XERIANT, INC. - FORM 10-Q

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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, 2019

☐ 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 x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
		Emerging growth company	o

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 o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 8, 2020, the Registrant had outstanding 69,584,149 shares of common stock.

BANJO & MATILDA, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page

Special Note regarding Forward-looking Statements		3

PART I – Financial Information

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of December 31, 2019 (unaudited) and June 30, 2019	F-1
	Condensed Consolidated Statements of Operations for the three months ended December 31, 2019 and 2018 (Unaudited) and for the six months ended December 31, 2019 and from inception (August 6, 2018) through December 31, 2018 (Unaudited)	F-2
	Condensed Consolidated Statements of Stockholder’s Deficit for the six months ended December 31, 2019 (Unaudited) and from inception (August 6, 2018) through December 31, 2018 (Unaudited)	F-3
	Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2019 (Unaudited) and from inception (August 6, 2018) through December 31, 2018 (Unaudited)	F-5
	Notes to Condensed Consolidated Financial Statements (unaudited)	F-6
		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures

PART II – Other Information

Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 5.	Other Information	16
Item 6.	Exhibits	17

Signatures		18

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial statements

BANJO & MATILDA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019

(UNAUDITED)

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of December 31, 2019 (unaudited) and June 30, 2019		F-1

Condensed Consolidated Statements of Operations for the three months ended December 31, 2019 and 2018 (Unaudited) and for the six months ended December 31, 2019 and from inception (August 6, 2018) through December 31, 2018 (Unaudited)		F-2

Condensed Consolidated Statements of Stockholder’s Deficit for the six months ended December 31, 2019 (Unaudited) and from inception (August 6, 2018) through December 31, 2018 (Unaudited)		F-3

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2019 (Unaudited) and from inception (August 6, 2018) through December 31, 2018 (Unaudited)		F-5

Notes to Condensed Consolidated Financial Statements (unaudited)		F-6

Table of Contents

BANJO & MATILDA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

	As of December 31, 2019 (Unaudited)			As of June 30, 2019
Assets
Current assets
Cash	$	176,827		$	3,029
Deposits		12,546			-
Total current assets		189,373			3,029

Operating lease right-of-use asset		230,269			-
Total assets	$	419,642		$	3,029

Liabilities & stockholders’ deficit
Current liabilities
Accounts payable and accrued liabilities	$	53,966		$	378
Accrued liability, related party		3,001			1,500
Convertible notes payable, net of discount		133,952			-
Convertible notes payable, related party, net of discount		55,022			35,000
Lease liability, current		31,696			-
Total current liabilities		277,637			36,878

Lease liability, long-term		203,409			-
Total liabilities		481,046			36,878

Commitments and contingencies (Note 7)

Stockholders’ deficit
Series A Preferred stock, $0.00001 par value; 100,000,000 shares authorized; 3,500,000 designated; 3,113,368 and 0 shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively		31			-
Common stock, $0.00001 par value; 100,000,000 shares authorized; 69,584,149 and 0 shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively		696			-
Additional paid in capital		318,821			50,907
Accumulated deficit		(380,952	)		(84,756	)
Total stockholders’ deficit		(61,404	)		(33,849	)
Total liabilities and stockholders’ deficit	$	419,642		$	3,029

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANJO & MATILDA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the three months ended December 31, 2019			For the three months ended December 31, 2018			For the six months ended December 31, 2019			From Inception (August 6, 2018) through December 31, 2018

Operating expenses:
Research and development expense	$	-		$	1,982		$	6,339		$	1,982
Professional fees		85,433			22,696			95,993			22,696
Other general and administrative expenses		38,126			427			38,960			427
Total operating expenses		123,559			25,105			141,292			25,105

Operating loss		(123,559	)		(25,105	)		(141,292	)		(25,105	)

Operating (expenses):
Amortization of debt discount		(133,952	)		-			(133,952	)		-
Amortization of debt discount, related party		(14,265	)		-			(14,265	)		-
Interest expense		(2,862	)		-			(4,064	)		-
Interest expense, related party		(2,393	)		-			(2,623	)		-
Total other (expense)		(153,472	)		-			(154,904	)		-

Net loss	$	(277,031	)	$	(25,105	)	$	(296,196	)	$	(25,105	)

Net loss per common share - basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding - basic and diluted		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.

