NightFood Holdings, Inc 10-Q for FY2025 Q2
NightFood Holdings, Inc. (NGTF)
About this 10-Q
NightFood Holdings, Inc filed this 10-Q on February 14, 2025, covering the quarter ended December 31, 2024 (FY2025 Q2).
Headline figures
Quarter ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $15.14K
- up 1586.1% from $898 a year earlier
- Net loss
- $479.61K
- compared with a net loss of $422.03K a year earlier
- Diluted EPS
- -$0.00
- compared with -$0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period
ended:
Or
For the Transition Period from ___________ to____________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) |
| | ||
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
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 |
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.
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
such files).
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 | ☐ |
| ☒ | 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
On February 12, 2025 the issuer had
Table of Contents
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements (Unaudited) | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 33 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 40 |
| Item 4. | Controls and Procedures | 40 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 41 |
| Item 1A. | Risk Factors. | 41 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 41 |
| Item 3. | Defaults Upon Senior Securities. | 41 |
| Item 4. | Mine Safety Disclosures. | 41 |
| Item 5. | Other Information. | 41 |
| Item 6. | Exhibits. | 42 |
| Signatures | 44 | |
i
Nightfood Holdings, Inc.
Item 1. Financial Statements
1
Nightfood Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Acquisition costs secured by promissory note | ||||||||
| Property, plant and equipment, net of accumulated depreciation of $ | ||||||||
| Indefinite-lived intangible assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable and accrued liabilities - related party | ||||||||
| Convertible notes payable - net of discounts | ||||||||
| Total current liabilities | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Series A Stock, $ | ||||||||
| Series B Stock, $ | ||||||||
| Series C Stock, $ | ||||||||
| Series D Stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months Ended December 31, | For the six months Ended December 31, | |||||||||||||||
| 2024 | 2023 (Restated) | 2024 | 2023 (Restated) | |||||||||||||
| Revenues, net of slotting and promotion | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of product sold | ||||||||||||||||
| Advertising and promotional | ||||||||||||||||
| Selling, general and administrative expense | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense - debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense – financing cost | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on debt extinguishment | ( | ) | ||||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend on Series B Preferred Stock | ||||||||||||||||
| Net loss attributable to common shareholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares of capital outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT)
| Common Stock | Preferred Stock(1) | Additional | Total Stockholders’ | |||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Paid in Capital | Accumulated Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||
| Shares issued for amended convertible note | - | - | ||||||||||||||||||||||||||
| Deemed dividends associated with warrants related dilutive adjustments | - | - | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares issued under acquisition | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common Stock | Preferred Stock(2) | Additional Paid in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital (Restated) | Deficit (Restated) | (Deficit) (Restated) | ||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Common stock issued as financing cost | - | |||||||||||||||||||||||||||
| Warrants issued as consulting fee | - | - | ||||||||||||||||||||||||||
| Warrants issued as financing cost | - | - | ||||||||||||||||||||||||||
| Warrants issued associated with Promissory Notes | - | - | ||||||||||||||||||||||||||
| Deemed dividends associated with warrants related dilutive adjustments | - | - | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares issued as consulting fee | - | |||||||||||||||||||||||||||
| Warrants issued as financing cost | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
4
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT)
(1)
| Preferred Stock A | Preferred Stock B | Preferred Stock C | Preferred Stock D | Preferred Stock | ||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Shares | Par Value | Shares | Par Value | Par Value | ||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||||||||||
| Shares issued for amended convertible note | - | - | - | |||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Shares issued for acquisition (pending) | - | - | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
(2)
| Preferred Stock A | Preferred Stock B | Preferred Stock C | Preferred Stock D | Preferred Stock | ||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Shares | Par Value | Shares | Par Value | Par Value | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | |
$ | |
- | $ | - | $ | $ | |
||||||||||||||||||||||||||
| Balance, September 30, 2023 | - | - | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | - | $ | - | $ | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For Six Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (Restated) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations activities: | ||||||||
| Non-cash financing cost under contingent liability | ||||||||
| Interest income under acquisition note | ( | ) | ||||||
| Warrants issued for services | ||||||||
| Stock issued for services | ||||||||
| Stock issued for financing costs | ||||||||
| Amortization of debt discount | ||||||||
| Loss on amended / extinguishment of convertible note | ||||||||
| Warrants and returnable warrants issued for financing costs | ||||||||
| Bad debt | ||||||||
| Change in operating assets and liabilities | ||||||||
| Change in accounts receivable | ||||||||
| Change in inventory | ( | ) | ||||||
| Change in other current assets | ( | ) | ( | ) | ||||
| Change in accounts payable | ||||||||
| Change in related party payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ||||||
| Acquisition costs secured by promissory notes | ( | ) | ||||||
| Net cash used by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of units under Reg A | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from related party | ||||||||
| Proceeds from the issuance of debt, net | ||||||||
| Net cash provided by financing activities | ||||||||
| NET (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash Paid For: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Summary of Non-Cash Investing and Financing Information: | ||||||||
| Warrants and returnable warrants issued for financing cost | $ | $ | ||||||
| Stock issued for financing costs | $ | $ | ||||||
| Deemed dividend associated with preferred B stock and dilutive warrant adjustments | $ | $ | ||||||
| Debt and warrant discounts related to convertible notes | $ | |||||||
| Principal increased under convertible note, amended | $ | $ | ||||||
| Granted interest increase under convertible note, amended | $ | $ | ||||||
| Series D Preferred stock issued under convertible note, amended | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Nightfood Holdings, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Going Concern
Nightfood Holdings, Inc. is a Nevada corporation incorporated 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. We are also the sole shareholder of MJ Munchies, Inc., currently revoked in the State of Nevada, which owns certain intellectual property, but does not have any operations as of the period covered by these financial statements.
On February 2, 2024, the Company closed the acquisition of Future Hospitality Ventures Holdings Inc. (“FHVH” or “Future Hospitality”), a Nevada corporation and a new entrant in the Robots-as-a-Service (RaaS) space from Mr. Lei Sonny Wang, who concurrently became the Chief Executive Officer of Nightfood and a member of the Company’s board of directors. Under the leadership of Mr. Wang, as of the time of this filing, Future Hospitality has secured distribution agreements with Next Robot, Inc. (formally Botin Innovations, Inc.) and Bear Robotics, Inc. and is in the process of negotiating and exploring additional supplier relationships.
Our corporate address is 520 White Plains Road – Suite 500, Tarrytown, New York 10591 and our telephone number is 866-291-7778. We maintain web sites at www.nightfoodholdings.com, www.nightfood.com, www.RoboOp365.com, along with several additional web properties. Any information that may appear on those web sites should not be deemed to be a part of this report.
The Company’s fiscal year end is June 30.
Going Concern
| ● | The Company’s financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. No certainty of continuation can be stated. |
| ● | The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. For the six months ended December 31, 2024, the Company had an operating and net loss of $ |
| ● | The Company has limited available cash resources, and we do not believe our cash on hand will be sufficient to fund our operations and growth throughout fiscal year 2025 or adequate to satisfy our immediate or ongoing working capital needs. We are currently in default with respect to the terms of several of our convertible notes payable. |
| The Company is continuing to seek to raise capital through the sales of its common stock, preferred stock and/or convertible notes, as well as potentially the exercise of outstanding warrants, to finance the Company’s operations, of which it can give no assurance of success. Management has devoted a significant amount of time to the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. Additionally, management is investing in the acquisition of additional revenue generating assets through the issuance of debt and/or equity to further assist the Company’s growth initiatives. As of December 31, 2024 we have advanced cash proceeds totaling $ |
| ● | Because the Company has limited sales, no certainty of continuation can be stated. The Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue through existing subsidiaries and future acquisitions. In addition, the Company will receive the proceeds from its outstanding warrants as, if and when such warrants are exercised for cash. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. |
7
| ● | Even if the Company is successful in raising additional funds, the Company cannot give any assurance that it will, in the future, be able to achieve a level of profitability from the sale of the products and services of its subsidiaries to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. |
2. Summary of Significant Accounting Policies
Financial Statements
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2024.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three and nine-month periods have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.
