Attached files

file filename
EX-32.1 - CERTIFICATION - XERIANT, INC.banj_ex321.htm
EX-31.1 - CERTIFICATION - XERIANT, INC.banj_ex311.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
December 31, 2018
 
☐    
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:
000-54277
 
BANJO & MATILDA, INC
.
(Exact name of registrant as specified in its charter)
 
Nevada
 
27-1519178
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
 
Innovation Centre #1
3998 FAU Boulevard, Suite 309
Boca
Raton, Florida 33431
(Address of principal executive offices and zip code)
 
561-491-9595
(Registrant’s telephone number, including area code)
 
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 requirements for the past 90 days. Yes
☒    
No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes
☒   
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a 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 7(a)(2)(B) of the Securities Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐   
No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of March 5, 2020, the Registrant had outstanding 69,584,149 shares of common stock.
 
 
 
 
 
    
BANJO & MATILDA, INC.
FORM 10-Q
 
 
 
Page
 
3
 
 
 
F-1
 
 
F-2
 
 
F-3
 
F-4
 
 
F-5
 
 
F-6
 
 
4
 
14
 
14
 
 
 
15
 
 
15
 
 
15
 
 
15
 
 
15
 
 
15
 
 
16
 
 
17
    
 
2
 
 
 
This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to statements regarding projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to those set forth herein and in our Annual Report on Form 10-K.
 
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by the federal securities laws, we undertake no obligation to update forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
  
 
3
 
 
 
 
BANJO & MATILDA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2018
(UNAUDITED)
 
 
 
F-2
 
F-3
 
F-4
 
F-5
 
F-6
 
 
F-1
 
  
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
ASSETS
 
(Unaudited)
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
Prepaids
 
$-
 
 
$18,500
 
Assets of discontinued operations
 
 
8,115
 
 
 
5,385
 
TOTAL CURRENT ASSETS
 
 
8,115
 
 
 
23,885
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$8,115
 
 
$23,885
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
Trade and other payables
 
$623,135
 
 
$559,759
 
Settlement Payable
 
 
250,000
 
 
 
250,000
 
Trade financing
 
 
56,194
 
 
 
56,194
 
Accrued interest
 
 
436,540
 
 
 
339,059
 
Accrued interest, related parties
 
 
273,390
 
 
 
228,823
 
Loans payable, net of discount and deferred interest
 
 
580,875
 
 
 
580,875
 
Convertible notes payable
 
 
158,303
 
 
 
143,454
 
Convertible loans from related parties
 
 
443,871
 
 
 
443,871
 
Liabilities of discontinued operations
 
 
1,513,763
 
 
 
1,492,952
 
TOTAL CURRENT LIABILITIES
 
 
4,336,071
 
 
 
4,094,987
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES
 
 
4,336,071
 
 
 
4,094,987
 
 
 
 
 
 
 
 
 
 
STOCKHOLDERS’ DEFICIT
 
 
 
 
 
 
 
 
Preferred stock, $0.00001 par value, 100,000,000 shares authorized and 1,000,000 shares issued and outstanding, respectively
 
 
10
 
 
 
10
 
Common stock, $0.00001 par value, 100,000,000 shares authorized and 69,584,149 shares issued and outstanding, respectively
 
 
695
 
 
 
695
 
Additional paid in capital
 
 
1,951,295
 
 
 
1,951,295
 
Other accumulated comprehensive income
 
 
100,007
 
 
 
100,007
 
Accumulated deficit
 
 
(6,379,963)
 
 
(6,123,109)
TOTAL STOCKHOLDERS’ DEFICIT
 
 
(4,327,956)
 
 
(4,071,102)
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
$8,115
 
 
$23,885
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
  
 
F-2
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
For the three
 
 
For the six months
 
 
 
months ended December 31,
 
 
ended December 31,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Payroll and employee related expenses
 
$33,750
 
 
$74,170
 
 
$67,500
 
 
$148,341
 
Operating expense
 
 
4,151
 
 
 
-
 
 
 
7,951
 
 
 
-
 
Corporate and public company expense
 
 
-
 
 
 
-
 
 
 
22,348
 
 
 
17,250
 
Total operating expenses
 
 
37,901
 
 
 
74,170
 
 
 
97,799
 
 
 
165,591
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations
 
 
(37,901)
 
 
(74,170)
 
 
(97,799)
 
 
(165,591)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, related parties
 
 
-
 
 
 
-
 
 
 
(22,283)
 
 
-
 
Interest expense
 
 
(70,202)
 
 
(76,308)
 
 
(116,874)
 
 
(151,654)
Total other income (expense)
 
 
(70,202)
 
 
(76,308)
 
 
(139,157)
 
 
(151,654)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
 
(108,103)
 
 
(150,478)
 
 
(236,956)
 
 
(317,245)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations of discontinued operations
 
 
(14,568)
 
 
(77,290)
 
 
(19,898)
 
 
(142,216)
 
 
 
(14,568)
 
 
(77,290)
 
 
(19,898)
 
 
(142,216)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$(122,671)
 
$(227,768)
 
$(256,854)
 
$(459,461)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic diluted earnings per share on net loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$(0.00)
 
$(0.00)
 
$(0.00)
 
$(0.00)
Discontinued operations
 
 
(0.00)
 
 
(0.00)
 
 
(0.00)
 
 
(0.00)
 
 
$(0.00)
 
$(0.00)
 
$(0.00)
 
$(0.01)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
69,584,149
 
 
 
69,584,149
 
 
 
69,584,149
 
 
 
69,584,149
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
   
 
F-3
 
   
Condensed Consolidated Statement of Changes in Stockholders' Deficit (Unaudited)
Three and Six Months Ended December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
Preferred Stock
 
 
Common Stock
 
 
Paid
in
 
 
Comprehensive
 
 
Accumulated
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Income
 
 
Deficit
 
 
Total
 
Balance June 30, 2018
 
 
1,000,000
 
 
$10
 
 
 
69,584,149
 
 
$695
 
 
$1,951,295
 
 
$100,007
 
 
$(6,123,109)
 
$(4,071,102)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(134,183)
 
 
(134,183)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance September 30, 2018
 
 
1,000,000
 
 
 
10
 
 
 
69,584,149
 
 
 
695
 
 
 
1,951,295
 
 
 
100,007
 
 
 
(6,257,292
)
 
 
(4,205,285
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(122,671)
 
 
(122,671)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2018
 
 
1,000,000
 
 
$
10
 
 
 
69,584,149
 
 
$
695
 
 
$
1,951,295
 
 
$
100,007
 
 
$
(6,379,963
)
 
$
(4,327,956
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BANJO & MATILDA INC., AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders' Deficit (Unaudited)
Three and Six Months Ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock 
 
 
Common Stock 
 
 
 
Paid in
 
 
Comprehensive
 
 
Accumulated
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Income
 
 
 
Deficit
 
 
 
 
Total
 
 
Balance June 30, 2017
 
 
1,000,000
 
 
$10
 
 
 
69,584,149
 
 
$695
 
 
$1,951,295
 
 
$100,007
 
 
$(5,284,728)
 
$(3,232,721)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(231,693)
 
 
(231,693)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance September 30, 2017
 
 
1,000,000
 
 
$
10
 
 
 
69,584,149
 
 
$
695
 
 
$
1,951,295
 
 
$
100,007
 
 
$
(5,516,421
)
 