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BANJO & MATILDA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED DECEMBER 31, 2019 (UNAUDITED)

	Preferred Stock				Common Stock				Additional Paid in			Accumulated
	Shares		Amount		Shares		Amount		Capital			Deficit			Total
Balance June 30, 2019		-		-		-		-		50,907			(84,756	)		(33,849	)

Effect of reverse merger		3,113,637		31		69,584,149		696		(50,629	)					(49,902	)

Net Loss		-		-		-		-		-			(19,166	)		(19,166	)

Balance September 30, 2019		3,113,637		31		69,584,149		696		278			(103,922	)		(102,917	)

Fair value of beneficial conversion feature associated with convertible debt		-		-		-		-		318,543			-			318,543

Net Loss		-		-		-		-		-			(277,030	)		(277,030	)

Balance December 31, 2019		3,113,637	$	31		69,584,149	$	696	$	318,821		$	(380,952	)	$	(61,404	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANJO & MATILDA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FROM INCEPTION (AUGUST 6, 2018) THROUGH DECEMBER 31, 2018 (UNAUDITED)

	Preferred Stock				Common Stock				Additional Paid in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Inception, August 6, 2018		-	$	-		-	$	-	$	50,200	$	-		$	50,200

Net Loss		-		-		-		-		-		-			-

Balance September 30, 2018		-		-		-		-		50,200		-			50,200

Net Loss		-		-		-		-		-		(25,105	)		(25,105	)

Balance December 31, 2019		-	$	-		-	$	-	$	50,200	$	(25,105	)	$	25,095

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANJO & MATILDA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the six months ended December 31, 2019			From Inception (August 6, 2018) through December 31, 2018

Cash Flows from Operating Activities
Net Loss	$	(296,196	)	$	(25,105	)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization of debt discount		133,952			-
Amortization of debt discount, related party		14,265			-
Changes in operating assets & liabilities
Deposits		(12,546	)		-
Prepaid rent associated with operating lease right-of-use asset		4,837			-
Accounts payable and accrued expenses		3,685			-
Accrued expenses, related parties		1,501			-
Net cash used by operating activities		(150,502	)		(25,105	)

Cash Flows from Financing Activities
Proceeds from convertible notes payable		291,300			-
Proceeds from convertible notes payable, related party		33,000			-
Proceeds from sale of equity		-			50,200
Net cash provided by financing activities		324,300			50,200

Increase in Cash		173,798			25,095

Cash at beginning of period		3,029			-

Cash at end of period	$	176,827		$	25,095

Supplemental Cash Flow Information
Cash paid for interest	$	-		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANJO & MATILDA, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Banjo & Matilda, Inc. was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. and changed its name to Banjo & Matilda, Inc. on September 24, 2013.

On November 14, 2013, we entered into a share exchange agreement (the “Exchange Agreement”) with Banjo & Matilda Pty Ltd, (“Banjo & Matilda”) and the shareholders of Banjo & Matilda (“B&M Shareholders”). Pursuant to the Exchange Agreement, 100% of the issued and outstanding capital stock of Banjo & Matilda was acquired, making it a wholly-owned subsidiary. There was no prior relationship between the Company and its affiliates and Banjo & Matilda and its affiliates.

In consideration for the purchase of 100% of the issued and outstanding capital stock of Banjo & Matilda under the Exchange Agreement, we issued B&M Shareholders an aggregate of 24,338,872 restricted shares of common stock of the Company.

