset. Finite-lived
intangible assets primarily consist of software development capitalized. Finite-lived intangible assets are amortized on a straight-line
basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be
recoverable. These intangibles have useful lives ranging from 1 to 10 years. No events or changes in circumstances indicate that
impairment existed as of June 30, 2016. Recently
Issued Accounting Pronouncements In
August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern
(Subtopic 205-40), Disclosure of Uncertainties about an EntityÂ’s Ability to Continue as a Going Concern (ASU 2014-15). The
guidance in ASU 2014-15 sets forth managementÂ’s responsibility to evaluate whether there is substantial doubt about an entityÂ’s
ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements
for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise
substantial doubt about the entityÂ’s ability to continue as a going concern for one year from the date the financial statements
are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either
known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether
it is probable that managementÂ’s plans to address the substantial doubt will be implemented and, if so, whether it is probable
that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016,
and interim periods and annual periods thereafter. Early application is permitted. The Company is currently evaluating the impact
of the adoption of this standard on its consolidated financial statements. In
November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, “Balance Sheet Classification of Deferred
Taxes” (ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and is effective for financial
statements issued for annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires all
deferred tax assets and liabilities to be classified as non-current. The Company is currently evaluating the impact of the adoption
of this standard on its consolidated financial statements. In
January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”
(ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured
at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01
is effective beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on the
CompanyÂ’s results of operations, financial position or disclosures. In
February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize right-of-use assets
and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU
requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of
whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense
is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective
for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted.
The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to
recognize and measure leases at the beginning of the earliest period presented. The adoption of this guidance is not expected
to have a material impact on the CompanyÂ’s results of operations, financial position or disclosures. In
March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance simplifies
accounting for share-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as
income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur.
This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively
or retroactively. The Company is currently evaluating the impact the adoption of this standard would have on its financial condition,
results of operations and cash flows. In
May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and
Practical Expedients” (“ASU 2016-12”), which amends the guidance in the new revenue standard on collectability,
noncash consideration, presentation of sales tax, and transition. The amendments are intended to address implementation issues
and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. The new guidance
is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which
will be our interim period beginning January 1, 2018. Early adoption is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods with that reporting period. The Company is currently evaluating the
impact of adopting this standard on its consolidated financial statements. In
August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “Statement of Cash Flows.” There
were no other new accounting pronouncements during the year ended June 30, 2016 that we believe would have a material impact on
our financial position or results of operations. Reclassification Certain prior
year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect
on the reported results of operations or cash flow. |