$
(3,464,414
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(227,768)
 
 
(227,768)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2017
 
 
1,000,000
 
 
$
10
 
 
 
69,584,149
 
 
$
695
 
 
$
1,951,295
 
 
$
100,007
 
 
$
(5,744,189
)
 
$
(3,692,182
)
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
F-4
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
 
 
 
 
 
 
 
For the Six Months Ended
 
 
 
December 31,
2018
 
 
December 31,
2017
 
 
 
 
 
 
 
 
Cash Flows from Operating Activities
 
 
 
 
 
 
Net Loss
 
$(256,854)
 
$(459,461)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Debt discount amortization
 
 
-
 
 
 
25,068
 
Amortization of deferred finance fees
 
 
-
 
 
 
7,852
 
Changes in operating assets & liabilities
 
 
 
 
 
 
 
 
Prepaid expenses
 
 
18,500
 
 
 
-
 
Assets of discontinued operations
 
 
(2,730)
 
 
19,037
 
Trade payables and other liabilities
 
 
63,376
 
 
 
74,205
 
Accrued interest, related parties
 
 
97,481
 
 
 
105,779
 
Accrued interest
 
 
44,567
 
 
 
48,361
 
Liabilities of discontinued operations
 
 
20,811
 
 
 
178,252
 
Net cash used in operating activities
 
 
(14,849)
 
 
(907)
 
 
 
 
 
 
 
 
 
Cash Flows from Financing Activities
 
 
 
 
 
 
 
 
Net trade financing
 
 
14,849
 
 
 
(3,584)
Net cash provided by (used in) financing activities
 
 
14,849
 
 
 
(3,584)
 
 
 
 
 
 
 
 
 
Decrease in Cash
 
 
-
 
 
 
(4,491)
 
 
 
 
 
 
 
 
 
Cash at beginning of period
 
 
-
 
 
 
4,491
 
 
 
 
 
 
 
 
 
 
Cash at end of period
 
$-
 
 
$-
 
 
 
 
 
 
 
 
 
 
Supplemental Cash Flow Information
 
 
 
 
 
 
 
 
Cash paid for interest
 
$-
 
 
$-
 
Cash paid for income taxes
 
$-
 
 
$-
 
   
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
  
 
F-5
 
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
 
All currencies represented in the notes to the condensed consolidated financial statements are in United States Dollars (USD) unless specified as AUD (Australian Dollars).
 
Banjo and Matilda, Inc. was incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. On September 24, 2013, its name was changed to Banjo & Matilda, Inc.
 
On November 14, 2013, Banjo & Matilda, Inc., entered into a Share Exchange Agreement (the “Exchange Agreement”) with Banjo & Matilda, Pty Ltd., a corporation formed under the laws of Australia (the “Company”) and the shareholders of the Company. Pursuant to the Exchange Agreement, at the closing of the transaction contemplated thereunder (the “Transaction”), the Company became a wholly-owned subsidiary of Banjo & Matilda, Inc. (the “Parent”).
 
Banjo & Matilda Pty Ltd. was incorporated under the laws of Australia on May 27, 2009 and manufactures and sells cashmere fashion. Headquartered at Bondi Beach, the Aussie lifestyle of sun, sand and surf resonates innately with this label and its philosophy of low maintenance, style and comfort.
 
Banjo & Matilda USA, Inc. was incorporated in the State of Delaware on October 14, 2013, as a subsidiary, and is owned 100% by Banjo & Matilda, Inc.
 
The ultra-soft cashmere staples, pairing simplicity with cool sophistication has rapidly gained loyal customers worldwide positioning the label as the ‘go-to’ for contemporary cashmere products.
 
Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. That is, the share exchange is equivalent to the issuance of stock by Banjo & Matilda Pty Ltd. for the net monetary assets of the Banjo & Matilda, Inc. accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange will be identical to that resulting from a reverse acquisition, except no goodwill will be recorded. Under share reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, Banjo & Matilda, Inc. are those of the legal acquiree, Banjo & Matilda Pty Ltd., which is considered to be the accounting acquirer. Share and per share amounts stated have been retroactively adjusted to reflect the merger.
 
As a result of the exchange agreement, the reorganization was treated as an acquisition by the accounting acquiree that is being accounted for as a recapitalization and as a reverse merger by the legal acquirer for accounting purposes. Pursuant to the recapitalization, all capital stock shares and amounts and per share data have been retroactively restated. Accordingly, the financial statements include the following:
 
(1)
The balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the legal acquirer at fair value.
  
(2)
The statements of operations include the operations of the accounting acquirer for the period presented and the operations of the legal acquirer from the date of the merger.
  
 
F-6
 
  
In June of 2017, Banjo & Matilda, Inc. began to seek out companies to acquire as additional subsidiaries to expand its business lines, and generate more revenue and profit.
 
On September 20, 2017, Banjo & Matilda, Inc. entered into a Memorandum of Understanding with Spectrum King, LLC.
 
On March 19, 2018, Banjo & Matilda, Inc. entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction did not close.
 
On April 16, 2019, Banjo & Matilda, Inc. entered into a Share Exchange Agreement with American Aviation Technologies, LLC
 
On June 28, 2019, Banjo & Matilda, Inc. spun out two wholly-owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.
 
On September 30, 2019, the acquisition of American Aviation Technologies, LLC closed and it became a wholly-owned subsidiary of Banjo & Matilda, Inc.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Going Concern
 
The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At December 31, 2018 and June 30, 2018, the Company had no cash and $4,327,950 and $4,071,102 in negative working capital, respectively. For the three months ended December 31, 2018 and 2017, the Company had a net loss of $122,671 and $227,768, respectively. For the six months ended December 31, 2018 and 2017, the Company had a net loss of $256,854 and $459,461, respectively. To date, these losses and deficiencies have been financed principally through the loans from related parties and from third parties. In view of the matters described, there is substantial doubt as to the Company’s ability to continue as a going concern without a significant infusion of capital. We anticipate that we will have to raise additional capital to fund operations over the next 12 months. To the extent that we are required to raise additional funds to acquire properties, and to cover costs of operations, we intend to do so through additional offerings of debt or equity securities. There are no commitments or arrangements for other offerings in place, no guaranties that any such financings would be forthcoming, or as to the terms of any such financings. Any future financing will involve substantial dilution to existing investors.
 
Basis of Presentation
 
The accompanying financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”).
 
Principles of Consolidation
 
The condensed consolidated unaudited financial statements include the accounts of Banjo & Matilda, Inc. (“Banjo” or “the Company”) and its wholly owned subsidiaries Banjo & Matilda Pty Ltd. and Banjo & Matilda USA, Inc., collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation. These financial statements should be read in conjunction with the company’s latest annual financial statements.
 
Exchange Gain (Loss)
 
During the six-month periods ended December 31, 2018 and 2017, the transactions of the Company were denominated in US Dollars.
    
 
F-7
 
 
Foreign Currency Translation and Comprehensive Income (Loss)
 
During the six months ended December 31, 2018 and 2017, the transactions of the Company were denominated in US Dollars. All the transactions which were denominated in other currencies were converted to US dollars on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss).
 
Use of Estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make certain 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. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.
 
Reportable Segment
 
The Company has one reportable segment. The Company’s activities are inter-related and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business.
 
Revenue Recognition
 
Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
 
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
 
Cost of Sales
 
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), and importation duties and charges.
 
