UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ended: September 30, 2024
Or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period
from ___________ to____________
Commission File Number: 000-55406
NIGHTFOOD HOLDINGS,
INC.
(Exact name of registrant
as specified in its charter)
| Nevada | | 46-3885019 |
| (State or Other Jurisdiction of | | (I.R.S. Employer |
| Incorporation or Organization) | | Identification No.) |
| 520 White Plains Road, Suite 500 Tarrytown, New York | | 10591 |
| (Address of Principal Executive Offices) | | (Zip Code) |
888-888-6444
(Registrant’s telephone
number, including area code)
Securities registered pursuant to Section
12(b) of the Act:
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| N/A | | N/A | | N/A |
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes ☒ No ☐
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| | Emerging growth company | ☐ |
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
On January 7, the issuer
had 128,957,407 shares of common stock outstanding.
Table of Contents
Nightfood Holdings,
Inc.
Item 1. Financial Statements
Nightfood Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | |
September 30, | | |
June 30, | |
| | |
2024 | | |
2024 | |
| | |
(Unaudited) | | |
(Audited) | |
| ASSETS | |
| | |
| |
| | |
| | |
| |
| Current assets: | |
| | |
| |
| Cash and cash equivalents | |
$ | 293,523 | | |
$ | 148,294 | |
| Accounts receivable | |
| 1,381 | | |
| 22,337 | |
| Inventory | |
| 20,882 | | |
| 25,808 | |
| Other current assets | |
| 71,696 | | |
| 107,161 | |
| Total current assets | |
| 387,482 | | |
| 303,600 | |
| | |
| | | |
| | |
| Acquisition costs secured by promissory note | |
| 586,044 | | |
| 441,479 | |
| Indefinite-lived intangible assets | |
| 897,542 | | |
| 897,542 | |
| Total assets | |
$ | 1,871,068 | | |
$ | 1,642,621 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
$ | 1,333,493 | | |
$ | 1,059,251 | |
| Accounts payable and accrued liabilities - related party | |
| 341,204 | | |
| 295,510 | |
| Convertible notes payable - net of discounts | |
| 3,909,159 | | |
| 3,442,987 | |
| Total current liabilities | |
| 5,583,856 | | |
| 4,797,748 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 12) | |
| 370,200 | | |
| 278,200 | |
| | |
| | | |
| | |
| Stockholders’ equity (deficit): | |
| | | |
| | |
| Series A Stock, $0.001 par value, 1,000,000 shares authorized 1,000 issued and outstanding as at September 30, 2024 and June 30, 2024 | |
| 1 | | |
| 1 | |
| Series B Stock, $0.001 par value, 5,000 shares authorized 1,950 issued and outstanding as at September 30, 2024 and June 30, 2024 | |
| 2 | | |
| 2 | |
| Series C Stock, $0.001 par value, 500,000 shares authorized 13,333 issued and outstanding as at September 30, 2024 and June 30, 2024 | |
| 13 | | |
| 13 | |
| Series D Stock, $0.001 par value, 100,000 shares authorized 3,334 and 1,667 issued and outstanding as of September 30, 2024, and June 30, 2024, respectively | |
| 3 | | |
| 2 | |
| Common stock, $0.001 par value, 200,000,000 shares authorized 128,957,407 and 128,907,407 issued and outstanding as of September 30, 2024, and June 30, 2024, respectively | |
| 128,957 | | |
| 128,907 | |
| Additional paid in capital | |
| 35,190,613 | | |
| 35,064,148 | |
| Accumulated deficit | |
| (39,402,577 | ) | |
| (38,626,400 | ) |
| Total Stockholders’ Equity (Deficit) | |
| (4,082,988 | ) | |
| (3,433,327 | ) |
| Total Liabilities and Stockholders’ Equity (Deficit) | |
$ | 1,871,068 | | |
$ | 1,642,621 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
| | |
For Three Months Ended
September 30, | |
| | |
2024 | | |
2023
(Restated) | |
| | |
| | |
| |
| Revenues, net | |
$ | 24,454 | | |
$ | 8,935 | |
| | |
| | | |
| | |
| Operating expenses | |
| | | |
| | |
| Cost of product sold | |
| 12,649 | | |
| 56,663 | |
| Advertising and promotional expense | |
| 16,020 | | |
| (2,441 | ) |
| Selling, general and administrative expense | |
| 95,471 | | |
| 37,574 | |
| Professional fees | |
| 212,620 | | |
| 213,080 | |
| Total operating expenses | |
| 336,760 | | |
| 304,876 | |
| | |
| | | |
| | |
| Loss from operations | |
| (312,306 | ) | |
| (295,941 | ) |
| | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | |
| Interest income | |
| 15,986 | | |
| - | |
| Interest expense - debt | |
| (197,232 | ) | |
| (45,463 | ) |
| Interest expense – financing cost | |
| (92,982 | ) | |
| (765,270 | ) |
| Amortization of debt discount | |
| (50,372 | ) | |
| (212,259 | ) |
| Gain (loss) on debt extinguishment | |
| (127,705 | ) | |
| - | |
| Total other income (expense) | |
| (452,305 | ) | |
| (1,022,992 | ) |
| | |
| | | |
| | |
| Net (Loss) | |
| (764,611 | ) | |
| (1,318,933 | ) |
| | |
| | | |
| | |
| Deemed dividend on Series B Preferred Stock | |
| 11,566 | | |
| 20,771 | |
| Net income (loss) attributable to common shareholders | |
| (776,177 | ) | |
| (1,339,704 | ) |
| | |
| | | |
| | |
| Basic and diluted net loss per common share | |
$ | (0.00 | ) | |
$ | (0.01 | ) |
| | |
| | | |
| | |
| Weighted average shares of capital outstanding – basic and diluted | |
| 128,920,994 | | |
| 124,783,621 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
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 | |
| 128,907,407 | | |
$ | 128,907 | | |
| - | | |
$ | 18 | | |
$ | 35,064,148 | | |
$ | (38,626,400 | ) | |
$ | (3,433,327 | ) |
| Common stock issued for services | |
| 50,000 | | |
| 50 | | |
| | | |
| | | |
| 945 | | |
| | | |
| 995 | |
| Shares issued for amended convertible note | |
| - | | |
| - | | |
| - | | |
| 1 | | |
| 113,954 | | |
| - | | |
| 113,955 | |
| Deemed dividends associated with warrants related dilutive adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| 11,566 | | |
| (11,566 | ) | |
| - | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| | | |
| | | |
| (764,611 | ) | |
| (764,611 | ) |
| Balance, September 30, 2024 | |
| 128,957,407 | | |
$ | 128,957 | | |
| - | | |
$ | 19 | | |
$ | 35,190,613 | | |
$ | (39,402,577 | ) | |
$ | (4,082,988 | ) |
| | |
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 | |
| 123,587,968 | | |
$ | 123,588 | | |
| - | | |
$ | 3 | | |
$ | 33,112,935 | | |
$ | (35,306,788 | ) | |
$ | (2,070,262 | ) |
| Common stock issued as financing cost | |
| 3,333,333 | | |
| 3,333 | | |
| - | | |
| - | | |
| 46,667 | | |
| - | | |
| 50,000 | |
| Warrants issued as consulting fee | |
| - | | |
| - | | |
| - | | |
| - | | |
| 84,230 | | |
| - | | |
| 84,230 | |
| Warrants issued as financing cost | |
| - | | |
| - | | |
| - | | |
| - | | |
| 707,620 | | |
| - | | |
| 707,620 | |
| Warrants issued associated with Promissory Notes | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,878 | | |
| - | | |
| 9,878 | |
| Deemed dividends associated with warrants related dilutive adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,771 | | |
| (20,771 | ) | |
| - | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| (1,318,933 | ) | |
| (1,318,933 | ) |
| Balance, September 30, 2023 | |
| 126,921,301 | | |
$ | 126,921 | | |
| - | | |
$ | 3 | | |
$ | 33,982,101 | | |
$ | (36,646,492 | ) | |
$ | (2,537,467 | ) |
| (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 | |
| 1,000 | | |
$ | 1 | | |
| 1,950 | | |
$ | 2 | | |
| 13,333 | | |
$ | 13 | | |
| 1,667 | | |
$ | 2 | | |
$ | 18 | |
| Shares issued for amended convertible note | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,667 | | |
| 1 | | |
| 1 | |
| Balance, September 30, 2024 | |
| 1,000 | | |
$ | 1 | | |
| 1,950 | | |
$ | 2 | | |
| 13,333 | | |
$ | 13 | | |
| 3,334 | | |
$ | 3 | | |
$ | 19 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| (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 | |
| 1,000 | | |
$ | 1 | | |
| 1,950 | | |
$ | 2 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
$ | 3 | |
| Balance, September 30, 2023 | |
| 1,000 | | |
$ | 1 | | |
| 1,950 | | |
$ | 2 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
$ | 3 | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
Nightfood Holdings, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
| | |
For Three Months Ended
September 30, | |
| | |
2024 | | |
2023
(Restated) | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
| Net loss | |
$ | (764,611 | ) | |
$ | (1,318,933 | ) |
| 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 | |
| (15,986 | ) | |
| - | |
| Warrants issued for services | |
| - | | |
| 84,230 | |
| Stock issued for services | |
| 995 | | |
| - | |
| Stock issued for financing costs | |
| - | | |
| 50,000 | |
| Amortization of debt discount | |
| 50,372 | | |
| 212,259 | |
| Loss on amended / extinguishment of convertible note | |
| 127,705 | | |
| - | |
| Warrants and returnable warrants issued for financing costs | |
| | | |
| 707,620 | |
| Bad debt | |
| 48,610 | | |
| - | |
| Change in operating assets and liabilities | |
| | | |
| | |
| Change in accounts receivable | |
| 1,745 | | |
| 3,385 | |
| Change in inventory | |
| 4,926 | | |
| (16,386 | ) |
| Change in other current assets | |
| 6,069 | | |
| 50,320 | |
| Change in accounts payable | |
| 275,734 | | |
| 97,537 | |
| Change in relate party payable | |
| 44,200 | | |
| 30,825 | |
| Net cash used in operating activities | |
| (128,241 | ) | |
| (99,143 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| Acquisition costs secured by promissory notes | |
| (128,580 | ) | |
| - | |
| Net cash used by investing activities | |
| (128,580 | ) | |
| - | |
| | |
| | | |
| | |
| 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 | |
| 402,050 | | |
| 51,000 | |
| Net cash provided by financing activities | |
| 402,050 | | |
| 51,000 | |
| | |
| | | |
| | |
| NET (DECREASE) IN CASH AND CASH EQUIVALENTS | |
| 145,229 | | |
| (48,143 | ) |
| | |
| | | |
| | |
| Cash and cash equivalents, beginning of period | |
| 148,294 | | |
| 53,349 | |
| Cash and cash equivalents, end of period | |
$ | 293,523 | | |
$ | 5,206 | |
| | |
| | | |
| | |
| 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 | |
$ | - | | |
$ | 707,620 | |
| Stock issued for financing costs | |
$ | - | | |
$ | 50,000 | |
| Deemed dividend associated with preferred B stock and dilutive warrant adjustments | |
$ | 11,566 | | |
$ | 20,771 | |
| Principal increased under convertible note amended | |
$ | 13,750 | | |
$ | - | |
| Granted interest increased under convertible note amended | |
$ | 2,063 | | |
$ | - | |
| Preferred stock D issued under convertible note amended | |
$ | 113,955 | | |
$ | - | |
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
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 three
months ended September 30, 2024, the Company had an operating and net loss of $764,611, cash used in operations of $128,241 and
an accumulated deficit of $39,402,577. |
| ● | 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 September 30, 2024 we have advanced cash proceeds totaling $552,460 to potential acquisition targets under the terms of interest bearing notes, which are under negotiation for acquisition as soon as practicable. |
| ● | 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. 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. |
| ● | 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 $250,000 for substantially
all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. |
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. |
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 no long-lived asset impairments as of September 30, 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 months ended September 30, 2024 and 2023, there are no 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 $16,020 and a credit to advertising expense of $2,441 as a result of a reversal of a prior period
expense accrual for the three months ended September 30, 2024 and 2023, respectively. |
Income Taxes
| ● | The
Company has not generated any taxable income, and, therefore, no provision for income taxes has been provided. Deferred income taxes
are reported for timing differences between items of income or expense reported in the financial statements and those reported for income
tax purposes in accordance with FASB Topic 740, “Accounting for Income Taxes”, which requires the use of the asset/liability
method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and
for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred
taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than
not. |
| ● | 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 months ended September 30, 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. During the three months ended September
30, 2024 sales were related exclusively 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 months ended September 30, 2024,
and the year ended June 30, 2024, the Company did not earn any 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 September 30, 2024 and June 30, 2024, the Company did
not have any uninsured cash deposits.