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, contingent consideration with respect to certain financing contracts, income taxes and other contingencies, as well as valuing warrants and preferred shares, among others. |
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 $ |
Business Combinations
| ● | The Company accounts for business combinations using the purchase method of accounting. The purchase method requires the Company to determine the fair value of all acquired assets, including identifiable intangible assets and all assumed liabilities. The total cost of acquisitions is allocated to the underlying identifiable net assets, based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and the utilization of independent valuation experts and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates and asset lives, among other items. |
8
Goodwill and Intangibles
| ● | Goodwill represents the excess of the purchase price over the fair market value of the net assets (including intangibles) acquired on February 2, 2024 respectively and includes the value of indefinite lived intangible assets resulting from noncontractual customer relationships. The Company has implemented the Business Combinations Topic of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other. Goodwill is deemed to have an indefinite life. Goodwill and indefinite life intangible assets are not amortized but are subject to, at a minimum, annual impairment tests. The Company expenses costs to maintain or extend intangible assets as incurred. |
The Company reviews intangible assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure the recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value. There were no impairments for the periods presented.
The Company tests goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. There were no goodwill impairments for the periods presented.
Long-Lived Assets
| ● | The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. 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. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. The Company had long-lived asset impairments as of December 31, 2024 and June 30, 2024. |
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 loss on write down of inventory during the period spoilage is incurred as a part of selling, general and administrative expenses. The Company has no minimum purchase commitments with its vendors. During the three and six months ended December 31, 2024 and 2023, there are expenses related to inventory impairments which are included in Selling, General and Administrative expenses on the Company’s statements of profit and loss. |
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 carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not. |
9
| ● | A valuation allowance has been recorded to fully offset the deferred tax asset even though the Company believes it is more likely than not that the assets will be utilized |
| ● | The Company’s effective tax rate differs from the statutory rates associated with taxing jurisdictions because of permanent and temporary timing differences as well as a valuation allowance. |
Revenue Recognition
The Company accounts for revenue in accordance with Accounting Standards Updated ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”). The Company recognizes revenue in accordance with ASC 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
Through the three and six months ended December 31, 2024, and 2023, the Company earned revenues from sales generated in operating subsidiary Nightfood, Inc. During the three months ended September 30, 2023, sales were predominantly related to the sale of ice cream products to distributors. Thereafter sales were predominantly related to the sale of individual pouches of cookie products. Sales over the reporting periods were made using (i) Nightfood.com and other eCommerce platforms (Direct to Consumer) and (ii) third party distributors. Sales focus shifted entirely to direct-to-consumer sales in early 2024. Wholesale ice-cream production and sales were discontinued in fiscal 2024 and might resume if and when direct-to-consumer scale is achieved. Nightfood Inc. considers its performance obligations satisfied upon shipment of the purchased products to the customer with respect to sales processed by third party fulfilment centers, retail locations and purchases made via eCommerce portals. The Subsidiary 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. Due to the nature of Nightfood’s products, the Company does not accept returns of its snacks. Refunds to consumers are issued under certain circumstances, but product returns are not typically accepted.
During the three and six months ended December 31, 2024, and the year ended June 30, 2024, the Company did not earn any commercial revenue associated with its operations in the Robots-as-a-Service (RaaS) space.
Disaggregated Revenues
The Company is earning revenues from a single product line with sales of its food products through subsidiary Nightfood, Inc. and therefore has not presented disaggregated revenues.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during the year, the Company may exceed the federally insured limits. To mitigate this risk, the Company places its cash deposits only with high credit quality institutions. Management believes the risk of loss is minimal. At December 31, 2024 and June 30, 2024, the Company did not have any uninsured cash deposits.
10
Deemed Dividend – Series B Preferred Stock Warrants:
Each share of the Company’s Series B Preferred
Stock, par value $
The value of the deemed dividend was approximately
$
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. |
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 as a debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as interest expense. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. |
Stock Settled Debt
| ● | In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. |
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. |
11
Customer Concentration
| ● | Our customers in the three- and six-month periods ended December 31, 2024 consist of individual product purchasers via our website or via third party reseller sites such as Tik Tok and therefore, there were no customers which accounted for more than 10% of gross sales. In the three- and six-month periods ended December 30, 2023, we had one customer that accounted for more than 10% of gross sales. |
Vendor Concentration
| ● | During each of the three and six-month periods ended December 31, 2024 and 2023 one vendor accounted for more than 10% of our costs of goods sold. |
Receivables Concentration
| ● | As of December 31, 2024, the Company had receivables due from two ecommerce sales portals accounting for |
Fair Value of Financial Instruments
| ● | Cash and Equivalents, Receivables, Other Current Assets, Short-Term Debt, Accounts Payable, Accrued and Other Current Liabilities. | |
| ● | The carrying amounts of these items approximated fair value. |
| ● | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, Financial Accounting Standards Board ASC Topic 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). |
| Level 1 — | Valuations based on quoted prices for identical assets and liabilities in active markets. |
| Level 2 — | Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. |
| Level 3 — | Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. |
At December 31, 2024 and June 30, 2024, the Company had no outstanding derivative liabilities.
Income/Loss Per Share
| ● | In accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive. Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options and warrants, and classes of shares with conversion features. The computation of basic loss per share for the three and six months ended December 31, 2024 and 2023 excludes potentially dilutive securities because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted losses per share. |
12
Reclassification
| ● | The Company may occasionally make certain reclassifications to prior period amounts to conform with the current year’s presentation. Such reclassifications would not have a material effect on its consolidated statement of financial position, results of operations or cash flows. |
Restatement
| ● | During the fiscal year ended June 30, 2024, management identified several transactions that appeared to have been processed incorrectly in the fiscal year ended June 30, 2023. The impact of these transactions spanned various accounting topics, but were predominantly related to (1) insufficient impairment testing and provisions for impairment relative to inventory as of the year ended June 30, 2023, resulting in an overstatement of inventory as of the original report date, (2) timing of recognition of liabilities upon default of certain promissory notes in accordance with certain financing agreements resulting in an understatement of certain liabilities, and (3) certain other posting errors impacting cash, accounts receivable and accounts payable. In assessing whether the identified adjustments should be processed as prior period errors or recognized in the current period, management considered whether the facts that gave rise to the adjustments existed in prior years, or whether those events only arose due to information that came to light in the current year. The 2023 consolidated Annual Financial Statements and the consolidated statement of financial position as of June 30, 2023 were restated in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 to correct the prior period errors. As a result of these restatements, the comparative results for the six months ended December 31, 2023, included in this current report reflect a reduction to total assets of $ |
Recent Accounting Pronouncements
| ● | In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We expect to adopt this policy effective for the fiscal year ended June 30, 2025 and are currently evaluating the impact of adopting ASU 2023-07 on our financial statements. |
| ● | In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 is effective for fiscal years beginning after December 15, 2025. We are evaluating the impact of adopting ASU 2023-09 on our financial statements. |
| ● | In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate Related Disclosures for Investors, which requires registrants to disclose climate-related information in registration statements and annual reports. The new rules would be effective for annual reporting periods beginning in fiscal year 2025. However, in April 2024, the SEC exercised its discretion to stay these rules pending the completion of judicial review of certain consolidated petitions with the United States Court of Appeals for the Eighth Circuit in connection with these rules. We are evaluating the impact the adoption of this rule, if any, on our financial statements. |
13
3. Business Combination
Acquisition of Future Hospitality Ventures Holdings Inc.
