| NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Going
Concern The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles,
which contemplate the continuation of the Company as a going concern. The Company reported accumulated deficit of $5,284,728 as
of June 30, 2017. The Company also incurred net losses of $1,066,746 for the fiscal year ended June 30, 2017 and had negative
working capital. To date, these losses and deficiencies have been financed principally through the loans from related parties
and from third parties. In view of the matters described, there is substantial doubt as to the Company's ability to continue as
a going concern without a significant infusion of capital. We anticipate that we will have to raise additional capital to fund
operations over the next 12 months. To the extent that we are required to raise additional funds to acquire properties, and to
cover costs of operations, we intend to do so through additional offerings of debt or equity securities. There are no commitments
or arrangements for other offerings in place, no guaranties that any such financings would be forthcoming, or as to the terms
of any such financings. Any future financing will involve substantial dilution to existing investors. Basis
of Presentation The
accompanying consolidated 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 fiscal years ended June 30, 2017 and 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 dollars on the date of transaction and the exchange gains or losses were recorded in the consolidated statement
of operations. Foreign
Currency Translation and Comprehensive Income (Loss) During
the fiscal years ended June 30, 2017 and 2016, the transactions of the Company were denominated in US Dollars. All the transactions
which were denominated in other currencies were converted to US dollars on the date of settlement and the exchange gains and losses
were recorded in the consolidated statement of operations. No change was recorded in the comprehensive income (loss). 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 consolidated
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 and third party royalties. 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 Financial Accounting Standards Board (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 accounts for uncertain tax positions in accordance with 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, 2017 and 2016, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended
June 30, 2017 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, 2014
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 $3,455 as penalties
and $25,346 as interest 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 consolidated 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 consolidated 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, 2017 and June 30, 2016, the Company had $4,491 and $11,056 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, 2017 and June 30, 2016 are $135,956 and $147,870 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, 2017 and June
30, 2016, the Company had outstanding balances of Finished Goods Inventory of $18,443 and $102,427 respectively. As
of June 30, 2017 and June 30, 2016, a reserve for Estimated Inventory Charges in the amount of $230 and $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 ten years; computer equipment, two to three years; buildings and improvements,
five to fifteen years; leasehold improvements, two to ten years; and furniture and equipment, one to five years. As
of June 30, 2017 and June 30, 2016, Plant and Equipment consisted of the following:
June
30 June
30
2017 2016
Property,
plant & equipment $ 29,456 $ 31,378
Accumulated
depreciation (21,927 ) (19,402 )
$ 7,529 $ 11,976 Depreciation
was $2,525 and $2,497 for the fiscal years ended June 30, 2017 and 2016, 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, 2017 and June 30, 2016, 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) The
Company utilize FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings
(loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per
share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common
shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating
loss for which no common share equivalents are included because their effect would be anti-dilutive. The
following table sets for the computation of basic and diluted earnings per share the fiscal years ended June 30, 2017 and 2016:
June
30, 2017 June
30, 2016
Basic
and diluted
Net
loss $ (1,066,746 ) $ (1,115,977 )
Net
loss per share
Basic
$ (0.02 ) $ (0.02 )
Diluted $ (0.02 ) $ (0.02 )
Weighted
average number of shares outstanding:
Basic
& diluted 61,152,628 58,772,431 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 one to ten years. Recently
Issued Accounting Pronouncements In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In
January 2016, The FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and
Financial Liabilities (Topic 825) In
August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses
a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows
under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities
for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted,
including adoption in an interim period. We adopted this ASU in 2016 and the implementation did not have a material impact on
our financial position or consolidated statement of operations. In
July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480)
Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with
down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result
in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates
cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round
features that require fair value measurement of the entire instrument or conversion option. For public business entities, the
amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018 with early adoption permitted. The Company has elected for early adoption of this guidance during the fiscal
year ended June 30, 2017 on our consolidated financial statements. In
August 2017, the FASB issued guidance that eases certain documentation and assessment requirements of hedge effectiveness and
modifies the accounting for components excluded from the assessment. Some of the modifications include the ineffectiveness of
derivative gain/loss in highly effective cash flow hedge to be recorded in OCI, the change in fair value of derivative to be recorded
in the same income statement line as hedged item, and additional disclosures required on the cumulative basis adjustment in fair
value hedges and the effect of hedging on financial statement lines for components excluded from the assessment. The amendment
also simplifies the application of hedge accounting in certain situations to permit new hedging strategies to be eligible for
hedge accounting. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods
beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted and the modified retrospective transition method
should be applied. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements. Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact
on the Company’s present or future consolidated financial statements. 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. |