Deemed Dividend – Series B Preferred Stock Warrants:
Each share of the Company’s Series B Preferred
Stock, par value $0.001 per share (the “B Preferred” or “B Preferred Stock”) has a liquidation preference
of $1,000 and has no voting rights except as to matters pertaining to the rights and privileges of the B Preferred. Each share
of B Preferred is convertible at the option of the holder thereof into (i) 5,000 shares of the Registrant’s common stock (one
share for each $0.20 of liquidation preference) (the “Conversion Shares”) and (ii) 5,000 common stock purchase warrants, expiring
April 16, 2026 (the “Warrants”). The Warrants carried an initial exercise price of $0.30 per share. Subsequent financing events
and debt extinguishment resulted in adjustments to the exercise price of all warrants created from conversion of B Preferred from $0.30
per share to approximately $0.09704 per share through September 30, 2024. The exercise price of these warrants can continue to adjust
as the result of subsequent financing events and stock transactions. These adjustments can result in an exercise price that is either
higher, or lower, than the price as of September 30, 2024.
The value of the deemed dividend was approximately
$4.4 million as of June 30, 2022. During the years ended June 30, 2024 and 2023 the Company recorded an additional deemed dividend
of approximately $84,100 and $1.1 million in relation to the B Preferred stock and downward price adjustments to certain warrants.
During the three months ended September 30, 2024 the Company recorded a further deemed dividend of approximately $11,500 in relation
to the B Preferred stock and downward price adjustments to certain warrants.
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. |
Customer Concentration
| ● | Our
customers currently consist of individual product purchasers via our website or via third party reseller sites such as Tik Tok. In fiscal
2023 our customers consisted primarily of distributors that sell snack products to hotels and supermarkets. In the three months ended
September 30, 2023, we had one customer that accounted for 68% of our Gross Sales. In the three months ended June 30, 2024, we had no
customer which accounted for more than 10% of gross sales. |
Vendor Concentration
| ● | During
each of the three-month periods ended September 30, 2024 and 2023 one vendor accounted for more than 10% of our costs of goods sold. |
Receivables Concentration
| ● | As
of September 30, 2024, the Company had receivables due from two ecommerce sales portals accounting for 100% of open receivables. As
of September 30, 2023, the Company had receivables due from nine customers, one of whom accounted for over 56% of the outstanding
balance. Three of the others each accounted for between 10% and 14% of the outstanding balance. |
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 September 30, 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 months ended September 30, 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. |
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 three months ended September 30, 2023, included in this current report reflect a reduction to total assets of $144,929, an in increase to total liabilities of $51,330, and an increase to stockholders’ deficit of $196,259. |
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 are evaluating the impact of adopting ASU 2023-07on 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. |
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 1,000 shares of common stock, $0.001 par value per share, of FHVH (the “FHVH Common Stock”) owned
by him to NGTF for: (i) all 1,000 issued and outstanding shares of NGTF’s Series Super Voting A Preferred Stock held by
the NGTF Series A Shareholder, and (ii) an aggregate of 13,333 newly issued shares of NGTF’s Series C Convertible Preferred
Stock, each of which shall convert into 6,000 shares of common stock at $0.025 per share (the “Series C Preferred
Stock”, and together with the Series A Super Voting Preferred Stock, the “NGTF Exchange Shares”). In addition, the conversion
terms of the Super Voting A Preferred Stock were concurrently amended by replacing Section 1 to alter the voting structure of the Series
A Preferred Stock. Pursuant to the Amended Series A Certificate of Designation, the shares of Series A Preferred Stock will have a number
of votes equal to (i) the number of votes then held or entitled to be made by all other equity securities of NGTF plus (ii) one (1).
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: | |
| 13,333 | | |
| | |
| Fair value of Series A Preferred Stock | |
| | | |
$ | - | |
| Fair value of Series C Preferred Stock | |
| | | |
| 868,708 | |
| Total consideration | |
| | | |
$ | 868,708 | |
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 $0.0153 per share.
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 | |
$ | 111,863 | |
| Other current assets | |
| 126,000 | |
| Accounts payable | |
| (4,845 | ) |
| Other current liabilities | |
| (261,852 | ) |
| Total assets acquired and liability assumed | |
| (28,834 | ) |
| Indefinite-lived intangible assets (noncontractual customer relationships) | |
| 868,708 | |
| | |
| | |
| Total Net asset acquired | |
$ | 897,542 | |
As of September 30, 2024 and June 30, 2024, no
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.
4. Accounts Receivable and Allowance for Credit Losses
Accounts receivable 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 $19,172 as uncollectible
customer balances at September 30, 2024.
5. Inventories
| ● | Inventory
consists of the following at September 30, 2024 and June 30, 2024: |
| | |
September 30,
2024 | | |
June 30,
2024 | |
| Inventory: Finished Goods | |
$ | 1,756 | | |
$ | 800 | |
| Inventory: Ingredients | |
| 7,161 | | |
| 11,199 | |
| Inventory: Packaging | |
| 11,965 | | |
| 13,809 | |
| Total Inventory | |
$ | 20,882 | | |
$ | 25,808 | |
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 months ended September 30, 2024, and 2023 the Company didn’t write down inventory balances as
a result of inventory damage, obsolescence and spoilage.
6. Other current assets
Other current assets consist of the following at September 30, 2024
and June 30, 2024.
| | |
September 30,
2024 | | |
June 30,
2024 | |
| Other Current Assets | |
| | |
| |
| Prepaid interest expenses | |
$ | 1,282 | | |
$ | 1,206 | |
| Prepaid Professional fees | |
| 67,500 | | |
| 72,500 | |
| Other prepaid expenses | |
| 2,914 | | |
| 4,059 | |
| Deposits with vendors | |
| - | | |
| 29,396 | |
| TOTAL | |
$ | 71,696 | | |
$ | 107,161 | |
The Company wrote off $29,436 as uncollectible
other current assets at September 30, 2024.
7. Acquisition Costs Secured with Line of Credit Agreements
During the periods ended September 30, 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:
| | |
September 30,
2024 | | |
June 30,
2024 | |
| Funds provided to acquisition target 1 under LOC (“LOC 1”) | |
$ | 469,960 | | |
$ | 351,380 | |
| Funds provided to acquisition target 2 under LOC (“LOC 2”) | |
| 82,500 | | |
| 72,500 | |
| Interest receivable under LOC agreements | |
| 33,584 | | |
| 17,599 | |
| TOTAL | |
$ | 586,044 | | |
$ | 441,479 | |
LOC 1
LOC 1 provides that acquisition target 1 may draw
down advances of up to $750,000 (the “Credit Limit”) at any time, provided that the aggregate outstanding principal does
not exceed the Credit Limit. Each draw request must be made inwriting and is subject to approval by the Lender. Simple interest of 16%,
calculated on a 360-day year of twelve 30-day months, accrued and is payable annually on the anniversary date of the initial draw, December
13, 2023. LOC 1 matures on December 14, 2027, at which time all principal and accrued interest are due and payable.
As of September 30, 2024 and June 30, 2024, $27,924
and $14,565 was accrued as interest payable in respect of LOC 1, respectively.
LOC 2
LOC 2 provides that acquisition target 2 may draw
down advances of up to $300,000 (the “Second Credit Limit”) at any time, provided that the aggregate outstanding principal
does not exceed the Second Credit Limit. Each draw request must be made inwriting and is subject to approval by the Lender. Simple interest
of 16%, calculated on a 360-day year of twelve 30-day months, accrued and is payable annually on the anniversary date of the initial
draw, April 1, 2024. LOC 2 matures on December 31, 2026, at which time all principal and accrued interest are due and payable.