On January 22, 2024, the Company, Future Hospitality Ventures Holdings Inc., a Nevada corporation, Sean Folkson as the holder of all issued and outstanding Series A Preferred Stock of NGTF (the “NGTF Series A Shareholder”) and Lei Sonny Wang, the sole shareholder of FHVH (the “FHVH Shareholder”) entered into a share exchange agreement (the “Exchange Agreement”) whereby NGTF agreed to acquire FHVH through a share exchange (the “Exchange”) whereby FHVH became a wholly-owned subsidiary of NGTF.
Pursuant to the Exchange Agreement, the FHVH Shareholder
exchanged all
The Exchange Agreement was subject to certain closing conditions and contained customary representations, warranties and covenants. The consummation of the Exchange was conditioned upon, among other things: Sean Folkson resigning as the Chief Executive Officer of NGTF, continuing to serve as the President of Nightfood, Inc. through December 31, 2024, which may be extended, and continuing to serve as a director of NGTF through, at a minimum, the company’s first twelve (12) months on the NASDAQ Capital Market should a successful uplisting occur; and the appointment of Lei Sonny Wang as a director and Chief Executive Officer of NGTF. The parties at the time of the transaction were considered arm’s length and the exchange agreement was valued at fair market value at the time of the transaction.
The aforementioned agreements closed on February 2, 2024 (“Valuation Date”).
The following is a summary of the estimated fair values of acquisition costs at the date of issuance:
| Consideration Paid – Fair Value | ||||||||
| Stock issued: | ||||||||
| Number of Series C Preferred Stock: | ||||||||
| Fair value of Series A Preferred Stock | $ | |||||||
| Fair value of Series C Preferred Stock | ||||||||
| Total consideration | $ |
The fair value of the Series C Preferred shares
issued was determined as of the Valuation Date using the Market Approach to arrive at an indication of market value by using quoted market
prices of the common shares. The valuation utilized the Company stock price and the historical volatility of the Company. The Series C
Preferred shares’ fair value is based on the conversion value adjusted for the restriction period (6 months) and lack of marketability
using a Finnerty Put analysis and was determined to be $
The following is a summary of the estimated fair values of the assets acquired and liabilities assumed and additional information regarding the intangible assets acquired as of February 2, 2024:
| Tangible assets acquired: | ||||
| Cash | $ | |||
| Other current assets | ||||
| Accounts payable | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Total assets acquired and liability assumed | ( | ) | ||
| Indefinite-lived intangible assets (noncontractual customer relationships) | ||||
| Total Net asset acquired | $ | |||
As of December 31, 2024 and June 30, 2024, impairment of the Company’s goodwill was required. The purchase accounting for the acquisition remains incomplete as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Measurement period adjustments will be recognized prospectively. The measurement period is not to exceed 12 months from the respective dates of acquisition.
14
4. Accounts Receivable and Allowance for Credit Losses
Accounts receivables are recorded at the invoiced amount and do not bear interest. The Company’s accounts receivables consist entirely of invoices issued with respect to the sale of the Company’s snack goods. The Company applies the guidance of ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”). At each reporting period the Company gathers information about its current bad debt reserve and write-off practices and loss methodology, in-scope assets, historical credit losses, and expected changes to business practices under CECL. Accounts receivables are stated at estimated net realizable value from the sale of products to customers. During fiscal 2024 a shift in product sales and customer type occurred when the Company changed its product focus from sales of ice cream products to established customers to sales of snack cookies to individual customers online. Commercial customers comprising the Company’s sales in fiscal 2023 typically were customers contracting with the Company on short-term projects with larger credit limits and overall, larger project sizes, resulting in limited potential for write-offs of receivable balances. The Company’s sales in fiscal 2024 were comprised predominantly of sales to individual customers who pay in advance for snack items.
The Company reviewed methods provided by the guidance
and determined to use the loss-rate method in the CECL analysis for trade receivables. This loss-rate method was selected as there is
reliable historical information available at each fiscal year end, and this historical information was determined to be representative
of the Company’s current customers and billing practices. Defaults of accounts receivables have remained immaterial in each of fiscal
2024 and 2023 and therefore the Company has not recorded an allowance for credit losses. The Company wrote off $
5. Inventories
| ● |
| December 31, 2024 | June 30, 2024 | |||||||
| Inventory: Finished Goods | $ | $ | ||||||
| Inventory: Ingredients | ||||||||
| Inventory: Packaging | ||||||||
| Total Inventory | $ | $ | ||||||
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. During the three and six months ended December 31, 2024, and 2023 the Company did not write down inventory balances as a result of inventory damage, obsolescence and spoilage.
15
6. Other current assets
Other current assets consist of the following at December 31, 2024 and June 30, 2024.
| December 31, 2024 | June 30, 2024 | |||||||
| Other Current Assets | ||||||||
| Par value of | ||||||||
| Prepaid interest expenses | $ | $ | ||||||
| Prepaid Professional fees | ||||||||
| Other prepaid expenses | ||||||||
| Deposits with vendors | ||||||||
| TOTAL | $ | $ | ||||||
The Company wrote off $
7. Acquisition Costs Secured with Line of Credit Agreements
During the periods ended December 31, 2024 the Company’s subsidiary FHVH (the “Lender”) provided operating advances under the terms of certain Line of Credit Agreements (“LOC”) to acquisition targets as follows:
| December 31, 2024 | June 30, 2024 | |||||||
| Funds provided to acquisition target 1 under LOC (“LOC 1”) | $ | $ | ||||||
| Funds provided to acquisition target 2 under LOC (“LOC 2”) | ||||||||
| Interest receivable under LOC agreements | ||||||||
| TOTAL | $ | $ | ||||||
LOC 1
LOC 1 provides that acquisition target 1 may draw
down advances of up to $
As of December 31, 2024 and June 30, 2024, $
LOC 2
LOC 2 provides that acquisition target 2 may draw
down advances of up to $
As of December 31, 2024 and June 30, 2024, $
8. Accounts Payable and Accrued liabilities
Accounts payable and accrued liabilities consist of the following at December 31, 2024 and June 30, 2024:
| December 31, 2024 | June 30, 2024 | |||||||
| Interest Payable | $ | $ | ||||||
| Accounts payable | ||||||||
| TOTAL | $ | $ | ||||||
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9. Debt
Convertible Notes Payable
Mast Hill Promissory Notes (MH Notes)
| (a) | Promissory Notes Issued on September 23, 2022 |
On September 23, 2022, the Company entered
into a Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal sum of $
As a result of the transaction, the Purchasers
triggered their “most favored nation” clause which resulted in the Company entering into an MFN Amendment Agreement (the “MFN
Agreement”) with the Purchasers pursuant to which the Purchasers exercised their options under the most-favored nation terms contained
in their existing transaction documents with the Company. Pursuant to the MFN Agreement, among other things, (a) the Company issued to
each of the Purchasers
The Company paid to J.H. Darbie & Co., Inc.
$
The proceeds received by the Company from the
Offering, net of the original issue discount, fees and costs including legal fees of $
On May 2, 2023, a debtholder converted $
| (b) | Promissory Notes Issued on February 5, 2023 |
On February 5, 2023, the Company entered into
a Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to J.H. Darbie & Co., Inc.
$
17
| (c) | Promissory Notes Issued on February 28, 2023 |
On February 28, 2023, the Company entered into
a Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to J.H. Darbie & Co.,
Inc. $
On June 20, 2024, a debtholder converted a total of $
Below is a reconciliation of the (gain) loss on extinguishment of interest payable relative to
| Fair market value of | $ | |||
| Interest payable | ( | ) | ||
| Transfer agent fee | ( | ) | ||
| ( | ) | |||
| Gain on extinguishment | $ | ( | ) |
| (d) | Promissory Notes Issued on March 24, 2023 |
On March 24, 2023, the Company entered into a
Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to J.H. Darbie & Co., Inc.
$
18
| (e) | Promissory Notes Issued on April 17, 2023 |
On April 17, 2023, the Company entered into a
Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to J.H. Darbie & Co., Inc.