On July 1^st2015, the operations of Banjo & Matilda Pty Ltd were transferred to Banjo & Matilda (Australia) Pty Ltd., a wholly owned subsidiary of Banjo & Matilda Inc.

Following the worldwide downturn of the retail clothing business model, in June of 2017, Banjo & Matilda, Inc. began to seek out additional businesses to acquire as subsidiaries to expand and refocus its operations to generate more revenue and profit.

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 for the acquisition of Spectrum King, LLC as a wholly-owned subsidiary, a pioneer of full spectrum LED grow lights, specialized in designing, manufacturing and selling high-end LED grow lights for indoor/greenhouse applications with both the Agriculture and Horticulture industries.

On March 19, 2018, Banjo & Matilda, Inc. entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction failed to close.

On April 16, 2019, Banjo & Matilda, Inc. entered into a Share Exchange Agreement with American Aviation Technologies, LLC (“AAT”), an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs).

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.

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Banjo & Matilda, Inc. is an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs). This segment of the aviation industry is attracting significant investment in the development of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs).

The quintessence of contemporary aeronautical science and engineering, these mostly electric or hybrid-electric aircraft include small remotely controlled UAVs as well as larger passenger and cargo UAVs, which are targeting short-haul, on-demand transport of passengers and freight, called urban aerial mobility (UAM). The feasibility of these more lightweight and efficient aircraft designs is made possible through advances in composite materials, additive manufacturing (3D printing), miniaturization of electronics, computer processing speed, battery power and electromagnetic propulsion.

The UAV has become a viable, low cost alternative in many VTOL applications previously dominated by the helicopter, including aerial photography and videography. Among its advantages in aerial filming are its size, acoustics, low cost of operation, low altitude flying and superior maneuverability. Because of UAVs’ explosive growth over the past few years and the anticipated ubiquity in the future, new regulations are being formulated to allow their safe integration into low altitude civil airspace.

Stakeholders shaping this integration process include aircraft manufacturers, ridesharing companies, governmental regulatory agencies and civil transportation authorities, all of whom are working toward establishing standards and overcoming the variety of issues involved with its implementation. Key technologies impacting the development and implementation of this VTOL aircraft segment for fully autonomous applications include high speed (5G) data transmission and artificial intelligence. Also drawing interest is the development of VTOL and hover capable rotorcraft that can accomplish many of the civilian and military transport functions of a helicopter, but are faster, quieter, less complex to operate and safer on the ground. Helicopters have been around for over 80 years and have been improved significantly with advanced flight control systems but remain extremely complicated to fly and have performance limitations based on their fundamental flight principles. Due to a condition called retreating blade stall, also known as dissymmetry of lift, helicopters have a maximum forward speed of about 250 miles per hour. Additionally, helicopters produce high noise levels, due primarily to rotor blade vortex interaction and vibration, and have high operating costs.

The acquisition of American Aviation Technologies, LLC (“AAT”), which included the “Halo” patent, was undertaken to provide a foundation for the Company’s foray into aerospace industry. The “Halo” patent was issued in October 2019 after AAT had acquired all rights to the Halo aircraft design, including any prospective patents or applications for patents, through an intellectual property assignment by its inventor in 2018. As a scalable and multi-purpose platform, the aircraft’s size and capabilities can be expanded depending on the mission requirements, from a small frame UAV (or drone) to potentially a heavy lift cargo and even passenger transport aircraft, either manned or unmanned. Halo is expected to compete favorably with and exceed the performance of other VTOL aircraft in terms of speed, acoustics, maneuverability, efficiency, duration and safety.