As of September 30, 2024 and June 30, 2024, $5,660 and $3,034 was
accrued as interest payable in respect of LOC 2, respectively.
8. Accounts Payable and Accrued liabilities
Accounts payable and accrued liabilities consist of the following at
September 30, 2024 and June 30, 2024:
| | |
September 30,
2024 | | |
June 30,
2024 | |
| Interest Payable | |
$ | 628,686 | | |
$ | 434,535 | |
| Accounts payable | |
| 704,807 | | |
| 624,716 | |
| TOTAL | |
$ | 1,333,493 | | |
$ | 1,059,251 | |
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 $700,000.00, which amount
is the $644,000 actual amount of the purchase price plus an original issue discount in the amount of $56,000. In connection with
the issuance of the Promissory Note, the Company issued to the investor warrants to purchase 2,800,000 shares of common stock
at an exercise price of $0.225, as well as returnable warrants, which may only be exercised in the event that the Company were to default
on certain debt obligations, to purchase 7,000,000 shares of common stock at an exercise price of $0.30, in each case subject
to adjustment. The Promissory Note may be converted into Company common stock in the event of an event of default under the Promissory
Note by the Company.
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 5,434,783 5-year Returnable Warrants which may only be exercised in the event that the Company were to
default on certain debt obligations at an initial Exercise Price per share of $0.30, (b) the events of default set forth in the Notes
were amended to include certain of the Events of Default reflected in the Promissory Note, (c) the conversion price of the Notes was amended
so that upon an event of default, the conversion price equaled $0.10, subject to adjustment, (d) the Purchasers are entitled to deduct
$1,750 from conversions to cover associated fees, and $750 shall be added to each prepayment to reimburse the Purchasers for
administrative fees and (e) the definition of Exempt Issuance in the note was modified to remove certain clauses of the definition.
The Company paid to J.H. Darbie & Co., Inc.
$32,200 in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions
contemplated by the Purchase Agreement plus warrants to purchase 119,260 shares of common stock at $0.27, subject to adjustment.
The Company paid to Spencer Clarke LLC cash fees of $35,000 plus 500,000 shares of common stock.
The proceeds received by the Company from the
Offering, net of the original issue discount, fees and costs including legal fees of $7,000 and commission fees of $32,200 were
$604,800.
On May 2, 2023, a debtholder converted $49,995 into 1,500,000 shares
of common stock, of which $16,088 was principal and $33,907 was interest payable.
| (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 $619,000.00 (actual
amount of purchase price of $526,150.00 plus an original issue discount in the amount of $92,850.00). In connection with the issuance
of the Promissory Note, the Company issued to the investor warrants to purchase 6,900,000 shares of common stock at an exercise
price of $0.10, as well as returnable warrants, which may only be exercised in the event that the Company were to default on certain debt
obligations, to purchase 7,000,000 shares of common stock at an exercise price of $0.30, in each case subject to adjustment.
The Promissory Note may be converted into Company common stock in the event of an event of default under the Promissory Note by the Company.
The Company granted piggy-back registration rights to Mast Hill.
The Company paid to J.H. Darbie & Co., Inc.
$10,000 in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions
contemplated by the Purchase Agreement plus warrants to purchase 219,230 shares of common stock at $0.12, subject to adjustment.
The Company paid to Spencer Clarke LLC cash fees of $52,615 plus warrants to purchase 619,000 shares of common stock at
$0.10, warrants to purchase 690,000 shares of common stock at $0.10, and warrants to purchase 700,000 shares of common
stock at $0.30, in each case subject to adjustment.
| (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 $169,941 (actual amount
of purchase price of $136,800 plus an original issue discount in the amount of $24,141). In connection with the issuance of the Promissory
Note, the Company issued to the investor warrants to purchase 1,790,000 shares of common stock at an exercise price of $0.10,
as well as returnable warrants, which may only be exercised in the event that the Company were to default on certain debt obligations,
to purchase 1,820,000 shares of common stock at an exercise price of $0.10, in each case subject to adjustment. The Promissory
Note may be converted into Company common stock in the event of an event of default under the Promissory Note by the Company. The Company
granted piggy-back registration rights to Mast Hill.
The Company paid to J.H. Darbie & Co., Inc.
$6,840in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions contemplated
by the Purchase Agreement plus warrants to purchase 57,000 shares of common stock at $0.12, subject to adjustment. The Company
paid to Spencer Clarke LLC warrants to purchase 200,000 shares of common stock at $0.08, warrants to purchase 179,000 shares
of common stock at $0.10, and returnable warrants to purchase 182,000 shares of common stock at $0.30, in each case subject
to adjustment.
On June 20, 2024, a debtholder converted a total
of $33,000, in which $31,250 of interest payable and $1,750 of transfer agent fee, in exchange for 1,000,000 shares
of common stock.
Below is a reconciliation of the (gain) loss on extinguishment of interest
payable relative to
| Fair market value of 1,000,000 common stock | |
$ | 16,400 | |
| | |
| | |
| Interest payable | |
| (31,250 | ) |
| Transfer agent fee | |
| (1,750 | ) |
| | |
| (33,000 | ) |
| | |
| | |
| Gain on extinguishment | |
$ | (16,600 | ) |
| (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 $169,941 (actual amount
of purchase price of $136,800 plus an original issue discount in the amount of $24,141). In connection with the issuance of the Promissory
Note, the Company issued to the investor warrants to purchase 1,790,000 shares of common stock at an exercise price of $0.10,
as well as returnable warrants, which may only be exercised in the event that the Company were to default on certain debt obligations,
to purchase 1,820,000 shares of common stock at an exercise price of $0.10, in each case subject to adjustment. The Promissory
Note may be converted into Company common stock in the event of an event of default under the Promissory Note by the Company. The Company
granted piggy-back registration rights to Mast Hill.
The Company paid to J.H. Darbie & Co., Inc.
$6,840.00 in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions
contemplated by the Purchase Agreement plus warrants to purchase 57,000 shares of common stock at $0.12, subject to adjustment.
The Company paid to Spencer Clarke LLC a cash fee of $13,680 plus warrants to purchase 200,000 shares of common stock at
$0.08, warrants to purchase 179,000 shares of common stock at $0.10, and warrants to purchase 182,000 shares of common
stock at $.30, in each case subject to adjustment. Such 182,000 warrants, without any further action by either party thereto,
may be cancelled and extinguished in its entirety if the MH Note is fully repaid and satisfied on or prior to the Maturity Date, subject
further to the terms and conditions of the MH Note.
| (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 $169,941 (actual amount
of purchase price of $136,800 plus an original issue discount in the amount of $24,141). In connection with the issuance of the Promissory
Note, the Company issued to the investor warrants to purchase 1,790,000 shares of common stock at an exercise price of $0.10,
as well as returnable warrants, which may only be exercised in the event that the Company were to default on certain debt obligations,
to purchase 1,820,000 shares of common stock at an exercise price of $0.10, in each case subject to adjustment. The Promissory
Note may be converted into Company common stock in the event of an event of default under the Promissory Note by the Company. The Company
granted piggy-back registration rights to Mast Hill.
The Company paid to J.H. Darbie & Co., Inc.
$6,840 in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions
contemplated by the Purchase Agreement plus warrants to purchase 57,000 shares of common stock at $.12, subject to adjustment.
The Company paid to Spencer Clarke LLC a cash fee of $13,680 plus warrants to purchase 200,000 shares of common stock at
$.08, warrants to 179,000 shares of common stock at $.10, and returnable warrants to 182,000 shares of common
stock at $.10, in each case subject to adjustment.
| (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 $200,000 (actual amount of purchase
price of $170,000 plus an original issue discount in the amount of $30,000). Also pursuant to the Purchase Agreement, in connection
with the issuance of the Note: (a) Sean Folkson, the Company’s Chairman of the Board and Chief Executive Officer, pursuant
to a Pledge Agreement dated the Effective Date (the “Pledge Agreement”), pledged to Mast Hill, and granted to Mast Hill a
security interest in, all common stock and common stock equivalents of the Company owned by Mr. Folkson; (b) the Company, Nightfood Inc.
and MJ Munchies, Inc., each wholly-owned subsidiaries of the Company (collectively, the “Subsidiaries” and with the Company,
the “Debtors”) entered into a Security Agreement dated the Effective Date (the “Security Agreement”), pursuant
to which each of the Debtors granted Mast Hill a perfected security interest in all of their property to secure the prompt payments, performance
and discharge in full of all of the Debtors’ obligations under the Note and the other transaction documents entered into in connection
with the Purchase Agreement and the Note (the “Transaction Documents”); (c) The Subsidiaries entered into a Subsidiary Guarantee
dated the Effective Date (the “Guarantee”), pursuant to which the Subsidiaries unconditionally and irrevocably guaranteed
to Mast Hill the prompt and complete payment and performance by the Company and the Subsidiaries when due, of the obligations under the
Transaction Documents.
The Company paid to (a) J.H. Darbie & Co.,
Inc. 298,875 warrants at an exercise price of $0.05688 per share pursuant to the Company’s existing agreement with
J.H. Darbie & Co., Inc., in relation to the transactions contemplated by the Purchase Agreement. The Company paid to (b) Spencer Clarke
LLC 1,111,110 warrants at an exercise price of $.033, in each case subject to adjustment.
| (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 $62,000 (actual amount of purchase price of $52,700 plus an original issue discount in the amount of $9,300). The maturity
date of the Note is 12 months from the issue date and are 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. Mast Hill has the right, at any time on or following the date that
an Event of Default occurs to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including any
default interest) into Common Stock, at a conversion price of $0.033, subject to customary adjustments as provided in the Note for stock
dividends and stock splits, rights offerings, pro rata distributions, fundamental transactions and dilutive issuances. At any time prior
to the date that an Event of Default occurs under the Note, the Company may prepay the outstanding principal amount and interest then
due under the Note. On any such event, the Company shall make payment to Mast Hill of an amount in cash equal to the sum of (a) 100%
multiplied by the principal amount then outstanding plus (b) 100% multiplied by the accrued and unpaid interest on the principal
amount to the prepayment date plus (c) $750.00 to reimburse Mast Hill for administrative fees. In addition, if, at any time prior
to the full repayment or full conversion of all amounts owed under the Note, the Company receives cash proceeds from any source or series
of related or unrelated sources from the issuance of equity (subject to exclusions described in the Note), debt or the issuance of securities
pursuant to an Equity Line of Credit (as defined in the Note) of the Company, Mast Hill shall have the right in its sole discretion to
require the Company to apply up to 50% of such proceeds after the Minimum Threshold to repay all or any portion of the outstanding
principal amount and interest then due under the Note. The Note contains customary Events of Default for transactions similar to the transactions
contemplated by the Purchase Agreement and the Note, which entitle Mast Hill, among other things, to accelerate the due date of the unpaid
principal amount of, and all accrued and unpaid interest on, the Note, in addition to triggering the conversion rights. Upon the occurrence
of any Event of Default, the Note shall become immediately due and payable, and the Company shall pay to Mast Hill an amount equal to
the principal amount then outstanding plus accrued interest (including any default interest) through the date of full repayment multiplied
by 150%, as well as all costs of collection.