$
| (f) | Promissory Notes Issued on June 1, 2023 |
On June 1, 2023, the Company entered into a Securities
Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to (a) J.H. Darbie & Co.,
Inc.
| (g) | Promissory Notes Issued on October 6, 2023 |
On October 6, 2023 the Company entered into a
Securities Purchase Agreement and issued and sold to Mast Hill, a Secured Promissory Note (the “Note”) in the principal amount
of $
19
The Note contains restrictions on the Company’s ability to (a) incur additional indebtedness, (b) make distributions or pay dividends, (c) redeem, repurchase or otherwise acquire its securities, (d) sell its assets outside of the ordinary course, (e) enter into certain affiliate transactions, (f) enter into 3(a)(9) Transactions or 3(a)(10) Transactions (each as defined in the Note), or (g) change the nature of its business.
Commencing as of the Effective Date, and until such time as the Note is fully converted or repaid, the Company shall not effect or enter into an agreement to effect any Variable Rate Transaction (as defined in the Purchase Agreement).
The Purchase Agreement contains customary representations and warranties made by each of the Company and Mast Hill. It further grants to Mast Hill certain rights of participation and first refusal, and certain most-favored nation rights, all as set forth in the Purchase Agreement. Further the Note is subject to the terms of certain previously executed Security, Pledge and Guarantee agreements discussed above in 7(f).
The Company paid to Spencer Clarke LLC a cash
fee of $
| (h) | Promissory Notes Issued on November 17, 2023 |
On November 17, 2023 the Company entered into
a Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to Spencer Clarke LLC a cash
fee of $
| (i) | Promissory Notes Issued on December 6, 2023 |
On December 6, 2023 the Company entered into a
Securities Purchase Agreement and issued and sold to Mast Hill, a Promissory Note in the principal amount of $
The Company paid to Spencer Clarke LLC a cash
fee of $
20
| (j) | Promissory Notes Issued on January 24, 2024 |
On January 24, 2024 the Company entered into a
Securities Purchase Agreement, and issued and sold to Mast Hill a Promissory Note in the principal amount of $
| (k) | Promissory Notes Issued on March 13, 2024 |
On March 13, 2024, the Company entered into a
Securities Purchase Agreement and issued and sold to Mast Hill a Promissory Note in the principal amount of $
| (l) | Promissory Notes Issued on May 9, 2024 |
On May 9, 2024, the Company consummated transactions
pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated as of May 5, 2024 (the “Effective Date”)
and issued and sold to Mast Hill Fund, L.P., a Promissory Note (the “Note”) in the principal amount of $
| (m) | Promissory Notes Issued on September 23, 2024 |
On September 25, 2024, the Company consummated
transactions pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated as of September 23, 2024 (the “Effective
Date”) and issued and sold to Mast Hill Fund, L.P., a Promissory Note (the “Note”) in the principal amount of $
21
Fourth Man, LLC Promissory Notes (Fourth Man Notes)
| (a) | Promissory Notes Issued on June 29, 2023 |
On June 29, 2023, the Company the Company entered
into a Securities Purchase Agreement and issued and sold to Fourth Man, LLC (“Fourth Man”), a Promissory Note (the “Note”)
in the principal amount of $
The Company paid to J.H. Darbie & Co., Inc.
$
The maturity date of the Note is the 12-month anniversary of the Effective Date, and is the date upon which the principal amount, the OID, as well as any accrued and unpaid interest and other fees, shall be due and payable.
| (b) | Promissory Notes Issued on August 28, 2023 |
On August 28, 2023, the Company entered into a
Securities Purchase Agreement and issued and sold to Fourth Man, LLC (“Fourth Man”), a Promissory Note (the “Note”)
in the principal amount of $
The Company paid to J.H. Darbie & Co., Inc.
$
The maturity date of the Note is the 12-month anniversary of the Effective Date, and is the date upon which the principal amount, the OID, as well as any accrued and unpaid interest and other fees, shall be due and payable.
Amendment #1 to Fourth Man Promissory Notes.
On February 1, 2024, Fourth Man and NGTF entered
into a letter agreement whereby Fourth Man agreed to amend that certain promissory note in the principal amount of $
22
Below is a reconciliation of the loss on extinguishment of debt relative to the amended promissory notes with Fourth Man:
| $ | ||||
| Loss on extinguishment | $ |
Amendment #2 to Fourth Man Promissory Notes.
On July 22, 2024, the Company and Fourth Man,
LLC (“Noteholder”) entered into a letter agreement to amend that certain promissory note in the principal amount of $
During the period beginning on July 23, 2024,
and continuing through the new maturity date of
Below is a reconciliation of the loss on extinguishment of debt relative to the amended promissory notes with Fourth Man:
| $ | ||||
| Loss on extinguishment | $ |
The Company evaluated all of these 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 proceeds of issuance is first allocated among the convertible instrument and the other detachable instruments based on their relative fair values.
Below is a reconciliation of the above debts (Mast Hills Notes and Fourth Man Notes):
| Principal | Debt Discount | Net Value | ||||||||||
| Balance at June 30, 2024 | $ | $ | ( | ) | $ | |||||||
| Promissory notes payable issued | ||||||||||||
| Promissory notes amended | ||||||||||||
| Debt discount associated with Promissory notes | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ||||||||||||
| Balance at December 31, 2024 | $ | $ | ( | ) | $ | |||||||
| Principal | Debt Discount | Net Value | ||||||||||
| Balance at June 30, 2023 | $ | $ | ( | ) | $ | |||||||
| Promissory notes payable issued | ||||||||||||
| Debt discount associated with Promissory notes | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ||||||||||||
| Balance at December 31, 2023 | $ | $ | ( | ) | $ | |||||||
23
Interest expenses associated with above convertible notes are as follows:
| For the three months Ended December 31, | For the six months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Amortization | $ | $ | $ | $ | ||||||||||||
| Interest on the convertible notes | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of December 31, 2024 and June 30, 2024, the interest payable was
$
As a result of dilutive issuances during the period
the exercise price of all of the aforementioned convertible notes has been reset subsequent to the period to $
10. Capital Stock Activity
Common Stock
The Company is authorized to issue Two Hundred
Million (
| ● | The Company had |
During the six months ended December 31, 2024:
| ● | The Company issued |
During the six months ended December 31, 2023:
| ● | The Company issued |
| ● | The Company issued |
24
Preferred Stock
| ● | The Company had |
| ● | The Company had |
| ● | The Company had |
| ● | The Company had |
Series A Preferred Stock
The Company is authorized to issue
During the fiscal year ended June 30, 2024 the
former holder of the
The Company had
Series B Preferred Stock
In April 2021, the Company designated
The Company had
Series C Preferred Stock
On January 26, 2024, NGTF filed a Certificate
of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Series C COD”), which
established
On February 7, 2024, the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) of Nightfood Holdings, Inc. (“NGTF”) was amended (the “Amended Series C COD”) by revising Section G to include a provision for adjustments for reverse stock splits. Pursuant to the Amended Series C COD, if the corporation at any time combines its outstanding shares of common stock into a smaller number of shares, then the number of shares of common stock issuable upon conversion of the Series C Preferred Stock pursuant to Section G(a) shall be proportionately decreased. No other changes were made.
25
The Company issued
On December 9, 2024, the Company issued a further
The Company had
Series D Preferred Stock
On February 7, 2024, NGTF filed a Certificate
of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D COD”), which
established
The Company issued
The Company had
Dividends
The Company has never declared dividends, however the Company records a deemed dividend as a result of beneficial conversion feature associated with certain transactions associated with the Series B Preferred Stock.
In connection with certain conversion terms provided
for in the designation of the B Preferred, pursuant to which each share of B Preferred is convertible into
11. Warrants
The following is a summary of the Company’s outstanding common stock purchase warrants.
