Restatement of Prior Financial Information |
3. |
Restatement of Prior Financial
Information
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Subsequent to our external auditor's
periodic review of the Form 10-Q for the Periods Ended September 30, 2019 and December 31, 2019 and, in the process of review,
the current Form 10-Q for the Period Ended March 31, 2020, the Company conducted further reviews of the financial statements. Based
on such reviews, the following determinations were made: |
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Error in Accounting for Slotting and Set-up Fees |
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During our review, we determined that the accounting
treatment for the recognition of slotting fees and other fees paid or payable by the Company to certain strategic partners was
incorrect. Specifically, it has been determined that revenue relating to the slotting fee, which was originally capitalized and
amortized into expense over an 18-month period should instead be treated as a reduction in revenue at the later of recognition
of revenue for the transfer of the Nightfood product or when the Company pays or promised to pay the slotting fee. In addition,
certain fees related to platforms to launch our products and advertising efforts should have been capitalized and recorded as an
intangible asset. The Company previously recorded a portion of this fee as an intangible asset – placement fee and expensed
the remaining amount as advertising expense in the Period Ended December 31, 2019. |
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In accordance with the guidance provided
by the SEC's Staff Accounting Bulletin 99, Materiality ("SAB 99") and Staff Accounting Bulletin 108, Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"),
the Company has determined that the impact of adjustments relating to the corrections of this accounting error are not material
to previously issued annual audited and unaudited financial statements. Accordingly, these changes are disclosed herein and will
be disclosed prospectively. |
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As of June 30, 2019 (A) |
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidated Balance Sheet |
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Current assets |
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$ |
482,667 |
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$ |
487,500 |
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$ |
970,167 |
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Current liabilities |
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$ |
2,955,272 |
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$ |
223,333 |
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$ |
3,178,605 |
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Working capital (deficit) |
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$ |
(2,472,605 |
) |
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$ |
264,167 |
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|
$ |
(2,208,438 |
) |
Total assets |
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$ |
482,667 |
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$ |
487,500 |
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$ |
970,167 |
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Total liabilities |
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$ |
2,955,272 |
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$ |
223,333 |
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$ |
3,178,605 |
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Total stockholders' deficit |
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$ |
(2,472,605 |
) |
|
$ |
264,167 |
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|
$ |
(2,208,438 |
) |
(A) The balance sheet impact
of the errors was corrected in the quarter ended September 30, 2019.
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As of September 30, 2019 |
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidated Balance Sheet |
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Current assets |
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$ |
858,216 |
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$ |
387,917 |
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$ |
1,246,133 |
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Current liabilities |
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$ |
3,287,252 |
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$ |
1,151,666 |
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$ |
4,438,918 |
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Working capital (deficit) |
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$ |
(2,429,036 |
) |
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$ |
(763,749 |
) |
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$ |
(3,192,785 |
) |
Total assets |
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$ |
858,216 |
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$ |
1,221,250 |
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$ |
2,079,466 |
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Total liabilities |
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$ |
3,287,252 |
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$ |
1,151,666 |
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$ |
4,438,918 |
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Total stockholders' deficit |
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$ |
(2,429,036 |
) |
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$ |
69,584 |
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$ |
(2,359,452 |
) |
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As of December 31, 2019 |
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidate Balance Sheet |
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Current assets |
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$ |
577,944 |
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$ |
408,294 |
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$ |
986,238 |
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Current liabilities |
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$ |
4,514,446 |
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$ |
249,007 |
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$ |
4,763,453 |
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Working capital (deficit) |
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$ |
(3,936,502 |
) |
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$ |
159,287 |
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$ |
(3,777,215 |
) |
Total assets |
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$ |
1,550,298 |
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$ |
102,607 |
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$ |
1,652,905 |
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Total liabilities |
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$ |
4,514,446 |
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$ |
249,007 |
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$ |
4,763,453 |
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Total stockholders' deficit |
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$ |
(2,964,148 |
) |
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$ |
(146,400 |
) |
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$ |
(3,110,548 |
) |
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For the Year Ended June 30, 2019 (A) |
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidated Statements of Operations |
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Revenues |
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$ |
352,172 |
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$ |
- |
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$ |
352,172 |
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Operating expenses |
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$ |
2,263,722 |
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$ |
(264,167 |
) |
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$ |
1,999,555 |
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Loss from operations |
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$ |
(1,911,550 |
) |
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$ |
264,167 |
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$ |
(1,647,383 |
) |
Other income (expenses) |
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$ |
2,686,793 |
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$ |
- |
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$ |
2,686,793 |
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Net income (loss) |
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$ |
(4,598,343 |
) |
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$ |
264,167 |
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$ |
(4,334,176 |
) |
Basic & diluted EPS |
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$ |
(0.09 |
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$ |
- |
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$ |
(0.09 |
) |
(A) The income statement
impact of the errors was corrected in the quarter ended September 30, 2019.
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For the Three Months Ended
September 30, 2019
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidated Statements of Operations |
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Revenues |
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$ |
206,497 |
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$ |
(160,000 |
) |
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$ |
46,497 |
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Operating expenses |
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$ |
570,858 |
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$ |
(229,584 |
) |
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$ |
341,274 |
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Loss from operations |
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$ |
(364,361 |
) |
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$ |
69,584 |
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$ |
(294,777 |
) |
Other income (expenses) |
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$ |
218,803 |
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$ |
- |
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$ |
218,803 |
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Net income (loss) |
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$ |
(583,164 |
) |
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$ |
69,584 |
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$ |
(513,580 |
) |
Basic & diluted EPS |
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$ |
(0.01 |
) |
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$ |
- |
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$ |
(0.01 |
) |
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For the Six Months Ended
December 31, 2019
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidated Statements of Operations |
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Revenues |
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$ |
379,488 |
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$ |
(271,706 |
) |
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$ |
107,782 |
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Operating expenses |
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$ |
1,326,290 |
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$ |
(125,306 |
) |
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$ |
1,200,984 |
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Loss from operations |
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$ |
(946,802 |
) |
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$ |
(146,400 |
) |
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$ |
(1,093,202 |
) |
Other income (expenses) |
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$ |
557,320 |
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$ |
- |
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$ |
557,320 |
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Net income (loss) |
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$ |
(1,504,122 |
) |
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$ |
(146,400 |
) |
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$ |
(1,650,522 |
) |
Basic & diluted EPS |
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$ |
(0.02 |
) |
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$ |
- |
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$ |
(0.02 |
) |
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For the Three Months Ended
December 31, 2019
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Previously Reported |
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Adjustments |
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As Corrected |
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Consolidated Statements of Operations |
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Revenues |
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$ |
172,991 |
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$ |
(111,706 |
) |
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$ |
61,285 |
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Operating expenses |
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$ |
755,432 |
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$ |
104,278 |
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$ |
859,710 |
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Loss from operations |
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$ |
(582,441 |
) |
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$ |
(215,984 |
) |
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$ |
(798,425 |
) |
Other income (expenses) |
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$ |
338,517 |
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$ |
- |
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$ |
338,517 |
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Net income (loss) |
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$ |
(920,958 |
) |
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$ |
(215,984 |
) |
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$ |
(1,136,942 |
) |
Basic & diluted EPS |
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$ |
(0.02 |
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$ |
- |
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$ |
(0.02 |
) |
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