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 $5,270 plus 159,697 warrants at an exercise price of $0.033, in each case subject to adjustment.
| (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 $62,000 (actual amount
of purchase price of $52,700 plus an original issue discount in the amount of $9,300). The maturity date of the Note is 12 months
from the issue date and are 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. All the terms and conditions as set out in (g) above with respect to a Securities Purchase Agreement
and Promissory Note entered into on October 6, 2023, apply to the November 17, 2023 financing from Mast Hill. 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 $5,270 plus 159,697 warrants at an exercise price of $0.033, in each case subject to adjustment.
| (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 $170,588 (actual amount
of purchase price of $145,000 plus an original issue discount in the amount of $25,588). The maturity date of the Note is 12
months from the issue date and are the date upon which the principal amount, as well as any accrued and unpaid interest and other
fees, shall be due and payable. All the terms and conditions as set out in (g) above with respect to a Securities Purchase Agreement
and Promissory Note entered into on October 6, 2023, apply to the December 6, 2023 financing from Mast Hill. 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 $14,500 plus 439,394 warrants at an exercise price of $0.033, in each case subject to adjustment.
| (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 $388,300 (actual amount
of purchase price of $330,055 plus an original issue discount in the amount of $58,245). The maturity date of the Note is the 12-month
anniversary of the Issuance Date, and is the date upon which the principal amount, as well as any accrued and unpaid interest and other
fees, shall be due and payable. The Company paid certain fees in respect to the aforementioned financing agreements. The agreements also
provide for terms of conversion only upon an event of default. All the terms and conditions as set out in (g) above with respect to a
Securities Purchase Agreement and Promissory Note entered into on October 6, 2023, apply to the January 24, 2024 financing from Mast Hill.
Further the Note is subject to the terms of certain previously executed Security, Pledge and Guarantee agreements discussed above in 7(f).
| (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 $336,000 (actual amount
of purchase price of $285,600 plus an original issue discount in the amount of $50,400). The maturity date of the Note is the 12-month
anniversary of the Issuance Date, and is the date upon which the principal amount, as well as any accrued and unpaid interest and other
fees, shall be due and payable. The Company paid certain fees in respect to the aforementioned financing agreements. The agreements also
provide for terms of conversion only upon an event of default. All the terms and conditions as set out in (g) above with respect to a
Securities Purchase Agreement and Promissory Note entered into on October 6, 2023, apply to the March 13, 2024 financing from Mast Hill.
Further the Note is subject to the terms of certain previously executed Security, Pledge and Guarantee agreements discussed above in 7(f).
| (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 $395,000.00 (actual
amount of purchase price of $335,750 plus an original issue discount (“OID”) in the amount of $59,250). The use of proceeds
from the sale of the Mast Hill Note is strictly for business development and expenses related to compliance and merger and ongoing acquisition
activity, and not for any other purpose. The maturity date of the Mast Hill Note is the 12-month anniversary of the Issuance Date, and
is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. Mast
Hill has the right, at any time on or following the date that an event of default occurs under the Note, to convert all or any portion
of the then outstanding and unpaid Principal Amount and interest (including any default interest) into common stock of the Company, at
a conversion price of $0.033, subject to customary adjustments as provided in the Mast Hill Note for stock dividends and stock splits,
rights offerings, pro rata distributions, fundamental transactions and dilutive issuances. In addition, Mast Hill is entitled to deduct
$1,750.00 from the conversion amount upon each conversion, to cover Mast Hill’s fees associated with each conversion. Any such
conversion is subject to customary conversion limitations set forth in the Mast Hill Note so Mast Hill beneficially owns less than 4.99%
of the Common Stock.
| (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 $473,000.00 (actual
amount of purchase price of $402,050 plus an original issue discount (“OID”) in the amount of $70,950). The use of proceeds
from the sale of the Mast Hill Note is strictly for business development and expenses related to compliance and merger and ongoing acquisition
activity, and not for any other purpose. The maturity date of the Mast Hill Note is the 12-month anniversary of the Issuance Date, and
is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. Mast
Hill has the right, at any time on or following the date that an event of default occurs under the Note, to convert all or any portion
of the then outstanding and unpaid Principal Amount and interest (including any default interest) into common stock of the Company, at
a conversion price of $0.033, subject to customary adjustments as provided in the Mast Hill Note for stock dividends and stock splits,
rights offerings, pro rata distributions, fundamental transactions and dilutive issuances. In addition, Mast Hill is entitled to deduct
$1,750.00 from the conversion amount upon each conversion, to cover Mast Hill’s fees associated with each conversion. Any such
conversion is subject to customary conversion limitations set forth in the Mast Hill Note so Mast Hill beneficially owns less than 4.99%
of the Common Stock.
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 $65,000.00 (actual amount of purchase price of $55,250 plus an original issue discount in the amount
of $9,750). In connection with the issuance of the Promissory Note, the Company issued the investor warrants to purchase 600,000 shares
of common stock at an exercise price of $0.10 and 1,969,697 shares of Common Stock as commitment shares, 1,477,272 of
which shall be cancelled and returned to the Company’s treasury upon repayment of the Note on, or prior to, the date that is 180
calendar days after the date of the Agreement; and (b) granted piggy-back registration rights to Fourth Man.
The Company paid to J.H. Darbie & Co., Inc.
$2,763 in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions
contemplated by the Purchase Agreement plus warrants to purchase 23,021 shares of common stock at $0.10, subject to adjustment.
The Company issued Spencer Clarke LLC warrants to purchase 618,079 shares of common stock at $.033, in each case subject to
adjustment.
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 $60,000.00 (actual amount of purchase price of $51,000 plus an original issue discount in the amount
of $9,000). In connection with the issuance of the Promissory Note, the Company issued the investor warrants to purchase 650,000 shares
of common stock at an exercise price of $0.10 and 3,333,333 shares of Common Stock as commitment shares, 1,666,667 of
which shall be cancelled and returned to the Company’s treasury upon repayment of the Note on, or prior to, the date that is 180
calendar days after the date of the Agreement; and (b) granted piggy-back registration rights to Fourth Man.
The Company paid to J.H. Darbie & Co., Inc.
$2,550 in fees pursuant to the Company’s existing agreement with J.H. Darbie & Co., Inc., in relation to the transactions
contemplated by the Purchase Agreement plus warrants to purchase 21,250 shares of common stock at $.12, subject to adjustment.
The Company paid to Spencer Clarke LLC a cash fee of $5,100 plus 650,000 warrants at an exercise price of $.033, in each
case subject to adjustment.
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 $65,000 issued
by NGTF to Fourth Man on June 29, 2023 the “Promissory Note” and that certain promissory note in the principal amount of $60,000 to
Fourth Man on August 28, 2023 (the “Subsequent Note”, together with the Promissory Note, the “Notes”), effective
as of January 23, 2024. The amendment removed the right to the adjustment to the conversion price of the Notes to the price per share
specified in Section 3.21 of the note (“the Affected Adjustment”) issued on August 28, 2023 by NGTF to Fourth Man (the “Subsequent
Note”). The letter also amended the Subsequent Note to remove the right to the adjustment to the conversion price during the effective
period, solely with respect to the Affect Adjustment. In exchange for Fourth Man’s execution of the letter, NGTF agreed, to (i)
increase the total outstanding principal and accrued interest on the Notes by 10% and (ii) issue 1,667 shares of NGTF’s
Series D Preferred Stock to Fourth Man.
Below is a reconciliation of the loss on extinguishment
of debt relative to the amended promissory notes with Fourth Man:
| 10% increase in principle | |
$ | 12,500 | |
| 10% increase in guaranteed interest | |
| 1,875 | |
| 1,667 Series D Stock issued | |
| 113,955 | |
| Loss on extinguishment | |
$ | 128,330 | |
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 $65,000 issued
on June 29, 2023, as amended February 1, 2024 (“Note”) and that certain promissory note in the principal amount of $60,000 issued
on August 28, 2023, as amended February 1, 2024 (“Subsequent Note”, together with the Note, the “Notes”) issued
by the Company to the Noteholder, effective as of July 23, 2024.
During the period beginning on July 23, 2024,
and continuing through the new maturity date of January 23, 2025, the amendment removed the right to the adjustment to the conversion
price of the Notes to the price per share specified in Section 3.21 of the Notes. In exchange for the amendments under the letter agreement,
the Company agreed to increase the total outstanding principal and accrued interest of the Notes and to issue 1,667 shares of
Series D Preferred Stock of the Company to the Noteholder.