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The Halo platform is essentially a powered lift type of system with characteristics of tiltrotors and tiltwings and differs from rotorcraft such as the helicopter in its lift and forward propulsion mechanisms during horizontal flight, which has several advantages. Powered lift is one of seven main categories of aircraft classifications designated by the U.S. Federal Aviation Administration (FAA) and is defined as “a heavier-than-air aircraft capable of vertical take off and landing (VTOL) and low speed flight that depends principally on engine-driven lift devices or engine thrust for lift during these flight regimes and on non-rotating airfoils for lift during horizontal flight.” In tiltrotors and tiltwings one or more powered rotors are used for both lift and forward propulsion, essentially combining the vertical take off and landing capability of a helicopter with the efficiency, range, speed and cruise altitude of a conventional fixed-wing aircraft. For vertical flight, the rotors are horizontally angled to provide thrust upwards, lifting in the manner that a helicopter rotor operates. As the aircraft gains speed and altitude, the rotors progressively rotate or tilt forward, either moving independently of the wing or integrated and moving with the wing, eventually becoming perpendicular to the fuselage of the aircraft and functioning similar to a propeller in a vertical plane of orientation. Following the transition from vertical to forward flight mode, the airfoil-shaped wing generates the aerodynamic forces for lift and the rotor supplies the thrust. The wing’s greater efficiency, in conjunction with the rotor positioning, assists these aircraft in achieving higher forward speeds than helicopters, which are limited due to retreating blade stall. Tiltrotors and tiltwings are also inherently quieter in forward flight.

The Company is a member and tenant of the Research Park at Florida Atlantic University (FAU) in Boca Raton, Florida, which is part of the university and adjacent to the Boca Raton Airport. FAU is one of the top engineering schools in the state, and part of the National Science Foundation’s Industry/University Cooperative Research Center Program called the Center for Advanced Knowledge Enablement (CAKE). The 70-acre Research Park is home to many technology companies and research-based organizations. FAU recently opened a center for Artificial Intelligence and Connected Assured Autonomy through their College of Engineering and Computer Science, which is applicable to advanced aircraft systems. The Company will collaborate with FAU’s academic team, both faculty and students, through a series of joint research initiatives. The relationship with FAU would also potentially assist with access to grant programs and financing opportunities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the unaudited condensed financial statements have been included. Such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. These financial statements should be read in conjunction with the company’s latest annual financial statements.

Principles of Consolidation

The condensed consolidated unaudited financial statements include the accounts of Banjo & Matilda, Inc. (“Banjo” or “the Company”) and its wholly owned subsidiary American Aviation Technologies, LLC, 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.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of beneficial conversion features associated with convertible debt. Actual results could differ from these estimates.

Fair Value Measurements and Fair Value of Financial Instruments

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Deferred Taxes

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of December 31, 2019 there are no deferred tax assets.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has no cash equivalents.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit balance which is deducted from the total receivables balance in the balance sheet. As of December 31, 2019 and June, 30, 2019 there are no accounts receivable.

Revenue Recognition

Revenue includes product sales. The Company recognizes revenue from product sales in accordance with Topic 606 “Revenue Recognition in Financial Statements” which considers revenue realized or realizable and earned when all of the following criteria are met:

	(i)	persuasive evidence of an arrangement exists,
	(ii)	the services have been rendered and all required milestones achieved,
	(iii)	the sales price is fixed or determinable, and
	(iv)	Collectability is reasonably assured.

As of December 31, 2019 and June 30, 2019, the Company has no revenue.

Convertible Debentures

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt. During the six months ended December 31, 2019, the Company recorded a BCF in the amount of $318,543.

Fair Value of Financial Instruments

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Research and Development Expenses

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $6,339 for the six months ended December 31, 2019 and $1,982 for the period from inception (August 6, 2018) through December 31, 2018.

Advertising, Marketing and Public Relations

The Company expenses advertising and marketing costs as they are incurred. There Company recorded advertising expenses in the amount of $1,211 for the six months ended December 31, 2019 and $0 for the period from inception (August 6, 2018) through December 31, 2018.

Offering Costs

Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs for the six months ended December 31, 2019 and from inception (August 6, 2018) through December 31, 2018, respectively.

Income Taxes

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. Our consolidated federal tax return and any state tax returns are not currently under examination.

The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and 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.

Recent Accounting Pronouncements

In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.