During the fiscal year ended June 30, 2022, holders
of the Company’s B Preferred converted
26
During the fiscal year ended June 30, 2022,
During the fiscal year ended June 30, 2022, the
Company entered into a warrant agreement with one of the Company’s Directors issuing
During the fiscal year ended June 30, 2022, the
Company entered into an Agreement For Shareholder Lock-Up And Acquisition of Warrants (the “Lock-Up Agreement”), with Mr.
Folkson, issuing
During the fiscal year ended June 30, 2023, holders
of the Company’s B Preferred converted
During the fiscal year ended June 30, 2023,
During the fiscal year ended June 30, 2023 the
Company issued a cumulative
During the fiscal year ended June 30, 2023, the
Company issued an aggregate of
During the fiscal year ended June 30, 2023, the
Company entered into a warrant agreement with one of the Company’s Directors for the issuance of
During the fiscal year ended June 30, 2023, the
Company entered into an Agreement For Shareholder Lock-Up And Acquisition of Warrants (the “Lock-Up Agreement”), with Mr.
Folkson, issuing
During the fiscal year ended June 30, 2023, the
Company issued
27
During the fiscal year ended June 30, 2023, the
Company issued an aggregate of
During the fiscal year ended June 30, 2023, the
Company issued
During the fiscal year ended June 30, 2023, under
the terms of a Warrant Exchange Agreement, among other agreements, SC exchanged an aggregate of
During the fiscal year ended June 30, 2024, the
Company issued cumulative
During the fiscal year ended June 30, 2024,
During the fiscal year ended June 30, 2024, a
total of
During the fiscal year ended June 30, 2024, a
total of
During the three months ended September 30, 2024,
a total of
Certain warrants in the below table include dilution protection for the warrant holders, which could cause the exercise price to be adjusted either higher or lower as a result of various financing events and stock transactions. The result of the warrant exercise price downward adjustment on modification date is treated as a deemed dividend and fully amortized on the transaction date. In addition to the reduction in exercise price, with certain warrants there is a corresponding increase to the number of warrants to the holder on a prorated basis. Under certain conditions, such as the successful retirement of a convertible note through repayment, it is possible for the exercise price of these warrants to increase and for the number of warrants outstanding to decrease.
28
The aggregate intrinsic value of the warrants
as of December 31, 2024 is $
| Exercise Price | June 30, 2024 | Issued | Repricing | Exercised | Others | Cancelled | Expired | Redeemed | December 31, 2024 | |||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||||||||||
| $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||||||||||
| ) | ||||||||||||||||||||||||||||||||||||||
Returnable Warrants
A cumulative total of
During the fiscal year ended June 30, 2023, the
Company issued cumulative
Any expense related to such warrants will be recorded
in a future reporting period and only in the event the Company defaults on certain debt obligations. These returnable warrants were initially
valued using the Black Scholes model with a volatility of between
12. Commitments and Contingencies:
| ● | The Company has entered into certain consulting agreements which carry commitments to pay advisors and consultants should certain events occur. An agreement is in place with one Company Advisor that calls for total compensation over the four-year Advisor Agreement of |
29
| ● | On July 7, 2023, the Company
entered into a Letter of Engagement with Spencer Clarke LLC (“SC”). Under the terms of the agreement SC was retained to act
as the Company’s “Exclusive” Placement Agent in connection with any Capital/Debt Raise, warrant exercise, (“Financings”)
and for any Sale, Joint Venture, Merger, Acquisition or transaction (“M&A Transactions”) or any other financially structured
corporate activity, collectively (“Corporate Finance Activity”). On signing of the agreement, the Company issued | |
| ● | Sean Folkson has a consulting agreement entered into on February 2, 2024 and effective as of December 1, 2023 and runs through December 31, 2024. The agreement was automatically renewed on December 31, 2024. The agreement contains the potential for cash and equity bonuses should Nightfood, Inc. achieve certain revenue milestones. The Cash Performance Bonus shall be equal to |
| ● | Shares and warrants issuable for directors’ fees: As set out in Note 13 below, the Company has accrued total compensation for directors in the amount of $ |
| ● | Litigation: From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The Company is not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. |
13. Related Party Transactions
As of December 31, 2024 and June 30, 2024, related parties are
due a total of $
| December 31, 2024 | June 30, 2024 | |||||||
| Sean Folkson consulting fees payable | $ | $ | ||||||
| Directors’ fees payable | ||||||||
| Accrued compensation payable with shares and warrants (unissued) | ||||||||
| Lei Sonny Wang, salary payable | ||||||||
| Sean Folkson loan (principal $ | ||||||||
| Lei Sonny Wang, reimbursable expenses | ||||||||
| Total related party payable | $ | $ | ||||||
Services provided from related parties as professional fees:
| For the three months Ended December 31, | For the six months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Sean Folkson | $ | $ | $ | $ | ||||||||||||
| Directors’ fees and compensation for non-employee directors | ||||||||||||||||
| Lei Sonny Wang | ||||||||||||||||
| Total fees under professional fees | $ | $ | $ | $ | ||||||||||||
On February 2, 2024, Sean Folkson resigned as chief executive officer of NGTF and Lei Sonny Wang was appointed Chief Executive Officer and a director.
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Agreements with Mr. Folkson
Sean Folkson has a consulting agreement (the “Consulting
Agreement”) entered into on February 2, 2024 and effective as of December 1, 2023 and runs through December 31, 2024. The contract
was automatically renewed as of December 31, 2024. Pursuant to the Consulting Agreement, Mr. Folkson will (1) continue to serve as a director
of NGTF, subject to shareholder approval, for no less than the company’s first twelve (12) months on the NASDAQ Capital Market should
a successful uplisting occur, during which time both NGTF and its board of directors (the “Board”) will use its best effort
to maintain Mr. Folkson’s directorship and (2) will serve as president of Nightfood, Inc. until December 31, 2024, which may date
be extended. Mr. Folkson will receive cash and equity compensation as a director commensurate with the compensation received by other
directors. Unless either party provides the other written notice at least 45 days before the end of the Consulting Agreement’s term
of its intention to terminate, then the Consulting Agreement will renew automatically for one-year terms. The Consulting Agreement can
be terminated for cause without notice. Upon termination of the Consulting Agreement for any reason, Mr. Folkson will receive NGTF common
stock with a market value equal to $
In exchange for his services, Mr. Folkson will
receive a minimum annual salary of $
Agreements with Mr. Wang
In connection with Mr. Lei Sonny Wang’s
appointment as chief executive officer, NGTF and Mr. Wang entered into an employment agreement effective as of February 2, 2024 (the “Employment
Agreement”). Pursuant to the Employment Agreement, Mr. Wang will serve his initial term beginning February 2, 2024 (the “Effective
Date”) ending on the earlier of (i) the one-year anniversary of the Effective Date or (ii) the termination of the Employment Agreement
(the “Initial Term”). The Initial Term will be automatically extended for additional one-year terms (each a “Renewal
Term”), unless NGTF or Mr. Wang provides the other with notice, at least 30 days prior to the expiration of the current term, of
its desire not to renew the Employment Agreement. For his services, Mr. Wang will receive an annual base salary of $
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The Employment Agreement may be terminated with or without cause by NGTF and may be terminated with or without good reason by Mr. Wang. If NGTF terminates the agreement for cause, then NGTF will (i) pay Mr. Wang any unpaid Base Salary, benefits and any unreimbursed expenses within 10 days after the termination date; (ii) any unvested portion of equity granted to Mr. Wang through any agreement, including restricted stock awards, will be automatically forfeited; and (iii) both parties’ rights and obligations will cease, other than rights or obligations that arose prior to the termination date or in connection with the termination. If NGTF terminates the agreement without cause, then NGTF will (i) pay Mr. Wang any Base Salary or other amounts accrued and any unreimbursed expenses incurred within 10 days following the termination date; (ii) pay Mr. Wang a lump sum equal to the Base Salary that would have been paid to Mr. Wang for the remainder of the Initial Term or Renewal Term within 10 days of the termination; (iii) any grant of equity made to Mr. Wang, to the extent not vested, will automatically vest; and (iv) both parties’ rights and obligations will cease, other than rights or obligations that arose prior to the termination date or in connection with the termination. Should Mr. Wang terminate the Employment Agreement with good reason, then he will be entitled to the benefits payable to him as if the Employment Agreement had been terminated without cause. If Mr. Wang terminates the Employment Agreement without good reason, then he will be entitled to the benefits payable to him as if the Employment Agreement had been terminated with cause.