Below is a reconciliation of the loss on extinguishment
of debt relative to the amended promissory notes with Fourth Man:
| 10% increase in principle | |
$ | 13,750 | |
| 1,667 Series D Stock issued | |
| 113,955 | |
| Loss on extinguishment | |
$ | 127,705 | |
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) as presented on the Company’s balance sheet as of September 30, 2024 and September 30, 2023:
| | |
Principal | | |
Debt
Discount | | |
Net
Value | |
| Balance at June 30, 2024 | |
$ | 3,594,770 | | |
$ | (151,783 | ) | |
$ | 3,442,987 | |
| Promissory notes payable issued | |
| 473,000 | | |
| | | |
| 473,000 | |
| Promissory notes amended | |
| 13,750 | | |
| | | |
| 13,750 | |
| Debt discount associated with Promissory notes | |
| | | |
| (70,950 | ) | |
| (70,950 | ) |
| Amortization of debt discount | |
| | | |
| 50,372 | | |
| 50,372 | |
| Balance at September 30, 2024 | |
$ | 4,081,520 | | |
$ | (172,361 | ) | |
$ | 3,909,159 | |
| | |
Principal | | |
Debt
Discount | | |
Net
Value | |
| Balance at June 30, 2023 | |
$ | 2,108,382 | | |
$ | (559,016 | ) | |
$ | 1,549,366 | |
| Promissory notes payable issued | |
| 60,000 | | |
| | | |
| 60,000 | |
| Debt discount associated with Promissory notes | |
| | | |
| (18,878 | ) | |
| (18,878 | ) |
| Amortization of debt discount | |
| | | |
| 212,259 | | |
| 212,259 | |
| Balance at September 30, 2023 | |
$ | 2,168,382 | | |
$ | (365,635 | ) | |
$ | 1,802,747 | |
Interest expenses associated with above convertible notes are
as follows:
| | |
For three months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| Amortization | |
$ | 50,372 | | |
$ | 212,259 | |
| Interest on the convertible notes | |
| 194,075 | | |
| 44,198 | |
| Total | |
$ | 244,447 | | |
$ | 256,457 | |
As of September 30, 2024 and June 30, 2024, the interest payable was
$628,686 and $434,535, respectively.
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 $0.03333. In addition, certain
warrants issued to the noteholders, placement agent and J.H. Darbie have been repriced in accordance with their respective terms and conditions.
10. Capital Stock Activity
Common Stock
The Company is authorized to issue Two Hundred
Million (200,000,000) shares of common stock $0.001 par value per share (the “Common Stock”). Holders of Common Stock
are each entitled to cast one vote for each share held of record on all matters presented to shareholders. Cumulative voting is not allowed;
hence, the holders of a majority of the outstanding Common Stock can elect all directors, subject to the rights of the holder of Series
A Stock described below. Holders of Common Stock are entitled to receive such dividends as may be declared by the Board of Directors out
of funds legally available therefore and, in the event of liquidation, to share pro-rata in any distribution of the Company’s assets
after payment of liabilities. The board of directors is not obligated to declare a dividend and it is not anticipated that dividends will
be paid unless and until the Company is profitable. Holders of Common Stock do not have pre-emptive rights to subscribe to additional
shares if issued by the Company. There are no conversion, redemption, sinking fund or similar provisions regarding the Common Stock. All
of the outstanding shares of Common Stock are fully paid and non-assessable and all of the shares of Common Stock offered thereby will
be, upon issuance, fully paid and non-assessable. Holders of shares of Common Stock will have full rights to vote on all matters brought
before shareholders for their approval, subject to preferential rights of holders of any series of Preferred Stock. Holders of the Common
Stock will be entitled to receive dividends, if and as declared by the board of directors, out of funds legally available, and share pro-rata
in any distributions to holders of Common Stock upon liquidation. The holders of Common Stock will have no conversion, pre-emptive or
other subscription rights. Upon any liquidation, dissolution or winding-up of the Company, assets, after the payment of debts and liabilities
and any liquidation preferences of, and unpaid dividends on, any class of preferred stock then outstanding, will be distributed pro-rata
to the holders of the common stock. The holders of the common stock have no right to require the Company to redeem or purchase their shares.
Holders of shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding
shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the
holders of the remaining shares will not be able to elect any of our directors.
| ● | The
Company had 128,957,407 and 128,907,407 shares of its $0.001 par value common stock issued and outstanding as
September 30, 2024 and June 30, 2024 respectively. |
During the three months ended September 30, 2024:
| ● | The
Company issued 50,000 shares of common stock for services with a fair value of $995. |
During the three months ended September 30, 2023:
| ● | The
Company issued 3,333,333 shares of common stock for services with a fair value of $50,000. |
Preferred Stock
| ● | The
Company had 1,000 shares of its A Preferred stock issued and outstanding as of September 30,2024 and June 30, 2024. |
| ● | The
Company had 1,950 shares of its B Preferred stock issued and outstanding as of September 30,2024 and June 30, 2024. |
| ● | The
Company had 13,333 shares of its C Preferred stock issued and outstanding as of September 30,2024 and June 30, 2024. |
| ● | The
Company had 3,334 and 1,667 shares of its D Preferred stock issued and outstanding as of September 30, 2024 and June
30, 2024. |
Series A Preferred Stock
The Company is authorized to issue 1,000,000 shares
of $0.001 par value per share Preferred Stock. Of the 1,000,000 shares, 10,000 shares were designated as Series A Preferred
Stock (“Series A Stock”). Holders of Series A Stock are each entitled to cast 100,000 votes for each share held of record
on all matters presented to shareholders. On January 26, 2024, the Certificate of Designation of Preferences, Rights and Limitations
of Series A Super Voting Preferred Stock (the “Series A Preferred Stock”) of Nightfood Holdings, Inc. was amended (the “Amended
Series A COD”) by replacing Section 1 to alter the voting structure of the Series A Preferred Stock. Pursuant to the Amended Series
A COD, the shares of Series A Preferred Stock will have a number of votes equal to (i) the number of votes then held or entitled to be
made by all other equity securities of NGTF plus (ii) one (1). No other changes were made.
During the fiscal year ended June 30, 2024 the
former holder of the 1,000 outstanding shares of Series A Stock transferred his shares to the seller of certain assets as part
of a Share Exchange Agreement. (ref: Note 3 – Business Combination)
The Company had 1,000 shares of the Series A Stock issued
and outstanding as of September 30, 2024 and June 30, 2024 which shares are currently held by the Company’s CEO, Lei Sonny Wang.
Series B Preferred Stock
In April 2021, the Company designated 5,000 shares
of its Preferred Stock as Series B Preferred (the “B Preferred”), each share of which is convertible into 5,000 shares
of common stock and 5,000 non-detachable warrants with an initial exercise price of $0.30.
During the fiscal years ended June 30, 2023 and
2022, the Company sold 0 and 335 shares of its B Preferred for gross cash proceeds of $0 and $335,000, respectively. These
proceeds were used for operating capital. The B Preferred meets the criteria for equity classification and is accounted for as equity
transactions. Specifically, among other factors, this qualifies as equity because redemption is not invoked at the option of the holder
and the B Preferred does not have to be redeemed on a specified date.
During the fiscal year ended June 30, 2023, holders
of the B Preferred converted 1,310 shares of B Preferred into 6,550,000 shares of Common Stock. During the fiscal
year ended June 30, 2022, holders of the B Preferred converted 1,740 shares of B Preferred into 8,700,000 shares of
Common Stock.
The Company had 1,950 shares of its B Preferred issued and
outstanding as of September 30, 2024 and June 30, 2024.
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 500,000 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”), par value of
$0.001 per share, having such designations, rights and preferences as set forth in the Series C COD. The shares of Series C Preferred
Stock are convertible six (6) months after issuance into common stock of NGTF at a rate of six thousand (6,000) shares of common stock
for each share of Series C Preferred Stock. The shares of Series C Preferred Stock do not have voting rights and rank junior to the Series
B Preferred Stock. The holders of Series C Preferred Stock are not entitled to dividends.
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.
The Company issued 13,333 shares of NGTF’s Series
C Preferred Stock under share exchange agreement. (ref Note 3 – Business Combination)
The Company had 13,333 shares of its C Preferred issued and
outstanding as of September 30, 2024 and June 30, 2024.
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 100,000 shares of Series D Convertible Preferred Stock (the “Series D Preferred Stock”), par value of
$0.001 per share, having such designations, rights and preferences as set forth in the Series D COD. The shares of Series D Preferred
Stock are convertible six (6) months after issuance into common stock of NGTF at a rate of six thousand (6,000) shares of common stock
for each share of Series D Preferred Stock. The shares of Series D Preferred Stock do not have voting rights and rank junior to the Series
B Preferred Stock. The holders of Series D Preferred Stock are not entitled to dividends.
The Company issued 1,667 shares of NGTF’s Series D Preferred
Stock to Fourth Man under the amended promissory notes during the fiscal year ended June 30, 2024, and further issued 1,667 shares of
NGTF’s Series D Preferred Stock to Fourth Man under the amended promissory notes during the three months ended September 30, 2024
(ref Note 7 – Debt)
The Company had 3,334 and 1,667 shares of its D Preferred
issued and outstanding as of September 30, 2024 and June 30, 2024, respectively.
Dividends
The Company has never declared dividends, however
as set out below, during the fiscal year ended June 30, 2022 and 2021, upon issuance of a total of 335 and 4,665 shares
of B Preferred, respectively, the Company recorded a deemed dividend as a result of beneficial conversion feature associated with the
transaction.
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 5,000 shares of common
stock and 5,000 warrants, the Company recognized a beneficial conversion feature upon the conclusion of the transaction in the
amount of $4,431,387. The beneficial conversion feature was treated as a deemed dividend, and fully amortized on the transaction
date due to the fact that the issuance of the B Preferred was classified as equity. During the three months ended September 30, 2024
and 2023, the Company recorded an additional deemed dividend of $11,566 and $20,771, respectively, fully amortized on the transaction
dates, in relation to the B Preferred stock and downward price adjustments to certain warrants.
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 1,740 shares of B Preferred into 8,700,000 shares of Common Stock, along
with 8,700,000 warrants. Said warrants are subject to exercise price adjustments resulting from certain financing activities
and equity transactions which may increase or decrease the exercise price in in the future. At June 30, 2022, all warrants issued to the
Company’s B Preferred holders had an adjusted exercise price of $0.2919.
During the fiscal year ended June 30, 2022, 4,000,000 warrants
were issued to the holder of outstanding convertible notes with an initial exercise price of $0.25 per share, and 878,260 warrants
issued to the placement agent with an initial exercise price of $0.25 per share. The Company valued these warrants using the Black
Scholes model utilizing a 143.39% volatility and a risk-free rate of 1.25%. In addition, 167,500 warrants issued to
the placement agent with an initial exercise price of $0.20 per share and 167,500 warrants issued to the placement agent
with an initial exercise price of $0.30 per share. The Company valued these warrants using the Black Scholes model utilizing a 148.06%
volatility and a risk-free rate of 0.83%.
