Going Concern |
3.
Going Concern
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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 is new and has limited operating history and relatively
few sales, 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, 2021, the Company had an operating and net loss of $833,675 and negative cash flow from operations of $878,394 and an accumulated deficit of $26,320,481. |
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The
Company believes it has sufficient cash on hand to operate until the first quarter of calendar
2022 at which time it will require additional funds for operating capital and the planned
hotel rollout of its products in early 2022. We do not believe our cash on hand will
be adequate to satisfy our long-term working capital needs. We believe that our current capitalization
structure, combined with ongoing increases in distribution, revenues, and market capitalization,
will enable us to successfully secure required financing to continue our growth. |
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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. |
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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. |
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The
outbreak of the novel coronavirus (COVID-19), including the measures to reduce its spread,
and the impact on the economy, cannot fully be understood and identified. Indications to
date are that there are somewhat offsetting factors relating to the impact on our Company.
Industry data shows that supermarket sales remain up, with more people spending more time
at home. Anecdotally and statistically, snacking activity is also up while consumers are
reporting a decrease in sleep quality and sleep satisfaction. |
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The
offsetting factors are the impact of the virus on the overall economy, and the impact that
a down economic period can have on consumer behavior, including trial of new brands. Greater
unemployment, recession, and other possible unforeseen factors are shown to have an impact.
Research indicates that consumers are less likely to try new brands during economic recession
and stress, returning to the legacy brands they’ve known for decades. |
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With
consumers generally making fewer shopping trips, while buying more on those occasions and
reverting back to more familiar brands, certain brand-launch marketing tactics, such as in-store
displays and in-store product sampling tables, are either impaired or impermissible. So,
while overall night snacking demand is up, and consumer need/desire for better sleep is also
stronger, driving consumer trial and adoption has been more difficult and expensive during
these circumstances. |
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From
both public statements, and conversations between Nightfood Management and current and former
executives from certain global food and beverage conglomerates, it has been affirmed to Management
that there is increased strategic interest in the nighttime nutrition space as a potential
high-growth opportunity, partially due to recent declines in consumer sleep quality and increases
in at-home nighttime snacking. |
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We
have experienced no major issues with supply chain or logistics. Order processing function
has been normal to date, and our manufacturers have assured us that their operations are
“business as usual” as of the time of this filing. |
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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 us unable to meet certain
debts and expenses. |
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More
directly, COVID has impaired Nightfood’s ability to execute certain in-store and out-of-store
marketing initiatives. For example, since the inception of COVID, 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. |
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Additionally,
with more consumers shopping online, both for delivery or at-store pickup, the opportunity
for shoppers to learn about new brands at-shelf has been somewhat diminished. Management
is working to identify opportunities to build awareness and drive trial under these new circumstances. |
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It
is impossible to know what the future holds with regard to the virus, both for our company
and in the broader sense. There are many uncertainties regarding the current coronavirus
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,
and we are unable to predict the impact that COVID-19 will have on our financial position
and operating results due to numerous uncertainties. The Company expects to continue to assess
the evolving impact of the COVID-19 pandemic and intends to make adjustments accordingly,
if necessary. |
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