With regards to intellectual property, Mr. Wang has agreed that any work product resulting from the Employment Agreement will be the sole and exclusive property of NGTF and has irrevocably assigned all right, title and interest worldwide in and to any work product to NGTF. NGTF may also sublicense any work product resulting from the Employment Agreement.
16. Other Events
On September 10, 2024, the Company announced a strategic all-stock
acquisition of SWC Group Inc., doing business as CarryoutSupplies.com (“CarryOut”). CarryOut is a leading wholesaler and distributor
of custom takeout packaging for the foodservice industry, with traditional, biodegradable and compostable options. Subsequently, on December
10, 2024 the Company, Future Hospitality Ventures Holdings, Inc., SWC Group, Inc., and Sugarmade, Inc. entered into an amendment (the
“Amendment”) which modified certain terms of the Share Exchange Agreement (the “Agreement”). The Amendment modified
the method for calculating the number of shares to be issued under the Agreement. Under the revised terms, the share issuance was required
to be determined based on the 90-day Volume Weighted Average Price (VWAP) of the Company’s common stock as of December 4, 2024.
On December 9, 2024, the Company issued
On October 1, 2024 the Company announced that it has signed a Letter of Intent (LOI) to acquire Stratford Education Group Inc., doing business as the Los Angeles Cooking School. The Company’s relationship with Stratford at this time is that of a joint venture and the acquisition is now anticipated to complete in the second half of calendar 2025 to allow time for some financial and operational restructuring within Stratford prior to acquisition.
On October 4, 2024, the Company’s subsidiary Future Hospitality Ventures Holdings Inc. entered into a reseller agreement with Bear Robotics, Inc. for a one year term whereunder the Company has certain minimum unit purchase commitments on a quarterly and annual basis.
On November 27, 2024, the Board of Directors accepted the resignations of Dr. Thanuja Hamilton and Ms. Nisa Amoils from the Board, effective immediately.
17. Subsequent Events
On January 21, 2025, the Board of Directors (the “Board”) of Nightfood Holdings, Inc. (the “Company”) appointed Mr. Jamie Steigerwald and Mr. Christopher Dieterich as members of the Board to fill the vacancies created by the resignations of Dr. Thanuja Hamilton and Ms. Nisa Amoils, which were previously disclosed in the Company’s Form 8-K filed on December 6, 2024.
In addition, the Board designated Mr. Steigerwald as Chairman of the Board, replacing Mr. Sean Folkson, effective immediately.
The Company has evaluated events for the period through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure.
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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, 2024 as filed with the Securities and Exchange Commission (the “SEC”) on December 27, 2024, as well as the other information set forth herein.
OVERVIEW
General Development of Business
Nightfood Holdings, Inc. (“we”, “us”, “NGTF”, “the Company” or “Nightfood”) is a Nevada corporation incorporated 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. We are also the sole shareholder of MJ Munchies, Inc., currently revoked in the State of Nevada, which owns certain intellectual property, but does not have any operations as of the period covered by these financial statements.
On February 2, 2024, the Company closed the acquisition of Future Hospitality Ventures Holdings Inc. (“FHVH” or “Future Hospitality”), a Nevada corporation and a new entrant in the Robots-as-a-Service (RaaS) space from Mr. Lei Sonny Wang, who concurrently became the Chief Executive Officer (“CEO”) of Nightfood and a member of the Company’s board of directors. Under the leadership of Mr. Wang, as of the time of this filing, Future Hospitality has secured distribution agreements with Next Robots, Inc. (formally Botin Innovations, Inc.) and Bear Robotics, Inc. and is in the process of negotiating and exploring additional supplier relationships.
On September 10, 2024, the Company announced the closing of its strategic all-stock acquisition of SWC Group Inc., doing business as CarryoutSupplies.com (“CarryOut”). CarryOut is a leading wholesaler and distributor of custom takeout packaging for the foodservice industry, with traditional, biodegradable and compostable options. Subsequently, on December 10, 2024 the Company, Future Hospitality Ventures Holdings, Inc., SWC Group, Inc., and Sugarmade, Inc. entered into an amendment (the “Amendment”) which modified certain terms of the Share Exchange Agreement dated September 4, 2024 (the “Agreement”). The Amendment modifies the method for calculating the number of shares to be issued under the Agreement. Under the revised terms, the share issuance will be determined based on the 90-day Volume Weighted Average Price (VWAP) of the Company’s common stock as of December 4, 2024. On December 9, 2024, the Company issued 83,333 shares of its Series C preferred stock as the consideration required above. The issued shares are required to be returned in the event the transaction does not close as contemplated. As of the date of this report the transaction had not yet closed.
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Present Operations
Future Hospitality dba RoboOp365 launched in California shortly before California’s April 2024 foodservice and hospitality minimum wage increase which received significant media coverage. Future Hospitality provides artificial intelligence (AI) enabled robotic solutions that we believe deliver critical efficiencies, cost savings, and enhanced consumer experience in hospitality and food service. During the quarter ended December 31, 2024 the Company secured paid trial placements with two customers.
Management believes that incorporating Future Hospitality’s advanced AI-enabled robotic solutions positions the Company at the forefront of innovation in the hospitality sector at this critical point in time. We believe our success in this area can open new avenues for growth and efficiency across our portfolio. Our customers can benefit from plug-and-play, AI-enabled automation which integrates easily and seamlessly into traditional restaurants, hotels, health care facilities, school cafeterias and other food service operations. There are exponential benefits for customers with a portfolio of locations, which is the market segment we are initially targeting.
Subsidiary Nightfood, Inc. has encountered quality and logistics challenges with its current copacker. The Company is exploring selling other products in other categories and is seeking a new copacker for its cookie business.
DEVELOPMENT PLANS
Our focus is on identifying and exploiting explosive market trends within the hospitality, food services, and consumer goods sectors. By leading newly emerging categories and by identifying opportunities in existing markets undergoing transformational upheaval, our aim is to create upside potential unmatched in more mature markets.
In November 2023, we announced our goal of building a portfolio of operating companies in these spaces to enhance stability and shareholder value through uplist to a senior exchange such as NASDAQ. The first acquisition in this process was completed in February 2024, when we acquired newly formed Future Hospitality in an all-stock transaction.
We are currently in the process of acquiring two additional operating companies which are expected to bring millions of dollars in assets and synergistic revenue under the Nightfood Holdings umbrella, should the acquisitions be successfully completed, which we anticipate. Our updated timeline targets have us completing the first of these two acquisitions in spring of 2025, with the goal of transitioning to the NASDAQ as soon as practicable thereafter.
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 2024 AND 2023
Revenue
For the three months ended December 31, 2024, we had revenues of $15,141 as compared to revenues of $898, for the three months ended December 31, 2023. During the three months ended December 31, 2024, due to an earlier shift from retail distribution of Nightfood snacks to direct- to-consumer, we did not incur slotting fees as compared to the three months ended December 31, 2023 when slotting fees made up a substantial cost against revenues. Our cost of product sold for the three months ended December 31, 2024 and 2023 was $10,116 and $913 respectively. The increase in cost of product sold for the three months ended December 31, 2024 is related to shipping costs which increased due to our direct to consumer business model with limited shipping costs during the three months ended December 31, 2023 and the costs of product as we transitioned from the sale of ice cream and cookies to solely marketing our cookies by way of e-commerce.