The ASU will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company has assessed the impact of this standard. The Company entered into a new lease agreement commencing on November 1, 2019 which falls under this current guidance and has been implemented for the quarter ended December 31, 2019.

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

NOTE 3 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY

The Company leases 2,911 square feet of office space located at Innovation Centre No. 1, 3998 FAU Boulevard, Boca Raton, Florida. The Company entered into a lease agreement commencing on November 1, 2019 through January 1, 2025 in which the first three months of rent are abated. The base month rents of $4,367 from February 1, 2020 to October 1, 2020, $4,498 from November 1, 2020 to October 1, 2021, $4,633 from November 1, 2021 to October 1, 2022, $4,771 from November 1, 2022 to October 1, 2023, $4,915 from November 1, 2023 to October 1, 2024, and $5,063 from November 1, 2024 to January 1, 2025. Under the terms of the lease, the base rent is subject to sales tax. Additionally, the Company is responsible to pay common area maintenance, which is a variable expense.

Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations. At inception the Company paid prepaid rent in the amount of $4,659, which is netted against the operating lease right of use asset balance.

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NOTE 3 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY (CONTINUED)

Right-of- use asset is summarized below:

	December 31, 2019
Office lease	$	230,269
Less accumulated amortization		-
Right-of-use assets, net	$	230,269

Operating lease liability is summarized below:

	December 31, 2019
Office lease	$	235,104
Less: current portion		(31,696	)
Long term portion		203,408

Maturity of the lease liability is as follows:
Fiscal year ending June 30, 2020	$	23,295
Fiscal year ending June 30, 2021		57,027
Fiscal year ending June 30, 2022		58,746
Fiscal year ending June 30, 2023		60,506
Fiscal year ending June 30, 2024		62,318
Fiscal year ending June 30, 2025		37,182
		299,073
Plus: Present value discount		(63,969	)
Lease liability	$	235,104

NOTE 4 – EXCHANGE AGREEMENT

On April 18, 2019, Banjo & Matilda, Inc, and American Aviation Technologies, LLC (“AAT”) entered into a Share Exchange Agreement (“Agreement”). The agreement, which was effective on September 30, 2019, was pursuant to which Banjo acquired 100% of our issued and outstanding membership units in exchange for the issuance of Banjo shares of its Series A Preferred Stock constituting 86.39% 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, the Company will become a wholly owned subsidiary of Banjo.

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NOTE 4 – EXCHANGE AGREEMENT (CONTINUED)

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.

Consummation of the Exchange Agreement was effective on September 30, 2019. Pursuant to the Exchange Agreement, the members of AAT received 2,750,000 shares of the Banjo & Matilda, Inc.’s Series A Preferred Stock to the members of AAT in exchange for the 10,000,000 member units.

On September 30, 2019 just prior to the exchange, Banjo issued 170,000 shares of preferred stock as compensation and 193,637 shares of preferred stock in satisfaction of $2,608,224 in liabilities.

NOTE 5 – CONVERTIBLE NOTES PAYABLE

The following table illustrates the carrying values for the convertible notes payable as of December 31, 2019:

	December 31,
Convertible Notes Payable	2019
Convertible notes payable issued September 27, 2019 (6% interest)	$	93,000
Convertible notes payable issued September 30, 2019 (6% interest)		60,000
Convertible notes payable issued October 1, 2019 (6% interest)		53,300
Convertible notes payable issued October 4, 2019 (6% interest)		45,000
Convertible notes payable issued November 22, 2019 (6% interest)		40,000
Total face value		291,300
Less unamortized discount		(157,348	)
Carrying value	$	133,952

Between September 27, 2019 and November 22, 2019, AAT issued convertible notes payable with an aggregate face value of $291,300 with a coupon rate of 6%. The notes have a maturity date of six months. The agreements provided that in the event AAT is merged into Banjo (“Company”), at any time prior to the Maturity Date the holder has the option to convert the principal balance and any accrued interest at a conversion price of $.0033 per share.