Selling Expense
 
Selling expenses consist primarily of shipping and handling costs, relating to the delivery of products to customers, are classified as selling, general and administrative expenses. We had no selling expenses for the six months ended December 31, 2018 and 2017, respectively.
  
 
F-8
 
 
Operating Overhead Expense
 
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services, and meetings and travel.
 
Income Taxes
 
The Company utilizes Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
 
The Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740. When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of operations.
 
At June 30, 2018, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended June 30, 2018 and prior years or in computing its tax provision for 2016. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities from the period ended June 30, 2014 to the present, generally for three years after they are filed.
 
Concentration of Credit Risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base across many markets, predominantly Australia, United States of America, United Kingdom, Europe and the Middle East. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company’s Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk.
 
Risks and Uncertainties
 
The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.
  
 
F-9
 
 
Contingencies
 
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
 
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
 
Cash and Equivalents
 
Cash and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At December 31, 2018 and June 30, 2018, the Company had $0 and $0 in cash in Australia and in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.
 
Property, Plant & Equipment
 
Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to ten years; computer equipment, two to three years; buildings and improvements, five to fifteen years; leasehold improvements, two to ten years; and furniture and equipment, one to five years. Property and equipment is categorized under assets of discontinued operations in the balance sheet. Additionally, depreciation expense would be included under loss from operations of discontinued operations in the statement of operations.
 
Fair Value of Financial Instruments
 
For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
 
Level 1
inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
 
Level 2
inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
Level 3
inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
 
 
F-10
 
 
Earnings Per Share (EPS)
 
The Company utilize FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive.
 
The following table sets for the computation of basic and diluted earnings per share for the six-month periods ended December 31, 2018 and 2017:
 
 
 
Six-month periods ended
 
 
 
December 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Basic and diluted
 
 
 
 
 
 
Loss from continuing operations
 
$(236,956)
 
$(317,245)
Loss from operations of discontinued operations
 
 
(19,898)
 
 
(142,216)
Net loss
 
$(256,854)
 
$(459,461)
 
 
 
 
 
 
 
 
 
Net loss per share (basic and diluted)
 
 
 
 
 
 
 
 
Continuing operations
 
$(0.00)
 
$(0.00)
Discontinued operations
 
 
(0.00)
 
$(0.00)
 
 
$(0.00)
 
$(0.00)
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding:
 
 
 
 
 
 
 
 
Basic and diluted
 
 
69,584,149
 
 
 
69,584,149
 
 
Recently Issued Accounting Pronouncements
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017.
  
 
F-11
 
  
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
 
On June 20, 2018, the FASB issued ASU 2018-07,
Compensation—Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on August 6, 2018. The adoption of this standard did not have a material impact on the financial statements.
 
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
Reclassification
 
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow.
 
NOTE 3 – EXCHANGE AGREEMENT
 
On April 16, 2019, Banjo & Matilda, Inc and American Aviation Technologies LLC (“AAT”) entered into an Exchange Agreement dated as of March 16, 2019 pursuant to which Banjo shall acquire 100% of the issued and outstanding membership units of AAT in exchange for the issuance of Banjo shares of its Series A Preferred Stock constituting 84.4% of the total voting power of Banjo capital stock to be outstanding upon closing, after giving effect to the consummation of concurrent debt settlement and other capital stock issuances but before the issuance of shares of capital stock for investor relations purposes. As a result of the Exchange Agreement, AAT will become a wholly owned subsidiary of the Company.
 
The Exchange Agreement is subject to the satisfaction of certain conditions as set forth in the Exchange Agreement. At Closing, two additional directors will be added, resulting in a total of 4 directors serving post-closing.
 
AAT is a Florida limited liability company that is an aircraft design and development company dedicated to advancing aeronautical safety and performance through new and innovative concepts.
 
Upon the effective closing date, certain notes, loans, accrued interest, and related party loans will be converted to series A preferred shares. Additional preferred shares will also be exchanged for accrued expenses. Certain loans and accrued expenses were written up or down during the year ended June 30, 2018 to the value exchanged according to settlement agreements with certain investors and debtors of the Company. An additional $39,179 of trade payables was converted and accrued during the year ended June 30, 2018. $620,225 of trade payables will be converted to 25,095 series A preferred shares ($24,72 per share), $569,991 of accrued interest will be converted to 29,314 series A preferred shares ($19.44 per share), $691,828 of loans payable will be converted to 59,869 series A preferred shares ($11.75 per share), $123,141 of loans from related parties will be converted to 11,917 series A preferred shares ($10.33 per share), $320,730 of convertible loans from related parties will be converted to 18,682 series A preferred shares ( $17.16 per share) and $70,883 of other convertible debt will be converted to 14,296 series A preferred shares ($4.95 per share).
  
 
F-12
 
 
NOTE 4 – DISCONTINUED OPERATIONS
 
On June 28, 2019, the Company entered into a Spin Out Agreement with WNPAU Pty Ltd. (“WNPAU”), owned by the Company’s former CEO Brendan MacPherson, pursuant to which the Company agreed to sell and assign to WNPAU all the assets of the Company’s two subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD in exchange for the assumption of the liabilities of the Company’s two subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.
 
The operating results for Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD have been presented in the accompanying consolidated statement of operations for the six months ended December 31, 2018 and 2017 as discontinued operations and are summarized below:
 
 
 
Six Months Ended December 31,
 
 
 
2018
 
 
2017
 
Revenue
 
$-
 
 
$79,779
 
Cost of revenue
 
 
-
 
 
 
19,699
 
Gross Profit
 
 
-
 
 
 
60,080
 
Operating expenses
 
 
2,902
 
 
 
151,595
 
Loss from operations
 
 
(2,902)
 
 
(91,515)
Other income (expenses)
 
 
(16,996)
 
 
(50,701)
 
 
$(19,898)
 
$(142,216)
 
The assets and liabilities of the discontinued operations at December 31, 2018 and June 30, 2018 are summarized below:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
 
 
 
 
 
 
 
Prepaids
 
$3,357
 
 
$-
 
Property and equipment, net
 
 
4,758
 
 
 
5,385
 
Total assets
 
$8,115
 
 
$5,385
 
 
 
 
 
 
 
 
 
 
Cash overdraft
 
$7,164
 
 
$6,565
 
Trade and other payables
 
 
1,030,805
 
 
 
1,035,072
 
Deposit payable
 
 
4,622
 
 
 
4,622
 
Trade financing
 
 
305,874
 
 
 
305,874
 
Accrued interest
 
 
165,298
 
 
 
140,819
 
Total liabilities
 
$1,513,763
 
 
$1,492,952
 
  
 
F-13
 
 
PROPERTY AND EQUIPMENT
 
As of December 31, 2018 and June 30, 2018, Property, Plant and Equipment consisted of the following:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
Property, plant and equipment
 
$30,081
 
 
$30,081
 
Accumulated depreciation
 
 
(25,323)
 
 
(24,696)
 
 
$4,758
 
 
$5,385
 
 
Depreciation was $627 and $1,095 for the six months ended December 31, 2018 and 2017, respectively.
 
