Accounting Policies, by Policy (Policies)
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9 Months Ended |
Mar. 31, 2024 |
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| Summary of Significant Accounting Policies [Abstract] |
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| Use of Estimates |
Use
of Estimates
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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, and the website, income taxes and contingencies, valuing convertible preferred stock for a “beneficial
conversion feature” (“BCF”) and warrants among others. |
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| Cash and Cash Equivalents |
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. |
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| Business Combinations |
Business
Combinations
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● |
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. |
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| Goodwill and Intangibles |
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 (“FASB”) Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill
and Other. Goodwill is 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.
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| Long-Lived Assets |
Long-Lived
Assets
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● |
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 March 31, 2024 and June 30, 2023. |
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| Inventories |
Inventories
| | ● | Inventories consisting of packaged food items and supplies are stated at the lower of cost (FIFO) or net realizable value, including provisions for spoilage commensurate with known or estimated exposures which are recorded as a loss on write down of inventory during the period spoilage is incurred as a part of selling, general and administrative expenses The Company has no minimum purchase commitments with its vendors. During the three and nine months ended March 31, 2024 the Company wrote down inventory balances by $105,455 and $251,010, respectively, as a result of damage, loss, spoilage, and obsolescence. Expenses related to inventory impairments are included in Selling, General and Administrative expenses on the Company’s statements of profit and loss. |
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| Advertising Costs |
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 $6,453 and $38,960 for the three months ended March 31, 2024 and 2023, respectively. The Company recorded advertising costs of $6,044 and $129,295 for the nine months ended March 31, 2024 and 2023, respectively. |
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| Income Taxes |
Income
Taxes
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● |
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. |
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| Revenue Recognition |
Revenue
Recognition
The
Company accounts for revenue in accordance with Accounting Standards Updated (“ASU”) 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 nine months ended March 31, 2024 and 2023, the Company generated
revenues from sales generated in operating subsidiary Nightfood, Inc. and the sale of ice-cream and cookie products to customers and distributors
using (i) Nightfood.com on the Shopify eCommerce platform (Direct to Consumer); and (ii) third party distributors. Sales focus in the
most recent quarter ended March 31, 2024 has shifted entirely to direct-to-consumer as the Company is focused on its newly developed cookie
products. Wholesale ice-cream production and sales have been discontinued, and might resume if and when direct-to-consumer scale is achieved.
The Company considers its performance obligations satisfied upon shipment of the purchased products to the customer with respect to sales
processed by third party fulfilment centers and retail locations, and delivery of the product for sales made to distributors or direct
to end user via eCommerce portals. The Company 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.
The Company is not currently earning any revenue associated with its operations
in the Robots-as-a-Service (RaaS) space, although product demonstrations have begun and Management believes revenues will begin soon.
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| Disaggregated Revenues |
Disaggregated
Revenues
The
Company currently is earning revenues from a single product line with sales of its cookie products through subsidiary Nightfood, Inc.
and therefore has not presented disaggregated revenues.
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| Concentration of Credit Risk |
Concentration
of Credit Risk
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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 March 31,
2024 and June 30, 2023, 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 $0.11082 per share through March 31, 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 March 31, 2024.
The
value of the deemed dividend was approximately $4.4 million as of June 30, 2022. During the year ended June 30, 2023 the Company
recorded an additional deemed dividend of approximately $1.1 million in relation to the B Preferred stock and downward price adjustments
to certain warrants. During the nine months ended March 31, 2024 the Company recorded a further deemed dividend of approximately $69,181
in relation to the B Preferred stock and downward price adjustments to certain warrants.
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| Debt Issue Costs |
Debt
Issue Costs
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● |
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. |
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| Equity Issuance Costs |
Equity
Issuance Costs
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● |
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. |
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| Original Issue Discount |
Original
Issue Discount
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If
debt is issued with an original issue discount, the original issue discount is recorded to 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. |
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| Stock Settled Debt |
Stock
Settled Debt
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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. |
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| Stock-Based Compensation |
Stock-Based
Compensation
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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. |
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| Customer Concentration |
Customer
Concentration
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In each of the three- and the nine-month periods ended March 31, 2024, the Company had 1 customer which accounted for more than 10% of gross sales. During the three months ended March 31, 2023, the Company had one customer account for approximately 94% of the gross sales. During the nine months ended March 31, 2023, the Company had one customer account for approximately 34% of the gross sales. One other customer accounted for approximately 31% of gross sales, and two other customers accounted for between 10 and 12% of gross sales respectively.
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| Vendor Concentration |
Vendor
Concentration
| | ● | In the three- and nine-month periods ended March 31,2024, one vendor accounted for more than 10% of the Company’s costs of goods sold. During the three- and nine-month periods ended March 31, 2023, two vendors accounted for more than 10% of the Company’s costs of goods sold. |
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| Receivables Concentration |
Receivables
Concentration
| | ● | As of March 31, 2024, the Company had receivables due from nine customers. One accounted for 62% of the total balance, and three of the others each accounted for between 15% and 17% of the outstanding balance. As of June 30, 2023, the Company had receivables due from nine customers, one of who accounted for over 56% of the outstanding balance. Three of the others each accounted for between 10% and 14% of the outstanding balance. |
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| Fair Value of Financial Instruments |
Fair
Value of Financial Instruments
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● |
Cash
and Equivalents, Receivables, Other Current Assets, Short-Term Debt, Accounts Payable, Accrued and Other Current Liabilities. |
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The
carrying amounts of these items approximated fair value. |
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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 (“FASB”) 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
March 31, 2024 and June 30, 2023, the Company had no outstanding derivative liabilities.
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| Income/Loss Per Share |
Income/Loss
Per Share
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In
accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available
to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar
to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock
that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were
dilutive. Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options
and warrants, and classes of shares with conversion features. The computation of basic loss per share for the three and nine months
ended March 31, 2024 and 2023 excludes potentially dilutive securities because their inclusion would be antidilutive. As a result,
the computations of net loss per share for each period presented is the same for both basic and fully diluted losses per share. |
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| Reclassification |
Reclassification
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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. |
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| Recent Accounting Pronouncements |
Recent
Accounting Pronouncements
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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 (“CODM”) 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. |
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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. |
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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. |
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