The Company evaluated the agreement 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. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $291,300 related to these notes. Additionally, for the six months ended December 31, 2019 the Company recorded $133,952 in amortization of debt discount related to the BCF.

For the six months ended December 31, 2019 the Company recorded $4,064 in interest expense.

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NOTE 6 – CONVERTIBLE NOTES PAYABLE, RELATED PARTY

The following table illustrates the carrying values for the convertible notes payable, related party as of December 31, 2019 and June 30, 2019:

	December 31,			June 30,
Convertible Notes Payable	2019			2019
Convertible notes payable issued March 4, 2019 (8% interest)	$	25,000		$	25,000
Convertible notes payable issued May 31, 2019 (8% interest)		10,000			10,000
Convertible notes payable issued July 5, 2019 (8% interest)		5,000			-
Convertible notes payable issued August 5, 2019 (8% interest)		5,000			-
Convertible notes payable issued September 5, 2019 (8% interest)		5,000			-
Convertible notes payable issued September 23, 2019 (8% interest)		18,000			-
Total face value		68,000			35,000
Less unamortized discount		(12,978	)		-
Carrying value	$	55,022		$	35,000

Between March 4, 2019 and September 23, 2019, AAT issued convertible notes payable with an aggregate face value of $68,000 with a coupon rate of 8% to a related party. The agreements provided that in the event AAT is merged into Banjo (“Company”), at any time prior to the Maturity Date the holder has the option to convert the principal balance and any accrued interest at a conversion price of $.0033 per share.

The Company evaluated the agreement 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. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $27,243 related to these notes. Additionally, for the six months ended December 31, 2019 the Company recorded $14,265 in amortization of debt discount related to the BCF.

For the six months ended December 31, 2019 the Company recorded $2,623 in interest expense.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of December 31, 2019, the Company is not aware of any contingent liabilities that should be reflected in the financial statements.

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NOTE 8 – EQUITY

Preferred Stock

There are 100,000,000 shares authorized as preferred stock, of which 3,500,000 are designated as Series A Preferred Stock having a par value of $0.00001 per share. The Series A preferred stock has the following rights:

	·	Voting: The preferred shares shall be entitled to 100 votes to every one share of common stock.

	·	Dividends: The Series A Preferred Stockholders are treated the same as the Common Stock holders except at the dividend on each share of Series A Convertible Preferred Stock is equal to the amount of the dividend declared and paid on each share of Common Stock multiplied by the Conversion Rate.

	·	Conversion: Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time into shares of Common Stock on a 1:1,000 basis.

	·	The shares of Series A Preferred Stock are redeemable at the option of the Corporation at any time after September 30, 2022 upon not less than 30 days written notice to the holders. It is not mandatorily redeemable.

As of December 31, 2019 and June 30, 2019, the Company has 3,113,638 and 0 shares of Series A Preferred Stock issued and outstanding, respectively. The balance of Preferred Stock at December 31, 2019 and June 30, 2019 was $31 and $0, respectively.

Common Stock

There have been no changes to the common stock for six months ended December 31, 2019. The Company currently has 100,000,000 common shares authorized with a par value of $0.00001 per share. The number of shares outstanding at December 31, 2019 and June 30, 2019 was 69,584,149 and 0, respectively. The balance of Common Stock at December 31, 2019 and June 30, 2019 was $696 and $0, respectively.

NOTE 9 – GOING CONCERN MATTERS

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, 2019 and June 30, 2019, the Company had $176,827 and $3,029 in cash and $88,264 and $33,849 in negative working capital, respectively. For the six months ended December 31, 2019 and from inception (August 6, 2018) through December 31, 2018, the Company had a net loss of $296,196 and $25,105, respectively. For the three months ended December 31, 2019 and 2018, the Company had a net loss of $277,031 and $25,105, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

NOTE 10 – SUBSEQUENT EVENTS

Between March 2, 2020 and April 23, 2020, AAT issued convertible notes payable with an aggregate face value of $51,629 with a coupon rate of 6%. The notes have a maturity date of six months. The agreements provided that in the event AAT is merged into Banjo (“Company”), at any time prior to the Maturity Date the holder has the option to convert the principal balance and any accrued interest at a conversion price of $.0033 per share.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2019. The unaudited statements of operations for the six months ended December 31, 2019 and from inception (August 6, 2018) through December 31, 2018 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.