TRADE AND OTHER PAYABLES
 
As of December 31, 2018 and June 30, 2018, trade and other payable are comprised of the following:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
Trade payable
 
$444,337
 
 
$446,427
 
Payroll payable
 
 
241,994
 
 
 
241,994
 
Payroll taxes
 
 
199,343
 
 
 
219,19
 
Employee benefits
 
 
92,589
 
 
 
92,837
 
Other liabilities
 
 
52,787
 
 
 
34,619
 
 
 
$1,030,805
 
 
$1,035,072
 
 
TRADE FINANCING
 
As of December 31, 2018 and June 30, 2018, trade financing is comprised of the following:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
Trade Financing - January 7, 2013
 
$49,454
 
 
$49,454
 
Trade Financing - August 14, 2014
 
 
128,468
 
 
 
128,468
 
Trade Financing - November 2, 2016
 
 
17,981
 
 
 
17,981
 
Trade Financing - November 3, 2016
 
 
2,601
 
 
 
2,601
 
Trade Financing - November 29, 2016
 
 
107,370
 
 
 
107,370
 
 
 
$305,874
 
 
$305,874
 
  
 
F-14
 
    
Trade Financing – January 7, 2013
 
On January 7, 2013, the Company entered into a trade financing agreement with a financial institution in Australia with a maximum limit of AUD $200,000 at an interest rate of 20.95% per annum. Upon default of the loan, the Company reached a settlement with its obligation with the entity in the amount of AUD $165,523. Per the settlement, the amount was to be paid through application of its Export Market Development Grant and up to 25% of the Company’s store sales in Australia. As of December 31, 2018, and June 30, 2018, the Company had an outstanding balance of USD $49,454.
 
Trade Financing – August 14, 2014
 
On August 14, 2014, the Company entered into a trade finance agreement with an entity in the United States with a total maximum facility of $1,500,000 based on $1,000,000 towards sales invoiced and $500,000 towards purchase order financing. Original term was for 12 months with automatic renewal for each consecutive period thereafter with interest at base rate floor of 3.25% plus 4.5%. In the event of default, an additional 7% interest is added. As of December 31, 2018, and June 30, 2018, the Company had an outstanding balance of $128,468. The Company renewed the loan term indefinitely until full settlement occurs. As of December 31, 2018, and June 30, 2018, the Company had an accrued interest balance of $68,359 and $58,493, respectively. For the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $9,766 and $9,766, respectively.
 
Trade Financing – November 2, 2016
 
On November 2, 2016, the Company entered into a merchant agreement with a capital funding group for a purchase price of $35,000 and purchased amount of $47,250. The Company amortized the excess of purchase amount over the purchase price, over the term of the financing of 21 months. Pursuant to the agreement, the Company cannot obtain future financing by selling receivables without consent from the lender. The Merchant holds a security interest in all accounts and proceeds. As of December 31, 2018, and June 30, 2018, the balance owed to the lender amounted to $17,981 and accrued interest of $15,165 and $11,667, respectively. The term has been extended indefinitely until full settlement occurs without penalty. For the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $3,500 and $3,500, respectively.
 
Trade Financing – November 3, 2016
 
On November 3, 2016, the Company entered into a payment rights purchase and sale agreement for $72,500 which was due in April 2017. The financing had a purchase price of $50,000 with the purchased amount of $72,500. The Company amortized the excess of the purchased amount over purchase price, over the term of the financing of six months. The Company was required to make daily payments of $575.40 to the lender. As of December 31, 2018, and June 30, 2018, the loan balance owed to the lender of $2,601 is in default. The loan has been charged an interest rate of 16% per annum while in default. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $207 and $210, respectively. As of December 31, 2018 and June 30, 2018, the balance of accrued interest was $5,817 and $5,610, respectively.
  
 
F-15
 
 
Trade Financing – November 29, 2016
 
On November 29, 2016, the Company entered into a consignment agreement. It is a platform for funding advance inventory production. This facility allowed the Company to fund manufacturing with a consignment facility which pegs repayment to the sales of inventory. During the year ended June 30, 2017, the Company initially raised $21,928 for a purchase price of $26,313. This amount was paid off as of March 31, 2017. The difference of $4,385 was amortized over the period of financing. The Company again raised $114,888 for a purchase price of $133,342 in December 2016 due by December 2017. The difference of $18,454 was amortized over the period of financing. As of December 31, 2018, and June 30, 2018, balance outstanding was $107,370, with $34,431 and $28,007 in accrued interest, respectively. As of December 31, 2018, the loan was in default and charged an interest rate of 12% per annum. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $6,425 and $7,689, respectively.
 
NOTE 5 – TRADE AND OTHER PAYABLES
 
As of December 31, 2018 and June 30, 2018, trade and other payable are comprised of the following:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
Trade payable
 
$114,345
 
 
$118,469
 
Officer compensation
 
 
288,696
 
 
 
221,196
 
Payroll payable
 
 
220,094
 
 
 
220,094
 
 
 
$623,135
 
 
$559,759
 
 
NOTE 6 – TRADE FINANCING
 
January 4, 2017
 
The Company entered into a Note Purchase Agreement for $65,000 dated January 4, 2017 with a third party. The amount was due on July 4, 2017 and carries interest at the rate of 18%. As of December 31, 2018, and June 30, 2018, the outstanding loan balance was $56,194 and accrued interest was $20,417 and $14,253, respectively. As of July 18, 2018, the loan maturity date has been extended until full settlement occurs without penalty. Effective with the AAT merger closing described in Note 3, the note holder has agreed to convert all outstanding principal and interest into 3,418,889 shares of common stock effected for the post-reverse split. As of June 30, 2018 the principal and interest related to this note was written down by $126 and $349, respectively, to accurately reflect the value of the conversion.
 
NOTE 7 – LOANS PAYABLE
 
As of December 31, 2018 and June 30, 2018, loans payable is comprised of the following:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
Loan Payable - December 2013
 
$81,993
 
 
$81,993
 
Loan Payable - June 2015
 
 
498,882
 
 
 
498,882
 
 
 
$580,875
 
 
$580,875
 
 
 
F-16
 
  
Loan Payable - December 2013
 
In December 2013, the company entered into a short-term loan arrangement in the amount of $100,000 with an individual. Terms of the note require interest payment of $5,000 on the repayment date, 30 days after the note date. If not repaid at that time, interest will accrue at the rate of $166 per day until the note is repaid. The loan has been in default since January 2014 and accruing interest of $166 per day. The outstanding principal balance as of December 31, 2018 and June 30, 2018 was $81,994. As of December 31, 2018 and June 30, 2018, the accrued interest balance was $204,151 and $173,939, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $30,212 and $30,544, respectively. Effective with the AAT merger closing described in Note 3, the note holder has agreed to convert all outstanding principal and interest into 200,358 shares of effected for the post-reverse split. As of June 30, 2018, the principal and interest related to this note was written down by $20,152 and $42,749, respectively, to accurately reflect the value of the conversion.
 
Loan Payable – June 2015
 
In June 2015, the Company entered into a secured promissory note in the amount of $500,000 with a Delaware statutory trust. The note bears interest at the rate of 18% per annum and was due on or before July 1, 2017. The note has various covenants attached including one in which all credit card receipts are to be swept into an account which will fund payments on the note that are not in excess of the minimum quarterly payments required. As a condition of the note, an affiliate of the lender was granted a warrant to purchase 6,000,000 shares of the common stock of the Company at a price of $.08 in whole or in part. The outstanding balance as of December 31, 2018 and June 30, 2018 was $498,882. As of December 31, 2018 and June 30, 2018, the accrued interest balance was $196,397 and $141,671, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $54,727 and $55,452, respectively. Effective with the AAT merger closing described in Note 3, the note holder has agreed to convert all outstanding principal and interest into 31,086,911 shares of common stock effected for the post-reverse split. As of June 30, 2018, the principal was written down by $1,118 to accurately reflect the value of the conversion.
 