During the fiscal year ended June 30, 2022, the
Company entered into a warrant agreement with one of the Company’s Directors issuing 100,000 warrants at a strike price
of $0.2626 having a term of five years. The Company valued these warrants using the Black Scholes model utilizing a 151.07%
volatility and a risk-free rate of 0.79%.
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 400,000 warrants at a strike price of $0.30 having a term of one year. The Company valued these warrants
using the Black Scholes model utilizing a 107.93% volatility and a risk-free rate of 0.50%.
During the fiscal year ended June 30, 2023, holders
of the Company’s B Preferred converted 1,310 shares of B Preferred into 6,550,00 shares of Common Stock, along
with 6,550,000 warrants. Said warrants are subject to further exercise price adjustments resulting from certain financing activities
and equity transactions which may increase or decrease the exercise price in the future. At June 30, 2023 all warrants issued to the Company’s
B Preferred holders had an adjusted exercise price of $0.13796.
During the fiscal year ended June 30, 2023, 2,800,000 warrants
were issued to the holder of an outstanding promissory note with an initial exercise price of $0.225 per share, 280,000 warrants
were concurrently issued to the Placement Agent with an initial exercise price of $0.225, and a further 119,260 warrants were issued to
the Placement Agent with initial exercise price of $0.27 per share. The Company valued these warrants using the Black Scholes model utilizing
a 122.42% volatility and a risk-free rate of 3.91%. On October 4, 2022, the Company and the Placement Agent entered into
an Addendum to amend their Letter of Engagement to cancel compensatory warrants to purchase 280,000 shares of common stock of the Company
and to cancel returnable compensatory warrants to purchase 700,000 shares of Common Stock of the Company for a one-time cash payment of
$35,000 and the issuance of 500,000 shares of Common Stock in full satisfaction of compensation earned.
During the fiscal year ended June 30, 2023 the
Company issued a cumulative 12,870,000 warrants to the holder of outstanding promissory notes, 19,460,000 returnable
warrants (which warrants are cancelable in full should the notes be repaid in full on or before maturity), 4,875,189 placement
agent warrants, 546,000 returnable placement agent warrants (which warrants are cancelable in full should the notes be
repaid in full on or before maturity) and 831,386 warrants to JH Darbie. The warrants were issued at initial exercise prices
between $0.033 and $0.12 per share and valued on issuance dates with the Black Scholes model utilizing a volatility from 111.36%
and 112.33% and a risk-free rate from 3.41% and 4.18%.
During the fiscal year ended June 30, 2023, the
Company issued an aggregate of 6,549,128 shares of its Common Stock for the cashless exercise of 4,928,260 original
issued stock purchase warrants.
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 100,000 warrants at a
strike price of $0.125 having a term of five years. The Company valued these warrants using the Black Scholes model utilizing
a 121.75% volatility and a risk-free rate of 4.06%.
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 400,000 warrants at a strike price of $0.30 having a term of one year. The Company valued these warrants
using the Black Scholes model utilizing a 103.60% volatility and a risk-free rate of 4.30%.
During the fiscal year ended June 30, 2023, the
Company issued 1,871,800 warrants to various subscribers under its Tier 2 offering pursuant to Regulation A (also known
as “Regulation A+”) pursuant to which the Company is offering up to 5,000,000 units at a price of $0.50 per
unit, each unit consisting of 4 shares of Common Stock and 4 Common Stock purchase warrants (“Unit”) for
exercise at a strike price per Share equal to 125% of the price per share of Common Stock, or $0.15625 per share with a term
of 2 years.
During the fiscal year ended June 30, 2023, the
Company issued an aggregate of 5,750,000 shares of its Common Stock for cash exercise of 5,750,000 original issued stock
purchase warrants at $0.05 per share. The Company received net proceeds of $276,066. In addition, as incentive to induce the aforementioned
warrant holders to exercise existing warrants, the Company issued an aggregate of 6,900,000 replacement warrants to investors
and placement agents. The warrants were issued at initial exercise prices between $0.05 and $0.125 per share and valued on issuance
dates with the Black Scholes model utilizing a volatility from 110.80% and 111.31% and a risk-free rate from 3.69% and 4.27%.
A total of $377,560 was expensed on issuance as financing costs.
During the fiscal year ended June 30, 2023, the
Company issued 1,000,000 retainer warrants under an Amendment and Addendum to Letter of Engagement agreement at a strike price
of $0.033. The warrants included a provision for cashless exercise and carried a 5 years term. The Company valued these warrants
using the Black Scholes model utilizing a 113.71% volatility and a risk-free rate of 3.69%. The Company recorded the value of
the retainer warrants as consulting expenses.
During the fiscal year ended June 30, 2023, under
the terms of a Warrant Exchange Agreement, among other agreements, SC exchanged an aggregate of 16,181,393 of its existing warrants
originally issued in fiscal 2021 with initial exercise prices ranging from $0.20 to $0.30, the exercise price of which had been subject
to downward price adjustments following issuance and were exercisable at $0.0747 per share as a result of anti-dilution provisions
as of February 2023, for a like amount of new warrants to purchase Company Common Stock at a price per share capped at $0.0747 (the
“New Warrants”).
During the fiscal year ended June 30, 2024, the
Company issued cumulative 650,000 warrants to the holder of outstanding promissory notes, and cumulative 6,208,788 warrants
to the placement agent, and 21,250 warrants to JH Darbie as commission fees. The warrants were issued at initial exercise prices
between $0.033 and $0.12 per share and valued on issuance dates with the Black Scholes model utilizing a volatility between 124.86%
and 136.57, and a risk-free rate between 4.12% and 4.68%.
During the fiscal year ended June 30, 2024, 7,000,000 returnable
warrants became non-returnable warrants as a result of the Company’s default on certain debt obligations and $699,350 was recorded
as additional financing costs.
During the fiscal year ended June 30, 2024, a
total of 23,147,255 outstanding share purchase warrants issued in connection with conversion of the Company’s B
Preferred into Common Stock were adjusted as a result of certain antidilution clauses resulting in a total of 30,274,042 outstanding
share purchase warrants with a downward adjusted exercise price of $0.1042 per share.
During the fiscal year ended June 30, 2024, a
total of 1,818,182 share purchase warrants were exercised in a cashless transaction.
During the three months ended September 30, 2024,
a total of 30,274,042 outstanding share purchase warrants issued in connection with conversion of the Company’s B
Preferred into Common Stock were adjusted as a result of certain antidilution clauses resulting in a total of 32,342,911 outstanding
share purchase warrants with a downward adjusted exercise price of $0.0970 per share.
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.
The aggregate intrinsic value of the warrants as of September 30, 2024
is $6.44 million. The aggregate intrinsic value of the warrants as of June 30, 2024 was $6.14 million.
Exercise
Price | | |
June 30,
2024 | | |
Issued | | |
Repricing | | |
Exercised | | |
Others | | |
Cancelled | | |
Expired | | |
Redeemed | | |
September 30,
2024 | |
| $ | 0.03333 | | |
| 142,772,040 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 142,772,040 | |
| $ | 0.0747 | | |
| 16,181,392 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 16,181,392 | |
| $ | 0.0970 | | |
| | | |
| | | |
| 32,342,911 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 32,342,911 | |
| $ | 0.1250 | | |
| 100,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | |
| $ | 0.1042 | | |
| 30,274,042 | | |
| - | | |
| (30,274,042 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| $ | 0.1563 | | |
| 1,871,800 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,871,800 | |
| $ | 0.2626 | | |
| 100,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | |
| $ | 0.5000 | | |
| 500,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 500,000 | |
| | | | |
| 191,799,274 | | |
| - | | |
| 2,068,869 | | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 193,868,143 | |
Returnable Warrants
A cumulative total of 18,956,523 Returnable
Warrants issued in conjunction with a financing agreement dated as of September 23, 2022, and a MFN agreement entered into concurrently
on September 23, 2022 (ref: Note 7 above) may only be exercised in the event that the Company were to default on certain debt
obligations. The Returnable Warrants have an initial exercise price of $0.30 per share, subject to customary adjustments (including
price-based anti-dilution adjustments) and may be exercised at any time after an Event of Default until the five-year anniversary of such
date. The Returnable Warrants include a cashless exercise provision as set forth therein. The exercise of the Returnable Warrants are
subject to a beneficial ownership limitation of 4.99% of the number of shares of Common Stock outstanding immediately after giving
effect to such exercise. In the event of the Company’s failure to timely deliver shares of Common Stock upon exercise of the Returnable
Warrants, the Company would be obligated to pay a “Buy-In” amount pursuant to the terms of the Returnable Warrants. On December
29, 2022, upon an event of default as defined under the MFN agreement, 5,434,785 returnable warrants issued to each of
the Purchasers under the MFN Agreement, and 1,086,957 returnable warrants issued to the Placement Agent, were triggered and
valued using the Black Scholes model with a volatility of 124.14% and a risk-free rate of 3.94% resulting in financing expenses
recorded as additional financing costs in the cumulative amount of $1,085,780. In February 2023, the Company issued 3,800,000 shares
of its common stock in exchange for the return of 10,869,566 returnable warrants. The warrants issued to the Placement Agent
remained available for exercise.
During the fiscal year ended June 30, 2023, the
Company issued cumulative 12,460,000 returnable warrants to the Purchasers of certain convertible notes issued after September
2022, and cumulative 546,000 returnable warrants to the Placement Agent.
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 111.36% and 112.33% and a risk-free rate of between 3.67%
and 3.91% resulting in contingent expenses to be recorded as additional financing costs in the cumulative amount of $809,800, which
amount will be recorded in a future reporting period, only in the event the Company defaults on certain debt obligations.
