Quarterly report pursuant to Section 13 or 15(d)

Going Concern

v3.22.1
Going Concern
9 Months Ended
Mar. 31, 2022
Going Concern [Abstract]  
Going Concern
3. 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. Because the business remains unproven and may not ever attain profitability, 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 nine months ended March 31, 2022, the Company had a net loss of $2,048,362 (comprised of operating loss of $1,645,538 and other expenses of $402,824, most of which is comprised of interest and amortization related to the Company’s convertible note financing and changes in the share price of the common stock), negative cash flow from operations of $1,728,876 and accumulated deficit of $27,603,890.

 

While most of the Company’s internal financial model scenarios project it reaching profitability early in Fiscal 2023, cash on hand does not project to be adequate to satisfy its mid-range working capital needs to get the Company both to profitability and also cash flow positive. As a result, the Company anticipates raising capital early in Fiscal 2023.

 

The Company believes that forthcoming business developments along with its current capitalization structure will enable it to successfully secure required financing to continue its planned growth in the hotel vertical.

 

Because the business has limited operating history and sales, no certainty of continuation can be stated. Management has devoted a significant amount of time in the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern will again be dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations long-term.

 

The Company cannot give any assurance that it will, in the future, be able to achieve a level of profitability from the sale of its products to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the financials are issued. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

  

     

There is still potential uncertainty resulting from the outbreak of the novel coronavirus (COVID-19) (the “Pandemic”), including those potentially related to measures to reduce its spread, and the impact on the economy. Rates of unemployment, recession, inflation, and other possible unforeseen factors could also have an impact.

 

From both public statements, and conversations between Nightfood management and current and former executives from certain global food and beverage conglomerates, management believes that there is increased strategic interest in the nighttime nutrition space as a potential high-growth opportunity, partially due to ongoing declines in consumer sleep quality and increases in at-home nighttime snacking, both trends believed to be accelerated by COVID.

 

The Company has experienced no material issues with supply chain or logistics resulting from COVID. Order processing function has been consistent with historical norms. As stated in Development Plans below, the Company is in the process of transitioning contract manufacturers to handle increased demand and does not anticipate any disruption from this transition as a result of COVID or any other causes.

 

It is possible that the fallout from the Pandemic could make it more difficult in the future for the Company to access required growth capital, possibly rendering the Company unable to meet certain debts and expenses.

 

More directly, the Pandemic has impaired the Company’s ability to execute certain in-store and out-of-store marketing initiatives within the normal course of supermarket business. For example, since the inception of the Pandemic, the Company was unable to conduct in-store demonstrations and unable to participate in local pregnancy, baby expos, and health expos that were originally intended to be part of our marketing mix for supermarket distribution. Furthermore, the Company’s national hotel rollout, which is currently underway, had previously experienced Pandemic-related delays.

 

Additionally, with more consumers shopping online, both for delivery or at-store pickup, the opportunity for supermarket shoppers to learn about new brands at the point of purchase has been somewhat diminished. Management is working to identify opportunities to build awareness and drive supermarket trial and growth under these new circumstances, while simultaneously executing a strategic pivot to focus on hotel distribution for immediate growth.

 

It is impossible to know what the future holds with regard to the Pandemic, both for the Company and in the broader sense. There are many uncertainties regarding the Pandemic, and the Company is closely monitoring the impact of the Pandemic on all aspects of its business, including how it will impact its customers, vendors, and business partners.

 

It is difficult to know if the Pandemic has materially impacted the results of operations of the Company, and it is unable to predict the impact that the Pandemic will have on its financial position and operating results due to numerous uncertainties. The Company expects to continue to assess the evolving impact of the Pandemic and intends to make adjustments accordingly, if necessary.