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Costs and expenses
For the three months ended December 31, 2024, and 2023 we incurred operating expenses of $251,666 and $120,965 respectively.
| For the three months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses | ||||||||
| Cost of product sold | 10,116 | 913 | ||||||
| Advertising and promotional | 12,940 | 3,798 | ||||||
| Selling, general and administrative expense | 61,332 | 41,559 | ||||||
| Professional fees | 167,278 | 74,695 | ||||||
| Total operating expenses | 251,666 | 120,965 | ||||||
For the three months ended December 31, 2024 and 2023, cost of product sold increased to $10,116 from $913. This is a direct result of the increase in shipping costs in the three months ended December 31, 2024 as the Company transitioned from retail sales to direct to consumer offerings. Shipping and freight costs in the three months ended December 31, 2024 totaled $4,398 and costs of cookie production totaled $5,499 while the costs of product sold in December 31, 2023 was comprised solely of limited freight costs of $913.
For the three months ended December 31, 2024 and 2023, advertising and promotional expenses increased to $12,940 (2024) from $3,798 in advertising and promotion for the three months ended December 31, 2023. This increase is largely due to increased direct-to-consumer advertising and promotional efforts during the period.
For the three-month period ended December 31, 2024 and 2023, selling, general, and administrative expenses increased from $41,559 (2023) to $61,332 (2024). The increase is related mainly to an increase in investor relations expenses of $21,338 period over period, offset by some small decreases in other selling, general and administrative expenses in the three months ending December 31, 2024.
For the three months ended December 31, 2024 and 2023, professional fees increased to $167,278 for the three months ended December 31, 2024 as compared to $74,695 in the three months ended December 31, 2023. This increase was largely due to an increase in consulting fees from approx. $29,800 (2023) to $79,609 (2024) and an increase in fees to our CEO of $30,000 (2024) with no comparable fees in the same period ended December 31, 2023 plus small increases in directors and legal fees.
Total operating expenses were $251,666 (December 31, 2024) and $120,965 (December 31, 2023) and include those expenses associated with running the operating portion of our business (such as manufacturing our snacks, advertising for our product, warehousing, freight, and the like). It also includes certain cash and non-cash expenses incurred by us related to activities such as SEC compliance, fundraising activities, and maintaining our public entity in good standing. Our revenues and operations are currently limited, therefore expenses relating to financing and compliance activities make up a larger portion of our total expenses than they might in a larger company.
Other Income (Expense)
| Other income (expense) | Three months ended December 31, 2024 | Three months ended December 31, 2023 | ||||||
| Interest income | 29,643 | - | ||||||
| Interest expense - debt | (211,179 | ) | (61,596 | ) | ||||
| Interest expense – financing cost | (2,050 | ) | (38,890 | ) | ||||
| Amortization of debt discount | (59,495 | ) | (201,481 | ) | ||||
| Total other income (expense) | (243,081 | ) | (301,967 | ) | ||||
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For the three months period ended December 31, 2024 and 2023, total other expenses totaled $243,081 as compared to $301,967. A major portion of these results are related to accounting treatment applied to financing costs and debt and the amortization of debt discount during the three months ended December 31, 2023. During the three months ended December 31, 2024 we recorded interest income of $29,643 with no comparable income for the three months ended December 31, 2023. During the three months period ended December 31, 2024 we had interest expenses on debt of $211,179 as compared to interest expenses of $61,596 as we increased our debt by way of loans and debentures. During the three months period ended December 31, 2024 we recorded $2,050 for interest expense related to financing costs and $59,495 as amortization of debt discounts as compared to $38,890 for interest expense on financing costs and $201,481 as amortization of debt discount for the three months ended December 31, 2023 as we applied an account treatment to these items in 2023.
Net Loss
Our net loss in the three months ended December 31, 2024 was relatively consistent with our net loss for the three months ended December 31, 2023. Net loss at December 31, 2024 totaled $479,606 as compared to a net loss of $422,034 in the three months ended December 31, 2023. The largest component of the increase to our current period net loss was an increase in operating expenses from $120,965 (2023) to $251,666 (2024) mainly due to an increase in professional fees and general and administrative expenses in the three months ended December 31, 2024, offset by a decrease in other expense to $243,081 (2024) from $301,967 (2023) which was mainly the result of a reduction of amortization in debt discount for the three months ended December 31, 2023 offset by interest expense for debt increasing in the three months ended December 31, 2024.
RESULTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2024 AND 2023
Revenue
For the six months ended December 31, 2024, we had revenues of $39,595 as compared to revenues of $9,833, for the six months ended December 31, 2023. During the six months ended December 31, 2024, due to an earlier shift from retail distribution of Nightfood snacks to direct- to-consumer, we did not incur slotting fees. Our cost of product sold for the six months ended December 31, 2024 and 2023 was $27,765 and $57,576 respectively.
Costs and expenses
For the six months ended December 31, 2024, and 2023 we incurred operating expenses of $588,426 and $425,841 respectively.
| For the six months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses | ||||||||
| Cost of product sold | 22,765 | 57,576 | ||||||
| Advertising and promotional | 28,960 | 1,357 | ||||||
| Selling, general and administrative expense | 156,803 | 79,133 | ||||||
| Professional fees | 379,898 | 287,775 | ||||||
| Total operating expenses | 588,426 | 425,841 | ||||||
For the six months ended December 31, 2024 and 2023, cost of product sold decreased to $22,765 from $57,576. This is a direct result of the cessation of slotting fees as the Company transitioned from retail sales to direct to consumer offerings. For the six-month period ended December 31, 2023, the slotting fees totaled $39,534, with no similar expense in the current six-month period.
For the six months ended December 31, 2024 and 2023, advertising and promotional expenses increased to $28,960 (2024) from $1,357 in advertising and promotion for the six months ended December 31, 2023.
This increase is largely due to increased direct-to-consumer advertising and promotional efforts during the period.
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For the six-month period ended December 31, 2024 and 2023, selling, general, and administrative expenses increased from $79,133 (2023) to $156,803 (2024). The largest component of this increase was the result of a write down of accounts receivable and other current assets in the total amount of $48,609 plus insurance fees increased by $13,000.
For the six months ended December 31, 2024 and 2023, professional fees increased to $379,898 for the six months ended December 31, 2024 as compared to $287,775 in the six months ended December 31, 2023. This increase was largely due to a contract for CEO fees in the amount of $60,000 for the six months ended December 31, 2024 with no comparable contract in the period ended December 2023.
Total operating expenses were $588,426 (December 31, 2024) and $425,841 (December 31, 2023) and include those expenses associated with running the operating portion of our business (such as manufacturing our snacks, advertising for our product, warehousing, freight, and the like). It also includes certain cash and non-cash expenses incurred by us related to activities such as SEC compliance, fundraising activities, and maintaining our public entity in good standing. Our revenues and operations are currently limited, therefore expenses relating to financing and compliance activities make up a larger portion of our total expenses than they might in a larger company.
Other Income (Expense)
| Other income (expense) | Six months ended December 31, 2024 | Six months ended December 31, 2023 | ||||||
| Interest income | 45,629 | - | ||||||
| Interest expense - debt | (408,411 | ) | (107,059 | ) | ||||
| Interest expense – financing cost | (95,032 | ) | (804,160 | ) | ||||
| Amortization of debt discount | (109,867 | ) | (413,740 | ) | ||||
| Gain on debt extinguishment | (127,705 | ) | - | |||||
| Total other income (expense) | (695,386 | ) | (1,324,959 | ) | ||||
For the six months period ended December 31, 2024 and 2023, total other expenses totaled $695,386 as compared to $1,324,959. A major portion of these results are related to accounting treatment applied to financing costs and debt and the amortization of debt discount during the six months ended December 31, 2023. During the six months ended December 31, 2024 we recorded interest income of $45,629 with no comparable income for the six months ended December 31, 2023. During the six months period ended December 31, 2024 we had interest expenses on debt of $408,411 as compared to interest expenses on debt of $107,059 as we increased our debt by way of loans and debentures. During the six months period ended December 31, 2024 we recorded $95,032 for interest expense related to financing costs and $109,867 as amortization of debt discounts as compared to $804,160 for interest expense on financing costs and $413,740 as amortization of debt discount for the six months ended December 31, 2023 as we applied an account treatment to these items in 2023. During the six months ended December 31, 2024 we recorded $127,705 as a loss on debt extinguishment with no comparable entry for the six months ended December 31, 2023.