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 500,000 warrants
with an exercise price of $0.15 per share, of which all have vested. |
| ● | 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 4,800,000 non-refundable
warrants to purchase 4,800,000 shares of Retainer Stock, at an initial exercise price per warrant equal to .0333 during
the five (5)-year period. Under the terms of the agreement the Company is required to pay fees of 10% for any financing in cash,
as well as issue five-year cashless warrants exercisable at the lowest exercise price in effect at the time of issue. In addition, fees
are payable for mergers, acquisitions and other M&A transactions in both cash and shares. On July 7, 2023, the Company terminated
the agreement with SC, however fees payable remain in effect for 24 months after termination. In respect to the Company’s financings
and acquisition activity in the fiscal year ended June 30, 2024, the Company accrued cash fees of $151,500 as well as stock-based
consideration valued at $71,230 in the form of 4,588,148 stock purchase warrants, 167 shares of Series D Preferred
stock and 667 shares of Series C Preferred Stock for total accruals estimated of $278,200, none of which has been
issued or paid as of June 30, 2024. In the three months ended September 30, 2024, the Company accrued cash fees of $53,200, as well as
stock-based consideration of $38,800 in the form of 393,235 additional stock purchase warrants and 167 additional shares of Series D
Preferred Stock. Total accruals at September 30, 2024 have an estimated value of $370,200. |
| | | |
| | ● | 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 contains the potential for cash and equity bonuses should Nightfood, Inc. achieve certain revenue milestones. The
Cash Performance Bonus shall be equal to 2% of gross Nightfood, Inc. revenues, paid quarterly. The Equity Performance
Bonus shall be paid in any quarter where gross Nightfood, Inc. revenues exceed $250,000 and shall be paid in stock equal to 10%
of the gross quarterly revenues for the bonus period, based on the average closing priced for the last 10 trading days. |
| ● | 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 $58,500 with respect to a total
of 2,801,526 unissued shares and 100,000 unissued share purchase warrants as of the date of this report. |
| ● | 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 September 30, 2024 and June 30, 2024, related parties are due
a total of $341,204 and $295,510, respectively:
| | |
September 30,
2024 | | |
June 30,
2024 | |
| Sean Folkson consulting fees payable | |
$ | 127,000 | | |
$ | 109,000 | |
| Directors’ fees payable | |
| 60,000 | | |
| 57,000 | |
| Accrued compensation payable with shares and warrants (unissued) | |
| 58,500 | | |
| 42,500 | |
| Lei Sonny Wang consulting fees payable | |
| 41,200 | | |
| 35,200 | |
| Sean Folkson loan (principal $40,000) and interest payable | |
| 47,876 | | |
| 46,676 | |
| Lei Sonny Wang, reimbursable expenses | |
| 6,628 | | |
| 5,134 | |
| Total related party payable | |
$ | 341,204 | | |
$ | 295,510 | |
Services provided from related parties as professional fees:
| | |
Three Months Ended September 30, | |
| | |
2024 | | |
2023 | |
| Sean Folkson | |
$ | 30,000 | | |
$ | 18,000 | |
| Directors’ fees and compensation for non-employee directors | |
| 28,000 | | |
| 17,625 | |
| Lei Sonny Wang | |
| 30,000 | | |
| - | |
| Total fees under professional fees | |
$ | 88,000 | | |
$ | 35,625 | |
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.
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 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 $125,000 based on
the average closing price for the last 10 trading days, which stock will be deemed fully earned as of the termination. Additionally, if
the Consulting Agreement is terminated prior to December 31, 2024, then Mr. Folkson will be entitled to continue to receive his Base Salary
from the termination date until December 31, 2024. If Mr. Folkson is removed as a director of NGTF earlier than one year after NGTF’s
successful uplist to any national securities exchange, then he will receive NGTF common stock with a market value equal to $500,000 based
on the average closing price for the last 10 trading days, which stock will be deemed fully earned on the date he was removed from the
Board.
In exchange for his services, Mr. Folkson will
receive a minimum annual salary of $120,000 (“Base Salary”), payable monthly. Mr. Folkson will be paid $6,000 per
month of his Base Salary until NGTF completes a capital raise of not less than $1,000,000 or Nightfood, Inc. develops a monthly positive
cash flow greater than $10,000 (the “Financial Conditions”). Until the Financial Conditions are met, any unpaid portion
of the Base Salary will accrue. Nightfood, Inc. and NGTF have agreed that the entirety of the Base Salary will accrue between December
1, 2023 and February 29, 2024. The payments of $6,000 will begin on March 1, 2024. Upon meeting the Financial Conditions or successfully
uplisting to NASDAQ, the parties will create a payment schedule to ensure payment of the full salary and accrued income within three to
nine months, including $57,000 in consulting fees owed to Mr. Folkson as of November 1, 2023 pursuant to a consulting agreement dated
December 27, 2021 between Mr. Folkson and NGTF. Mr. Folkson will be entitled to cash and equity bonuses based on certain conditions, beginning
with the three-month period ending March 31, 2024 and quarterly thereafter. The cash bonus will equal 2% of Nightfood, Inc.’s
revenues, including royalties, during the quarterly period, which will be paid no later than 15 days after the close of the quarterly
period to which it relates. The equity bonus will be paid in any quarter where gross Nightfood, Inc. revenues exceed $250,000, commencing
with the three-month period ending March 31, 2024 and quarterly thereafter. The equity bonus will be paid in NGTF common stock with a
market value equal to 10% of gross quarterly revenues for the applicable period, based on the average closing price for the last
10 trading days. Such stock shall be deemed fully earned as of the last day of the applicable quarter and issued within 30 days of the
end of the quarter. The cash and equity bonuses will be paid during the term of the Consulting Agreement and for 36 months afterward.
Should NGTF sell all shares of Nightfood, Inc., its business, or any rights to any other party to manufacture, market, and distribute
products under the Nightfood brand name, then Mr. Folkson will receive a cash bonus equal to 2% of the sale price and/or any royalties
earned by NGTF or Nightfood, Inc. payable by NGTF in cash or as a percentage of any securities received and an equity bonus equal to 10%
of the sale price and/or any royalties earned by NGTF or Nightfood, Inc. payable by NGTF in cash or as a percentage of any securities
received (the “Sale Bonus”). The Sale Bonus will be paid with respect to any transaction during the term of the Consulting
Agreement or that is consummated within 36 months thereafter.
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 $120,000, payable monthly
beginning on the Effective Date. Until NGTF completes an additional two mergers and a capital raise in excess of $1,000,000 gross
proceeds, or NGTF has financial capabilities to support the Base Salary, Mr. Wang will be paid $6,000 per month of the Base Salary,
and the unpaid portion of the Base Salary will accrue.
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 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 and 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. As of the date of this report the transaction had not yet closed.
17. Subsequent Events
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 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 (ref: Note 12 above)
On December 9, 2024, the Company issued 13,333
shares of its Series C preferred stock as the consideration required under a certain agreement entered into on September 10, 2024 and
discussed above in Note 16. 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.
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.
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 and 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. As of the date of this report the transaction had not yet closed.
Present Operations
Future Hospitality dba RoboOp365 launched in California
shortly before California’s April 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.
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 SEPTEMBER 30, 2024 AND 2023
Revenue
For the three months
ended September 30, 2024, we had revenues of $24,454 as compared to revenues of $8,935, for the three months ended September 30, 2023.
During the three months ended September 30, 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 three months ended September
30, 2024 and 2023 was $12,649 and $56,663 respectively.
Costs and expenses
For the three months
ended September 30, 2024, and 2023 we incurred operating expenses of $336,760 and $304,876 respectively.
| | |
For the three months Ended
September 30, | |
| | |
2024 | | |
2023 | |
| Operating expenses | |
| | |
| |
| Cost of product sold | |
| 12,649 | | |
| 56,663 | |
| Advertising and promotional | |
| 16,020 | | |
| (2,441 | ) |
| Selling, general and administrative expense | |
| 95,471 | | |
| 37,574 | |
| Professional fees | |
| 212,620 | | |
| 213,080 | |
| Total operating expenses | |
| 336,760 | | |
| 304,876 | |
For the three months
ended September 30, 2024 and 2023, cost of product sold decreased to $12,649 from $56,663. 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 three-month period ended September
30, 2023, the slotting fees totaled $39,534, with no similar expense in the current three month period.
For the three months
ended September 30, 2024 and 2023, advertising and promotional expenses increased to $16,020 (2024) from a credit of $2,441 in advertising
and promotion for the three months ended September 30, 2023. This increase is largely due to increased advertising and promotional efforts
during the period as we promoted sales of products direct to the consumer. In addition, the credit was a result of certain previously
booked marketing expenditures which were reversed in the three-month period ended September 30, 2023, offset with actual costs in the
period.
For the three-month period
ended September 30, 2024 and 2023, selling, general, and administrative expenses increased from $37,574 (2023) to $95,471 (2024). The
largest component of this increase was the result of a write down of accounts receivable and other current asset in total amount
of $48,609.
For the three months
ended September 30, 2024 and 2023, professional fees remained relatively constant at $212,620 for the current three months ended September
30, 2024 as compared to $213,080 in the three months ended September 30, 2023.
Total operating expenses
were $336,760 (September 30, 2024) and $304,876 (September 30, 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
September 2024 | | |
Three months ended September 2023 | |
| Interest income | |
| 15,986 | | |
| - | |
| Interest expense - debt | |
| (197,232 | ) | |
| (45,463 | ) |
| Interest expense – financing cost | |
| (92,982 | ) | |
| (765,270 | ) |
| Amortization of debt discount | |
| (50,372 | ) | |
| (212,259 | ) |
| Gain (loss) on debt extinguishment | |
| (127,705 | ) | |
| - | |
| Total other income (expense) | |
| (452,305 | ) | |
| (1,022,992 | ) |
For the three months
period ended September 30, 2024 and 2023, total other expenses totaled $452,305 as compared to $1.022,992. Most 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 September
30, 2023. During the three months ended September 30, 2024 we recorded interest income of $15,986 with no comparable income for the three
months ended September 30, 2023. During the three months period ended September 30, 2024 we had interest expenses on debt of $197,232
as compared to interest expenses of $45,463 as we increased our debt by way of loans and debentures. During the three months period ended
September 30, 2024 we recorded $92,982 for interest expense related to financing costs and $50.372 as amortization of debt discounts as
compared to $765,270 for interest expense on financing costs and $212,259 as amortization of debt discount for the three months ended
September 30, 2023 as we applied an account treatment to these items in 2023. During the three months ended September 30, 2024 we incurred
a loss on debt extinguishment with no comparable loss for the three months ended September 30, 2023.