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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

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.

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Critical Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. These financial statements should be read in conjunction with the company’s latest annual financial statements.

Principles of Consolidation

Use of Estimates

Fair Value Measurements and Fair Value of Financial Instruments

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

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Deferred Taxes

Cash and Cash Equivalents

Accounts Receivable and Allowance for Doubtful Accounts

Revenue Recognition

	(i)	persuasive evidence of an arrangement exists,
	(ii)	the services have been rendered and all required milestones achieved,
	(iii)	the sales price is fixed or determinable, and
	(iv)	Collectability is reasonably assured.

As of December 31, 2019 and June 30, 2019, the Company has no revenue.

Convertible Debentures

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Fair Value of Financial Instruments

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

Research and Development Expenses

Advertising, Marketing and Public Relations

Offering Costs

Income Taxes

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Recent Accounting Pronouncements

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 six months ended December 31, 2019 versus the period from August 6, 2018 (Inception) through December 30, 2019 and the three months ended December 31, 2019 versus the three months ended December 31, 2018. 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.

Results of Operations

The following information represents our results of operations the three months ended December 31, 2019 versus the three months ended December 31, 2018.

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Three months ended December 31, 2019 compared to the three months ended December 31, 2018

	For the three months ended December 31, 2019 (Unaudited)			For the three months ended December 31, 2018 (Unaudited)			$			%

Operating expenses:
Research and development expense	$	-		$	1,982		$	(1,982	)	(100%)
Professional fees		85,433			22,696			62,737			276	%
Other general and administrative expenses		38,126			427			37,699		8933		%
Total operating expenses		123,559			25,105			(131,358	)		100	%

Loss from operations		(123,559	)		(25,105	)		(98,454	)		392	%

Other income (expense):
Amortization of debt discount		(133,952	)		-			(133,952	)		100	%
Amortization of debt discount, related parties		(14,265	)		-			(14,265	)		100	%
Interest expense		(2,862	)		-			(2,862	)		100	%
Interest expense, related parties		(2,393	)		-			(2,393	)		100	%
Total other income (expense)		(153,472	)		-			(153,472	)		100	%

Net loss	$	(277,031	)	$	(25,105	)	$	(251,926	)	1003		%

Research and Development Expenses

Total research and development expenses were $0 for the three months ended December 31, 2019 compared to $1,982 for the three months ended December 31, 2018. The decrease of 100% was due to the fact there were no research and development expenses in the current period as expenses for the Company didn’t begin incurring until October 2018.

Professional Fees

Total professional fees were $85,433 for the three months ended December 31, 2019 compared to $22,696 for the three months ended December 31, 2018. The increase of 276% was due to the ramp up of operations.

Other general and administrative expenses

Total other general and administrative expenses were $38,126 for the three months ended December 31, 2019 compared to $427 for the three months ended December 31, 2018. The increase of 8933% was due to the ramp up of operations.

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Other Expenses

Total other expenses were $153,472 for the three months ended December 31, 2019 compared to $0 for the three months ended December 31, 2018. Total other expenses consist of interest expense on debt and amortization of debt discount. The increase of 100% was due to the ramp up of operations.

Net loss

Total net loss was $277,031 for the three months ended December 31, 2019 compared to $25,105 for the three months ended December 31, 2018. The increase of 1003% was due to the ramp up of operations.