NOTE 8 – CONVERTIBLE NOTES PAYABLE
 
As of December 31, 2018 and June 30, 2018, convertible notes payable is comprised of the following:
 
 
 
December 31,
 
 
June 30,
 
 
 
2018
 
 
2018
 
Convertible Notes Payable - August 2014 to October 2018
 
$74,178
 
 
$58,570
 
Convertible Notes Payable - August 2016 to June 2018
 
 
84,125
 
 
 
84,884
 
 
 
$158,303
 
 
$143,454
 
  
 
F-17
 
 
Convertible Notes Payable - August 2014 to October 2018
 
From August 2014 to October 2018, the Company entered into the following convertible loan agreements with a lender:
 
Issuance Date
 
Face Value
 
 
Interest Rate
 
 
Term
 
Conversion Terms
 
August 9, 2014
 
$19,000
 
 
 
6%
 
Six Months
 
20% Discount to Market
 
December 12, 2014
 
 
7,500
 
 
 
6%
 
Six Months
 
30% Discount to Market
 
June 22, 2018
 
 
31,700
 
 
 
6%
 
Six Months
 
Fixed Price of .01 Per Share
 
September 20, 2018
 
 
8,006
 
 
 
6%
 
Six Months
 
Fixed Price of .01 Per Share
 
October 23, 2018
 
 
7,972
 
 
 
6%
 
Six Months
 
Fixed Price of .01 Per Share
 
 
 
$74,178
 
 
 
 
 
 
 
 
 
 
 
Accounting Considerations
 
The Company evaluated the agreements under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The embedded conversion features contained in the August 9, 2014 and December 12, 2014 were a variable conversion price and resulted in an embedded derivative and thus requiring bifurcation. The embedded conversion options in the remaining notes did not result in embedded derivatives that required bifurcation. Effective March 19, 2018, the note holder agreed to convert all outstanding principal and interest into 42,128 shares of Series A Preferred Stock upon the consummation of a merger. This settlement agreement eliminated the original derivative conversion terms. The note will now convert at a fixed rate plus any accrued interest.
 
The outstanding balance as of December 31, 2018 and June 30, 2018 was $74,178 and $58,570, respectively. The accrued interest balance was $7,513 and $5,413 as of December 31, 2018 and June 30, 2018, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $2,100 and $1,104, respectively. As of June 30, 2018 the principal and interest related to this loan was written down by $9,630 and $1,940, respectively, to accurately reflect the value of the conversion.
 
Convertible Notes Payable – October 2015 to May 2018
 
Issuance Date
 
Face Value
 
 
Interest Rate
 
 
Term
 
Conversion Terms
 
October 28, 2015
 
$10,000
 
 
 
6%
 
Six Months
 
20% Discount to Market; floor of .03 per share
 
August 12, 2016
 
 
23,000
 
 
 
6%
 
Six Months
 
Fixed Price of .03 Per Share
 
January 2, 2017
 
 
15,000
 
 
 
6%
 
Six Months
 
Fixed Price of .03 Per Share
 
February 9, 2017
 
 
22,125
 
 
 
6%
 
Six Months
 
Fixed Price of .03 Per Share
 
May 18, 2018
 
 
14,000
 
 
 
6%
 
Six Months
 
20% Discount to Market
 
 
 
$84,125
 
 
 
 
 
 
 
 
 
 
  
 
F-18
 
  
Accounting Considerations
 
The Company evaluated the agreements under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The embedded conversion feature contained in the May 18, 2018 was a variable conversion price and resulted in an embedded derivative and thus required bifurcation. The embedded conversion options in the remaining notes did not result in embedded derivatives that required bifurcation. Effective March 19, 2018, the note holder agreed to convert all outstanding principal and interest into 29,360 shares of Series A Preferred Stock upon the consummation of a merger. This settlement agreement eliminated the original derivative conversion terms. The note will now convert at a fixed rate plus any accrued interest.
 
There were no penalty or interest rate increase due to the default of the loans. The outstanding balance as of December 31, 2018 and June 30, 2018 was $84,124 and $84,884, respectively. The accrued interest was $8,409 and $5,892 as of December 31, 2018 and June 30, 2018, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $2,517 and $3,035, respectively. As of June 30, 2018 the principal and interest related to this loan was increased by $10,758 and $894, respectively, to accurately reflect the value of the conversion.
 
NOTE 9 – CONVERTIBLE NOTES PAYABLE FROM RELATED PARTIES
 
The Company had several outstanding convertible note agreements with a shareholder aggregating to AUD $370,000. The notes had interest rates varying from 6% to 15% per annum. In March 2015, the outstanding balance and accrued interest was refinanced by a $526,272 AUD convertible note. The Convertible Note bears interest at the rate of 18% per annum and is due on or before April 30, 2017. The interest portion of the note shall be paid weekly starting in April 2015. Principal payments of $9,929 AUD weekly were to commence in April 2016. All or any portion of the principal amount of the Convertible Note and all accrued interest is convertible at the option of the holder into common stock of the Company at a conversion price of five cents ($0.05) per share, subject to various standard provisions. The outstanding balance as of December 31, 2018 and June 30, 2018 was USD $320,730. The interest rate increased from 18% per annum to 22% per annum due to the loan default as of April 30, 2017. The Company determined the fair value of the convertible note of $80,909 using the intrinsic value method. The Company recorded an amortization of the debt discount of $0 and $15,432, during the fiscal years ended June 30, 2018 and 2017, respectively. The debt discount is fully amortized as of December 31, 2018 and June 30, 2018. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $35,184 and $42,956, respectively. Accrued interest as of December 31, 2018 and June 30, 2018 was $208,009 and $172,826, respectively. This note and any associated discount and accrued interest will be converted to preferred stock, see Note 10 for additional detail on the equity conversion. As of June 30, 2018 the principal and interest related to this loan was written down by $66,599 and $35,887, respectively, to accurately reflect the value of the conversion.
 
The Company has loans payable in the amount of $123,141 to shareholders and officers of the Company as of December 31, 2018 and June 30, 2018. The note bears interest at the rate of 15% per annum and was due on or before June 30, 2014. The outstanding balance, including accrued interest, may be converted into common shares of Banjo & Matilda, Inc. at a discount of 10% to last 30 days average share priced rate. The Company has granted the Lenders a security interest in the intellectual property of the Borrower. The remaining loan balance has been in default. There was no penalty or interest rates increase due to the default.
 
 
F-19
 
   
Accounting Considerations
 
The Company evaluated the agreements under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The embedded conversion features contained in the August 9, 2014 and December 12, 2014 were a variable conversion price and resulted in an embedded derivative and thus requiring bifurcation. The embedded conversion options in the remaining notes did not result in embedded derivatives that required bifurcation Effective March 19, 2018, the note holder agreed to convert all outstanding principal and interest into 758,672 shares of common stock effected for the post-reverse split. This settlement agreement eliminated the original derivative conversion terms. The note will now convert at a fixed rate plus any accrued interest.
 
The accrued interest was $65,380 and $55,998 as of December 31, 2018 and June 30, 2018, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded interest expense in the amount of $9,382 and $13,400, respectively. As of June 30, 2018, the principal and interest related to this loan was written down by $47,485 and $21,594, respectively, to accurately reflect the value of the conversion.
 