Net Loss
Our net loss in the three
months ended September 30, 2024 totaled $764,611 as compared to a net loss of $1,318,933 in the three months ended September 30, 2023.
The largest component of this decrease was the result of other expense which was substantially reduced as aresult of a reduction
of financing costs.
LIQUIDITY AND CAPITAL
RESOURCES
As of September 30, 2024,
we had cash on hand of $293,523, receivables of $1,381, other current assets of $71,696 and inventory valued at $20,882 and a working
capital deficit of $5,196,374.
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 September 30, 2024, we have generated an accumulated deficit of approximately $39,402,577. 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 significant accumulated deficit, even after turning 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 obligation and commitments and finance our operations, as we have in the past,
primarily through the sale of our securities and other forms of external financing until such time that we are able to generate sufficient
funds from the sale of our products to finance our operations, of which we can give no assurance.
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.
Cash Flow from Operating
Activities
During the three
months ended September 30, 2023, net cash used in operating activities was $99,143 compared to net cash used of $128,241 for the three
months ended September 30, 2024 as set out below:
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
Three months ended
September 30,
2024 | | |
Three months ended
September 30,
2023 | |
| Net loss | |
$ | (764,611 | ) | |
$ | (1,318,933 | ) |
| 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 | |
| (15,985 | ) | |
| - | |
| Warrants issued for services | |
| - | | |
| 84,230 | |
| Stock issued for services | |
| 995 | | |
| - | |
| Stock issued for financing costs | |
| - | | |
| 50,000 | |
| Amortization of debt discount | |
| 50,372 | | |
| 212,259 | |
| Loss on amended / extinguishment of convertible note | |
| 127,705 | | |
| - | |
| Warrants and returnable warrants issued for financing costs | |
| | | |
| 707,620 | |
| Bad debt | |
| 48,609 | | |
| - | |
| Change in operating assets and liabilities | |
| | | |
| | |
| Change in accounts receivable | |
| 1,745 | | |
| 3,385 | |
| Change in inventory | |
| 4,926 | | |
| (16,386 | ) |
| Change in other current assets | |
| 6,069 | | |
| 50,320 | |
| Change in accounts payable | |
| 275,734 | | |
| 97,537 | |
| Change in relate party payable | |
| 44,200 | | |
| 30,825 | |
| Net cash used in operating activities | |
| (128,241 | ) | |
| (99,143 | ) |
Cash Flow from Investing
Activities
During the three months
ended September 30, 2024 cash from investing activities were comprised of acquisition costs secured by promissory notes of $128,580. There
were no cash flows from investing activities in the three months ended September 30, 2023.
Cash Flow from Financing
Activities
During the three months
ended September 30, 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 three months ended September 30, 2023, our financing activities provided net proceeds of $51,000 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 thethree months ended September 30, 2024.
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 September 30, 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 September 30, 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.
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.
On December 9, 2024, the Company issued 13,333
shares of its Series C preferred stock as the consideration required under a certain agreement entered into on September 10, 2024 and
discussed above in Note 16. 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.
There were no other sales
of equity securities during the period 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 filed by the Company.
ITEM 3. DEFAULTS UPON
SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY
DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
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 and 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. As of the date of this report the transaction had not yet closed.
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 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.
ITEM 6. EXHIBITS.
| Exhibit |
|
Exhibit Description |
| |
|
|
| 3.1 |
|
Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (333-193347) filed with the Commission on January 13, 2014) |
| 3.2 |
|
Articles of Amendment (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 20, 2017) |
| 3.3 |
|
Bylaws (Incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (333-193347) filed with the Commission on January 13, 2014) |
| 3.4 |
|
Certificate of Designation – Series A Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 17, 2018 ) |
| 3.5 |
|
Certificate of Designation – Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on April 23, 2021) |
| 3.6 |
|
Amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series A Super Voting Preferred Stock(incorporated by reference to Exhibit 3.1 on the Registrant’s Current Report on Form 8-K/A filed with the Commission on January 31, 2024) |
| 3.7 |
|
Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock(incorporated by reference to Exhibit 3.2 on the Registrant’s Current Report on Form 8-K/A filed with the Commission on January 31, 2024) |
| 3.8 |
|
Amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock(incorporated by reference to Exhibit 3.1 on the Registrant’s Current Report on Form 8-K/A filed with the Commission on March 19, 2024) |
| 3.9 |
|
Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock(incorporated by reference to Exhibit 3.2 on the Registrant’s Current Report on Form 8-K/A filed with the Commission on March 19, 2024) |
| 4.1 |
|
Common Stock Purchase Warrant issued to Fourth Man, LLC dated as of June 29, 2023 (Incorporated by reference to Exhibit 10.47 on the Registrant’s Annual Report on Form 10-K filed with the Commission on October 13, 2023). |
| 4.2 |
|
Common Stock Purchase Warrant issued to Fourth Man, LLC dated as of August 28, 2023 (Incorporated by reference to Exhibit 10.52 on the Registrant’s Annual Report on Form 10-K filed with the Commission on October 13, 2023). |
| 4.3 |
|
Warrants issued to J.H. Darbie & Co., Inc. dated as of June 29, 2023 (incorporated by reference to Exhibit 4.3 on the Registrant’s Quarterly Report on Form10-Q filed with the Commission on December 29, 2023) |
| 4.4 |
|
Warrants issued to J.H. Darbie & Co., Inc. dated as of August 28, 2023 (incorporated by reference to Exhibit 4.6 on the Registrant’s Quarterly Report on Form10-Q filed with the Commission on December 29, 2023) |
| 10.1 |
|
Promissory Note issued to Fourth Man, LLC dated as of June 29, 2023 (Incorporated by reference to Exhibit 10.46 on the Registrant’s Annual Report on Form 10-K filed with the Commission on October 13, 2023). |
| 10.2 |
|
Promissory Note issued to Fourth Man, LLC dated as of August 28, 2023 (Incorporated by reference to Exhibit 10.51 on the Registrant’s Annual Report on Form 10-K filed with the Commission on October 13, 2023). |
| 10.3 |
|
Securities Purchase Agreement with Mast Hill Fund, L.P. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 20, 2023) |
| 10.4 |
|
Promissory Note dated with Mast Hill Fund, L.P. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 20, 2023) |
| 10.5 |
|
Securities Purchase Agreement dated as of June 29, 2023 between the Company and Fourth Man, LLC (Incorporated by reference to Exhibit 10.45 on the Registrant’s Annual Report on Form 10-K filed with the Commission on October 13, 2023). |
| 10.6 |
|
Securities Purchase Agreement dated as of August 28, 2023 between the Company and Fourth Man, LLC (Incorporated by reference to Exhibit 10.50 on the Registrant’s Annual Report on Form 10-K filed with the Commission on October 13, 2023). |
| 10.7 |
|
Securities Purchase Agreement with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on December 12, 2023) |
| 10.8 |
|
Promissory Note with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 on the Registrant’s Current Report on Form 8-K filed with the Commission on December 12, 2023) |
| 10.9 |
|
Share Exchange Agreement by and among Nightfood Holdings, Inc., Future Hospitality Ventures Holdings Inc., Sean Folkson as the holder of the Series A Preferred Stock of NGTF and the sole shareholder of FHVH dated January 22, 2024. (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on January 26, 2024) |
| 10.10 |
|
Securities Purchase Agreement with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on January 29, 2024) |
| 10.11 |
|
Promissory Note dated January 24, 2024 with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 on the Registrant’s Current Report on Form 8-K filed with the Commission on January 29, 2024) |
| 10.12++ |
|
Consulting Agreement between Nightfood Holdings, Inc. and Sean Folkson, dated February 2, 2024. (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on February 2, 2024) |
| 10.13++ |
|
Employment Agreement between Nightfood Holdings, Inc. and Lei Sonny Wang, dated February 2, 2024. (incorporated by reference to Exhibit 10.2 on the Registrant’s Current Report on Form 8-K filed with the Commission on February 2, 2024) |
| 10.14 |
|
Letter Agreement between Fourth Man, LLC and Nightfood Holdings, Inc. dated February 1, 2024 (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on March 19, 2024) |
| 10.15 |
|
Securities Purchase Agreement with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on March 20, 2024) |
| 10.16 |
|
Promissory Note dated March 12, 2024 with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 on the Registrant’s Current Report on Form 8-K filed with the Commission on March 20, 2024) |
| 10.17 |
|
Securities Purchase Agreement with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed with the Commission on May 15, 2024) |
| 10.18 |
|
Promissory Note dated May 5, 2024 with Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 on the Registrant’s Current Report on Form 8-K filed with the Commission on May 15, 2024) |
| 10.19 |
|
Letter Agreement dated July 22, 2024 with Fourth Man, LLC amending the right to adjustment of the conversion price of certain promissory notes (incorporated by reference to the Registrant’s Form 10K filed with the Commission on December 27, 2024)
|
| 10.20 |
|
Share Exchange Agreement dated September 4, 2024 with Nightfood Holdings, Inc., Future Hospitality Ventures Holdings Inc., SWC Group, Inc. and Sugarmade, Inc. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on September 10, 2024) |
| 10.21 |
|
Promissory Note dated September 23, 2024 with Mast Hill Fund, L.P (incorporated by reference to the Registrant’s Form 10K filed with the Commission on December 27, 2024) |
| 10.22 |
|
Securities Purchase agreement dated September 23, 2024 with Mast Hill Fund LP (incorporated by reference to the Registrant’s Form 10K filed with the Commission on December 27, 2024) |
| 10.23 |
|
First Amendment to the Share Exchange Agreement dated December 10, 2024. (incorporated by reference to the Registrant’s Current Report on Form 8-K/A filed with the Commission on December 19, 2024) |
| 31.1* |
|
Certification of the Chief Executive and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1* |
|
Certification of the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
| 101.INS* |
|
Inline XBRL Instance Document |
| 101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed herewith |
| ++ |
Indicates a management contract or compensatory plan. |
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: January 13, 2025 |
By: |
/s/ Lei Sonny Wang |
| |
|
Lei Sonny Wang |
| |
|
Chief Executive Officer |
| |
|
(Principal Executive, Financial and Accounting Officer) |
38
6840
655000
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