Six months ended December 31, 2019 compared to the period from August 6, 2018 (Inception) through December 31, 2018

	For the six months ended December 31, 2019 (Unaudited)			From Inception (August 6, 2018) through December 31, 2018 (Unaudited)			$			%

Operating expenses:
Research and development expense	$	6,339		$	1,982		$	4,357			220	%
Professional fees		95,993			22,696			73,297			323	%
Other general and administrative expenses		38,960			427			38,533		9024		%
Total operating expenses		141,292			25,105			(131,358	)		523	%

Loss from operations		(141,292	)		(25,105	)		(116,187	)		463	%

Other income (expense):
Amortization of debt discount		(133,952	)		-			(133,952	)		100	%
Amortization of debt discount, related parties		(14,265	)		-			(14,265	)		100	%
Interest expense		(4,064	)		-			(4,064	)		100	%
Interest expense, related parties		(2,623	)		-			(2,623	)		100	%
Total other income (expense)		(154,904	)		-			(154,904	)		100	%

Net loss	$	(296,196	)	$	(25,105	)	$	(271,091	)	1080		%

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Research and Development Expenses

Total research and development expenses were $6,339 for the six months ended December 31, 2019 compared to $1,982 for the period from August 6, 2018 (Inception) through December 31, 2018. The increase of 100% was due to the fact there were no research and development expenses in the current period as expenses for the Company didn’t begin incurring until October 2018.

Professional Fees

Total professional fees were $95,993 for the six months ended December 31, 2019 compared to $22,696 for the period from August 6, 2018 (Inception) through December 31, 2018. The increase of 323% was due to the ramp up of operations.

Other general and administrative expenses

Total other general and administrative expenses were $38,960 for the six months ended December 31, 2019 compared to $427 for the period from August 6, 2018 (Inception) through December 31, 2018. The increase of 9024% was due to the ramp up of operations.

Other Expenses

Total other expenses were $154,904 for the six months ended December 31, 2019 compared to $0 for the period from August 6, 2018 (Inception) through December 31, 2018. Total other expenses consist of interest expense on debt and amortization of debt discount. The increase of 100% was due to the ramp up of operations.

Net loss

Total net loss was $296,196 for the six months ended December 31, 2019 compared to $25,105 for the period from August 6, 2018 (Inception) through December 31, 2018. The increase of 1080% was due to the ramp up of operations.

Operating Activities

Cash used in operations of $150,502 during the six months ended December 31, 2019 was primarily a result of our $296,196 net loss reconciled with our net non-cash expenses relating to amortization of debt discount, accounts payable and accrued liabilities. Cash used in operations of $25,105 from August 6, 2018 (Inception) through December 31, 2018 was a result of our $25,105 net loss.

Financing Activities

Net cash provided by financing activities for the six months ended December 31, 2019 was $324,300, which consisted of proceeds from the issuance of convertible debt in the amount of $291,300 and from the issuance of convertible debt, related party in the amount of $33,000. Net cash provided by financing activities from August 6, 2018 (Inception) through December 31, 2018 was $50,200, which consisted of proceeds from the sale of equity.

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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, 2019 and June 30, 2019, the Company had $176,827 and $3,029 in cash and $113,825 and $33,849 in negative working capital, respectively. For the six months ended December 31, 2019 and from inception (August 6, 2018) through December 31, 2018, the Company had a net loss of $296,196 and $25,105, respectively. For the three months ended December 31, 2019 and 2018, the Company had a net loss of $277,031 and $25,105, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

Off-Balance Sheet Arrangements

As of December 31, 2019, 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.

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.

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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, 2019. Based on his evaluation, Mr. Duffy concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2019.

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, 2019, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

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.

Item 2. Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are filed herewith:

Exhibit Number		Document

31.1		Certifications of the principal executive officer and principal financial officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certifications of the principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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SIGNATURES

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: May 8, 2020	By:	/s/ Keith Duffy
		Keith Duffy Chief Executive Officer and Chief Financial Officer (Principal Executive and Financial Officer)

XERIANT, INC. - FORM 10-Q - May 8, 2020

Attached files

XERIANT, INC. Reports