NOTE 10 – SETTLEMENT PAYABLE
 
On February 28, 2018, the company entered into 5 separate settlement agreements with current shareholders. These settlement agreements were made to exchange post reverse split shares of common stock to mitigate potential litigation. The settlement agreements require the company to issue common stock for $250,000.
 
NOTE 11 – COMMITMENTS
 
The Company leased commercial space in Sydney, Australia that served as its flagship as well as a retail store. We leased approximately 2,500 square feet of space pursuant to a three-year lease agreement which expired in October 2014. After expiration, the lease converted to a month-to-month basis. The annual rent for the premises was AUD $52,000 and the total lease expense for six months ended December 31, 2018 and 2017 was $0 and $6,348, respectively. This lease was terminated in September 2017.
 
NOTE 12 – STOCKHOLDERS’ EQUITY
 
Preferred Stock
 
Pursuant to an Employment Agreement (the “Agreement”) with the Chief Executive Officer on November 15, 2013, the Company issued 1,000,000 undesignated shares of Preferred Stock each having a par value of $0.00001. The preferred shares shall be entitled to 100 votes to every one share of common stock. The Preferred Shares shall only valid during the term of this Agreement. At the end of the Agreement, November 15, 2016, the shares shall be cancelled and returned to Treasury and the Executive shall have no preferential voting rights. If this Agreement is renewed, the preferred shares remain with the Executives. Effective with the Spin Out Agreement (See Note 13), the 1,000,000 shares of preferred stock were returned to the Company.
 
Common Stock
 
There have been no changes to the common stock for the six months ended December 31, 2018. The number of shares outstanding at December 31, 2018 and June 30, 2018 was 68,584,149. The balance of Common Stock at December 31, 2018 and June 30, 2018 was $695.
   
 
F-20
 
 
NOTE 13 – SUBSEQUENT EVENTS
 
Convertible Note Agreement
 
The company entered into a convertible note payable with a noteholder in the amount of $9,000 on May 1, 2019 and matures six months from the inception date. Interest rate on this note is 6% and is payable upon maturity or conversion. The noteholder may convert the note to shares of the company’s common stock at a price no less than $.0033333 a share.
 
Spin Out Agreement
 
Effective June 28, 2019, the Company entered into a Spin Out Agreement with WNPAU Pty Ltd. (“WNPAU”) which is owned by the Company’s former CEO Brendan MacPherson. In connection with the agreement, WNPAU agreed to assume all the assets and liabilities of the Company’s two subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD in exchange for the return of 1,000,000 shares of Preferred Stock held by Brendan MacPherson and $135,000 of accrued compensation owed to Brendan MacPherson.
 
Convertible Note Agreement
 
The company entered into a convertible note payable with a noteholder in the amount of $14,500 on July 16, 2019 and matures six months from the inception date. Interest rate on this note is 6% and is payable upon maturity or conversion. The noteholder may convert the note to shares of the company’s common stock at a fixed price of $0.01 per share, unless the Note holder covered a portion of the Note at a lower price, in which case the fixed price is the lower price; or the lowest price of any original common stock issued by the Company or exercise price or conversion price of any derivative securities, but not less than $0.0033333 per share.
 
Convertible Note Agreement
 
The company entered into a convertible note payable with a noteholder in the amount of $10,000 on September 24, 2019 and matures six months from the inception date. Interest rate on this note is 6% and is payable upon maturity or conversion. The noteholder may convert the note to shares of the company’s common stock at a fixed price of $0.01 per share, unless the Note holder covered a portion of the Note at a lower price, in which case the fixed price is the lower price; or the lowest price of any original common stock issued by the Company or exercise price or conversion price of any derivative securities, but not less than $0.0033333 per share.
 
Merger Agreement
 
On September 30, 2019 the Share Exchange Agreement between AAT and the Company, whereby the Company agreed to acquire all of the membership units of AAT with AAT becoming a wholly owned subsidiary of the Company was considered effective.
 
Note Conversions
 
On September 30, 2019 a noteholder converted $84,125 in principal and $13,740 into 29,360 Series A Preferred Stock in accordance with a settlement agreement reached on March 19, 2018.
 
On September 30, 2019 a noteholder converted $127,690 in principal and $12,734 into 42,128 Series A Preferred Stock in accordance with a settlement agreement reached on March 19, 2018.
  
 
F-21
 
 
  
The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited financial statements and the notes to those statements included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this Report that could cause actual results to differ materially from those anticipated in these forward-looking statements.
 
Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
 
In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.
 
This section of the report should be read together with Footnotes of the Company audited financials for the year ended June 30, 2018. The unaudited statements of operations for the three and six months ended December 31, 2018 and 2017 are compared in the sections below.
 
General Overview
 
Banjo and Matilda, Inc. was incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. On September 24, 2013, its name was changed to Banjo & Matilda, Inc.
 
On November 14, 2013, Banjo & Matilda, Inc., entered into a Share Exchange Agreement (the “Exchange Agreement”) with Banjo & Matilda, Pty Ltd., a corporation formed under the laws of Australia (the “Company”) and the shareholders of the Company. Pursuant to the Exchange Agreement, at the closing of the transaction contemplated thereunder (the “Transaction”), the Company became a wholly-owned subsidiary of Banjo & Matilda, Inc. (the “Parent”).
 
Banjo & Matilda Pty Ltd. was incorporated under the laws of Australia on May 27, 2009 and manufactures and sells cashmere fashion. Headquartered at Bondi Beach, the Aussie lifestyle of sun, sand and surf resonates innately with this label and its philosophy of low maintenance, style and comfort.
 
Banjo & Matilda USA, Inc. was incorporated in the State of Delaware on October 14, 2013, as a subsidiary, and is owned 100% by Banjo & Matilda, Inc.
 
The ultra-soft cashmere staples, pairing simplicity with cool sophistication has rapidly gained loyal customers worldwide positioning the label as the ‘go-to’ for contemporary cashmere products.
 
Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. That is, the share exchange is equivalent to the issuance of stock by Banjo & Matilda Pty Ltd. for the net monetary assets of the Banjo & Matilda, Inc. accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange will be identical to that resulting from a reverse acquisition, except no goodwill will be recorded. Under share reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, Banjo & Matilda, Inc. are those of the legal acquiree, Banjo & Matilda Pty Ltd., which is considered to be the accounting acquirer. Share and per share amounts stated have been retroactively adjusted to reflect the merger.
 
 
4
 
   
As a result of the exchange agreement, the reorganization was treated as an acquisition by the accounting acquiree that is being accounted for as a recapitalization and as a reverse merger by the legal acquirer for accounting purposes. Pursuant to the recapitalization, all capital stock shares and amounts and per share data have been retroactively restated. Accordingly, the financial statements include the following:
 
(1)
The balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the legal acquirer at fair value.
  
(2)
The statements of operations include the operations of the accounting acquirer for the period presented and the operations of the legal acquirer from the date of the merger.
 
In June of 2017, Banjo & Matilda, Inc. began to seek out companies to acquire as additional subsidiaries to expand its business lines, and generate more revenue and profit.
 
On September 20, 2017, Banjo & Matilda, Inc. entered into a Memorandum of Understanding with Spectrum King, LLC.
 
On March 19, 2018, Banjo & Matilda, Inc. entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction did not close.
 