Net Loss
Our net loss in the six months ended December 31, 2024 ($1,244,217) was lower than with our net loss for the six months ended December 31, 2023 ($1,740,967). The largest component of this decrease was the result of accounting treatment that impacted financing costs and amortization in debt discount during the six months ended December 31, 2023, offset by an increase in interest expense and loss on debt extinguishment for December 31, 2024.
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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2024, we had cash on hand of $17,341, receivables of $1,392, other current assets of $78,775 and inventory valued at $16,983 and a working capital deficit of $5,839,806.
Our cash on hand is not adequate to satisfy our working capital needs. We believe that our current capitalization structure, ongoing merger and acquisition activity, and our access to institutional capital will enable us to successfully secure the required financing to execute our development plans. In addition, we are currently working on acquisitions of additional revenue generating businesses to bolster our growth and strengthen our balance sheet.
As discussed above, the Company has limited available cash resources and we do not believe our cash on hand will be sufficient to fund our operations and growth through the balance of fiscal year 2025, or adequate to satisfy our immediate or ongoing working capital needs. The Company is continuing to raise capital through the sale of its securities, including common stock, preferred stock, and debt (including convertible debt) to finance the Company’s operations, of which it can give no assurance of success. In addition, we will receive the proceeds from our outstanding warrants as, if and when such warrants are exercised for cash.
If we are unable to raise cash through the sale of our securities, we may be required to severely restrict or cease our operations.
Even if the Company is successful in raising additional funds, the Company cannot give any assurance that it will, in the future, be able to achieve a level of profitability from the sale of products and services of its subsidiaries to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Since inception in January 2010 through December 31, 2024, we have generated an accumulated deficit of $39,882,183. This accumulated deficit is not debt, and there is no obligation or liability associated with it. An accumulated deficit reflects a negative balance of retained earnings and an accumulation of historical losses over time, related to both operations and financing activities. It is not unusual for growing companies to have a significant accumulated deficit, even after becoming profitable. The Company’s accumulated deficit is a function of losses sustained over time, along with the costs associated with raising operating capital.
Assuming we raise additional funds and continue operations, it is expected we may incur additional operating losses during the course of fiscal year 2025 and possibly thereafter. We plan to continue to pay or satisfy existing obligations and commitments and finance our operations, as we have in the past, primarily through the sale of our securities and other forms of external financing until such time that we are able to generate sufficient funds from the sale of our products to finance our operations, of which we can give no assurance.
We anticipate deriving additional revenue from our subsidiaries in fiscal year 2025, but we cannot at this time quantify the amount. We expect to successfully complete additional acquisitions of operating companies prior to the close of fiscal 2025.
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Cash Flow from Operating Activities
During the six months ended December 31, 2023, net cash used in operating activities was $348,749 compared to net cash used of $$270,240 for the six months ended December 31, 2024 as set out below:
| CASH FLOWS FROM OPERATING ACTIVITIES: | Six months ended December 31, 2024 | Six months ended December 31, 2023 | ||||||
| Net loss | $ | (1,244,217 | ) | $ | (1,740,967 | ) | ||
| Adjustments to reconcile net loss to net cash used in operations activities: | ||||||||
| Non-cash financing cost under contingent liability | 92,000 | - | ||||||
| Interest income under acquisition note | (45,629 | ) | - | |||||
| Warrants issued for services | - | 84,230 | ||||||
| Stock issued for services | 995 | 7,800 | ||||||
| Stock issued for financing costs | - | 50,000 | ||||||
| Amortization of debt discount | 109,867 | 413,740 | ||||||
| Loss on amended / extinguishment of convertible note | 127,705 | - | ||||||
| Warrants and returnable warrants issued for financing costs | - | 721,470 | ||||||
| Bad debt | 48,610 | - | ||||||
| Change in operating assets and liabilities | ||||||||
| Change in accounts receivable | 1,734 | 3,385 | ||||||
| Change in inventory | 8,826 | (26,345 | ) | |||||
| Change in other current assets | (1,009 | ) | (87,677 | ) | ||||
| Change in accounts payable | 517,664 | 153,965 | ||||||
| Change in relate party payable | 113,214 | 71,650 | ||||||
| Net cash used in operating activities | (270,240 | ) | (348,749 | ) | ||||
Cash Flow from Investing Activities
During the six months ended December 31, 2024 cash used for investing activities was comprised of acquisition costs secured by promissory notes of $223,063 and purchase of equipment of $39,700. There were no cash flows from investing activities in the six months ended December 31, 2023.
Cash Flow from Financing Activities
During the six months ended December 31, 2024, net proceeds of $402,050 was raised through the issuance of debt in the form of convertible notes and secured promissory notes. In the six months ended December 31, 2023, our financing activities provided net proceeds of $301,400 by way of proceeds raised by the issuance of debt.
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.
Note 2 to the consolidated financial statements, presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. There were no significant changes in our critical accounting estimates during the six months ended December 31, 2024.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide this information.
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 December 31, 2024. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on that evaluation, our chief executive officer concluded that our disclosure controls and procedures were not effective at December 31, 2024 due to the lack of full-time accounting and management personnel. We will consider hiring additional employees when we obtain sufficient capital.
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.
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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.
Other than as set out below, there were no other sales of equity securities during the six months covered by this Report that were not registered under the Securities Act and/or were not previously reported in a Current Report on Form 8-K or Form 10-Q filed by the Company.
On December 9, 2024, the Company issued 83,333 shares of its Series C preferred stock under the terms of a share exchange agreement entered into on September 4, 2024, as amended. The issued shares are required to be returned in the event the transaction does not close as contemplated. As of the date of this report the transaction has not yet closed.
In December 31, 2024 the Company issued 50,000 shares of is unregistered, restricted common stock to a vendor as part of an agreement to retire accounts payable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.
On November 27, 2024, the Board of Directors accepted the resignations of Dr. Thanuja Hamilton and Ms. Nisa Amoils from the Board, effective immediately.
A consulting agreement entered into with Sean Folkson, director, on February 2, 2024, was automatically renewed for a further term on December 31, 2024.
On January 21, 2025, the Board of Directors (the “Board”) of Nightfood Holdings, Inc. (the “Company”) appointed Mr. Jamie Steigerwald and Mr. Christopher Dieterich as members of the Board. In addition, the Board designated Mr. Steigerwald as Chairman of the Board, replacing Mr. Sean Folkson, effective immediately.
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ITEM 6. EXHIBITS.
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| * | Filed herewith |
| ++ | Indicates a management contract or compensatory plan. |
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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.
| Nightfood Holdings, Inc. | ||
| Dated: February 14, 2025 | By: | /s/ Lei Sonny Wang |
| Lei Sonny Wang | ||
| Chief Executive Officer | ||
| (Principal Executive, Financial and Accounting Officer) | ||
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Exhibit 31
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
I, Lei Sonny Wang (Principal Executive Officer and Principal Financial and Accounting Officer), certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Nightfood Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15 (f) for the registrant and I have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: February 14, 2025 | By: | /s/ Lei Sonny Wang |
| Lei Sonny Wang | ||
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Lei Sonny Wang, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) of Nightfood Holdings, Inc. (the “Company”), certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350) that, to his knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 (the “Report”):
| (1) | fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ Lei Sonny Wang | |
| Lei Sonny Wang | |
|
Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
|
| Date: February 14, 2025 |