On April 16, 2019, Banjo & Matilda, Inc. entered into a Share Exchange Agreement with American Aviation Technologies, LLC
 
On June 28, 2019, Banjo & Matilda, Inc. spun out two wholly-owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.
 
On September 30, 2019, the acquisition of American Aviation Technologies, LLC closed and it became a wholly-owned subsidiary of Banjo & Matilda, Inc.
 
Recent Developments
 
Spin Out Agreement
 
Effective June 28, 2019, the Company entered into a Spin Out Agreement with WNPAU Pty Ltd. (“WNPAU”) which is owned by the Company’s former CEO Brendan MacPherson. In connection with the agreement, WNPAU agreed to assume all the assets and liabilities of the Company’s two subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD exchange for the return of 1,000,000 shares of Preferred Stock held by Brendan MacPherson and $135,000 of accrued compensation owed to Brendan MacPherson.
 
Exchange Agreement
 
Effective April 16, 2019, Banjo & Matilda, Inc and American Aviation Technologies LLC (“AAT”) entered into an Exchange Agreement dated as of March 16, 2019 pursuant to which Banjo shall acquire 100% of the issued and outstanding membership units of AAT in exchange for the issuance of Banjo shares of its Series A Preferred Stock constituting 84.4% of the total voting power of Banjo capital stock to be outstanding upon closing, after giving effect to the consummation of concurrent debt settlement and other capital stock issuances but before the issuance of shares of capital stock for investor relations purposes. As a result of the Exchange Agreement, AAT will become a wholly owned subsidiary of the Company.
 
The Exchange Agreement is subject to the satisfaction of certain conditions as set forth in the Exchange Agreement. At Closing, two additional directors will be added, resulting in a total of 4 directors serving post-closing.
 
 
5
 
  
AAT is a Florida limited liability company that is an aircraft design and development company dedicated to advancing aeronautical safety and performance through new and innovative concepts.
 
Upon the effective closing date, certain notes, loans, accrued interest, and related party loans will be converted to series A preferred shares. Additional preferred shares will also be exchanged for accrued expenses. Certain loans and accrued expenses were written up or down during the year ended June 30, 2018 to the value exchanged according to settlement agreements with certain investors and debtors of the Company. An additional $39,179 of trade payables was converted and accrued during the year ended June 30, 2018. $620,225 of trade payables will be converted to 25,095 series A preferred shares ($24,72 per share), $569,991 of accrued interest will be converted to 29,314 series A preferred shares ($19.44 per share), $691,828 of loans payable will be converted to 59,869 series A preferred shares ($11.75 per share), $123,141 of loans from related parties will be converted to 11,917 series A preferred shares ($10.33 per share), $320,730 of convertible loans from related parties will be converted to 18,682 series A preferred shares ( $17.16 per share) and $70,883 of other convertible debt will be converted to 14,296 series A preferred shares ($4.95 per share). .
 
Critical Accounting Policies
 
Principles of Consolidation
 
The condensed consolidated unaudited financial statements include the accounts of Banjo & Matilda, Inc. (“Banjo” or “the Company”) and its wholly owned subsidiaries Banjo & Matilda Pty Ltd. and Banjo & Matilda USA, Inc., collectively referred to as the Company. All material intercompany accounts, transactions and profits were eliminated in consolidation. These financial statements should be read in conjunction with the company’s latest annual financial statements.
 
Exchange Gain (Loss)
 
During the six-month periods ended December 31, 2018 and 2017, the transactions of the Company were denominated in US Dollars.
 
Foreign Currency Translation and Comprehensive Income (Loss)
 
During the six-month periods ended December 31, 2018 and 2017, the transactions of the Company were denominated in US Dollars. All the transactions which were denominated in other currencies were converted to US dollars on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss).
 
Use of Estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make certain 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. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.
 
Reportable Segment
 
The Company has one reportable segment. The Company’s activities are inter-related and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business.
 
 
6
 
  
Revenue Recognition
 
Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
 
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
 
Cost of Sales
 
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), and importation duties and charges.
 
Selling Expense
 
Selling expenses consist primarily of shipping and handling costs, relating to the delivery of products to customers, are classified as selling, general and administrative expenses. We had no selling expenses for the six months ended December 31, 2018 and 2017, respectively.
 
Operating Overhead Expense
 
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services, and meetings and travel.
 
Income Taxes
 
The Company utilizes Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
 
The Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740. When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of operations.
 
At June 30, 2018, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended June 30, 2018 and prior years or in computing its tax provision for 2016. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities from the period ended June 30, 2014 to the present, generally for three years after they are filed.
 
 
7
 
  
Concentration of Credit Risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base across many markets, predominantly Australia, United States of America, United Kingdom, Europe and the Middle East. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company’s Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk.
 
Risks and Uncertainties
 
The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.
 
Contingencies
 
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
 
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
 
Cash and Equivalents
 
Cash and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At December 31, 2018 and June 30, 2018, the Company had $0 and $0 in cash in Australia and in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.
 
Property, Plant & Equipment
 
Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to ten years; computer equipment, two to three years; buildings and improvements, five to fifteen years; leasehold improvements, two to ten years; and furniture and equipment, one to five years. Property and equipment is categorized under assets of discontinued operations in the balance sheet. Additionally, depreciation expense would be included under loss from operations of discontinued operations in the statement of operations.
 
 
8
 
 
Fair Value of Financial Instruments
 
For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
 
Level 1
inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
 
Level 2
inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
Level 3
inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
 
Earnings Per Share (EPS)
 
The Company utilize FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive.
 
The following table sets for the computation of basic and diluted earnings per share for the six-month periods ended December 31, 2018 and 2017:
 
 
 
Six-month periods ended
 
 
 
December 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Basic and diluted
 
 
 
 
 
 
Loss from continuing operations
 
$(236,956)
 
$(317,245)
Loss from operations of discontinued operations
 
 
(19,898)
 
 
(142,216)
Net loss
 
$(256,854)
 
$(459,461)
 
 
 
 
 
 
 
 
 
Net loss per share (basic and diluted)
 
 
 
 
 
 
 
 
Continuing operations
 
$(0.00)
 
$(0.00)
Discontinued operations
 
 
(0.00)
 
$(0.00)
 
 
$(0.00)
 
$(0.00)
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding:
 
 
 
 
 
 
 
 
Basic and diluted
 
 
69,584,149
 
 
 
69,584,149
 
   
 
9
 
  
Recently Issued Accounting Pronouncements
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017.
 
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
 
On June 20, 2018, the FASB issued ASU 2018-07,
Compensation—Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on August 6, 2018. The adoption of this standard did not have a material impact on the financial statements.
 
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
Reclassification
 
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow.
 
Financial Results
 
The following discussion of the results of operations constitutes management’s review of the factors that affected the financial and operating performance for the quarter ending December 31, 2018 and 2017. This discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report. The Company has a June 30 fiscal year end.
 
During the quarters ended December 31, 2018 and 2017, the transactions of the Company were denominated in US Dollars. All the transactions which were denominated in other currencies were converted to US Dollars on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss). Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity. There were no significant fluctuations in the exchange rate for the conversion of Australian Dollars to US Dollars after the balance sheet date.
   
 
10
 
 
Results of Operations
 
The following information represents our results of operations for three months ended December 31, 2018 compared to the three months ended December 31, 2017.
 
Three Months Ended December 31, 2018 Compared to December 31, 2017
 
 
 
For the Three Months Ended
 
 
 
 
 
December 31,
2018
 
 
December 31,
2017
 
 
$
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Payroll and employee related expenses
 
 
33,750
 
 
 
74,170
 
 
 
(40,420)
 
 
-54
 %
Operating expense
 
 
4,151
 
 
 
0
 
 
 
4,151
 
 
 
100%
Total operating expenses
 
 
37,901
 
 
 
74,170
 
 
 
(36,269)
 
 
-49
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations
 
 
(37,901)
 
 
(74,170)
 
 
36,269
 
 
 
-49
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, related parties
 
 
-
 
 
 
-
 
 
 
-
 
 
 
100%
Interest expense
 
 
(70,202)
 
 
(76,308)
 
 
6,106
 
 
 
-8
 %
Total other income (expense)
 
 
(70,202)
 
 
(76,308)
 
 
26,232
 
 
 
-34
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
 
(108,103)
 
 
(150,478)
 
 
42,375
 
 
 
-28
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations of discontinued operations
 
 
(14,568)
 
 
(77,290)
 
 
62,722
 
 
 
-81
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$(122,671)
 
$(227,768)
 
$105,097
 
 
 
-46
 %
    
 
11
 
   
Expenses
 
Total operating expenses decreased 49% from $74,170 to $37,901, for the three months ended December 31, 2018 compared with the three months ended December 31, 2017. The reduction in operating expense was driven by the wind down in operations.
 
Loss from Operations of Discontinued Operations
 
Total loss from operations of discontinued operations decreased 81% from $77,290 to $14,568, for the three months ended December 31, 2018 compared with the three months ended December 31, 2017. The reduction in operating expense was driven by the wind down in operations.
 
Net Loss
 
Net loss was $122,671 for the three months ending December 31, 2018 compared to $227,768 for the three months ended December 31, 2017. The reduction in revenue and winding down of operations was the driver of the increasing loss.
 
Results of Operations
 
The following information represents our results of operations for six months ended December 31, 2018 compared to December 31, 2017.
 
Six Months Ended December 31, 2018 Compared to December 31, 2017
 
 
 
For the Six Months Ended
 
 
 
 
 
December 31,
2018
 
 
December 31,
2017
 
 
$
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Payroll and employee related expenses
 
 
67,500
 
 
 
148,341
 
 
 
(80,841)
 
 
-54
 %
Operating expense
 
 
7,951
 
 
 
-
 
 
 
7,951
 
 
 
100%
Corporate and public company expense
 
 
22,348
 
 
 
17,250
 
 
 
5,098
 
 
 
30%
Total operating expenses
 
 
97,799
 
 
 
165,591
 
 
 
(67,792)
 
 
-41
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations
 
 
(97,799)
 
 
(165,591)
 
 
67,792
 
 
 
-41
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, related parties
 
 
(22,283)
 
 
-
 
 
 
(22,283)
 
 
100%
Interest expense
 
 
(116,874)
 
 
(151,654)
 
 
34,870
 
 
 
-23
%
Total other income (expense)
 
 
(139,157)
 
 
(151,654)
 
 
26,232
 
 
 
-17
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from continuing operations
 
 
(236,956)
 
 
(317,245)
 
 
80,289
 
 
 
-25
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations of discontinued operations
 
 
(19,898)
 
 
(142,216)
 
 
122,318
 
 
 
-86
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$(256,854)
 
$(459,461)
 
$202,607
 
 
 
-44
%
 
 
12
 
 
Expenses
 
Total operating expenses decreased 41% from $165,591 to $97,799, for the six months ended December 31, 2018 compared with the six months ended December 31, 2017. The reduction in operating expense was driven by the wind down in operations.
 
Loss from Operations of Discontinued Operations
 
Total loss from operations of discontinued operations decreased 86% from $142,216 to $19,898, for the six months ended December 31, 2018 compared with the six months ended December 31, 2017. The reduction in operating expense was driven by the wind down in operations.
 
Net Loss
 
Net loss was $256,854 for the six months ended December 31, 2018 compared to $459,461 for the six months ended December 31, 2017. The reduction in revenue and winding down of operations was the driver of the increasing loss.
 
Current Liquidity and Capital Resources for the six months ended December 31, 2018 compared to the six months ended December 31, 2017
 
Operating Activities
 
Cash used in operations of $14,849 during the six months ended December 31, 2018 was primarily a result of our $256,854 net loss reconciled with our net non-cash expenses relating to prepaid expenses, assets from discontinued operations, accounts payable, accrued liabilities and liabilities of discontinued operations. Cash used in operations of $907 during the six months ended December 31, 2017 was primarily a result of our $459,461 net loss reconciled with our net non-cash expenses relating to prepaid expenses, assets from discontinued operations, accounts payable, accrued liabilities and liabilities of discontinued operations.
 
Financing Activities
 
Net cash used in financing activities for the six months ended December 31, 2018 was $14,849. Net cash used in financing activities for the six months ended December 31, 2017 of $3,584 resulted from net trade financing.
 
Inflation
 
The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
  
 
13
 
   
Going Concern
 
The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At December 31, 2018 and June 30, 2018, the Company had no cash and $4,327,950 and $4,071,102 in negative working capital, respectively. For the three months ended December 31, 2018 and 2017, the Company had a net loss of $122,671 and $227,768, respectively. For the six months ended December 31, 2018 and 2017, the Company had a net loss of $256,854 and $459,461, respectively. To date, these losses and deficiencies have been financed principally through the loans from related parties and from third parties. In view of the matters described, there is substantial doubt as to the Company’s ability to continue as a going concern without a significant infusion of capital. We anticipate that we will have to raise additional capital to fund operations over the next 12 months. To the extent that we are required to raise additional funds to acquire properties, and to cover costs of operations, we intend to do so through additional offerings of debt or equity securities. There are no commitments or arrangements for other offerings in place, no guaranties that any such financings would be forthcoming, or as to the terms of any such financings. Any future financing will involve substantial dilution to existing investors.
 
Off-Balance Sheet Arrangements
 
As of December 31, 2018, there were no off-balance sheet arrangements.
 
Critical Accounting Policies and Use of Estimates
 
Quantitative and Qualitative Disclosures about Market Risk
 
In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.
 
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our significant estimates and assumptions include the fair value of our common stock, stock-based compensation, the recoverability and useful lives of long-lived assets, and the valuation allowance relating to our deferred tax assets.
 
Contingencies
 
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Our management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.
 
Item 4. Controls and Procedures.
 
Disclosure Controls and Procedures
 
The Company has established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and, as such, is accumulated and communicated to the Company’s Chief Executive Officer, Keith Duffy, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. Duffy, evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of December 31, 2018. Based on his evaluation, Mr. Duffy concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2018.
 
Changes in Internal Control Over Financial Reporting
 
There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s most recent fiscal quarter ended December 31, 2018, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
   
 
14
 
   
 
 
None.
 
 
Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our Annual Report on Form 10-K.
 
 
None.
 
 
None.
 
 
None.
 
 
None.
    
 
15
 
  
 
The following exhibits are filed herewith:
 
Exhibit
Number
 
Document
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation
 
 
16
 
   
 
In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
BANJO & MATILDA, INC.
 
Date: March 6, 2020
By:
/s/ Keith Duffy
 
Keith Duffy
Chief Executive Officer and Chief Financial Officer
(Principal Executive and Financial Officer)
 
 
17
 
<