The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – BASIS OF PRESENTATION AND ORGANIZATION
All currencies represented in the notes to the 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.
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 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.
|
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 consolidated 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.
Exchange Gain (Loss)
During the years ended June 30, 2015 and 2014, the transactions of the Company were denominated in foreign currency and were recorded in Australian dollar (AUD) at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.
Foreign Currency Translation and Comprehensive Income (Loss)
The accounts of the Company were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder's equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. 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 AUD to USD after the balance sheet date.
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 interrelated 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.
Liquidity Matters
Based upon its current projection of revenue, management believes that its current cash position and available financing provide sufficient resources and operating flexibility through at least the next twelve months. However, there can be no assurance that projected revenue growth and improvement in operating results will occur or that the Company will successfully implement its plans. In the event cash flow from operations is not sufficient, additional sources of financing witl be required in order to maintain the Company's current operations. Whereas management believes it will have access to other financing sources, no assurance can be given that such additional sources of financing will be available on acceptable terms, on a timely basis or at all.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.
Cost of Sales
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping, importation duties and charges, third party royalties, and product sampling.
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 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 follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in 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 income.
At June 30, 2015 and 2014, the Company had not taken any significant uncertain tax positions on its tax returns for period ended June 30, 2014 and prior years or in computing its tax provision for 2015. 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, 2011 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.
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 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 June 30, 2015 and 2014, the Company had $362,668 and $33,367 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.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. The allowances for doubtful accounts as of June 30, 2015 and June 30, 2014 are $140,870 and $0 respectively.
Inventory
Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of June 30, 2015 and June 30, 2014, the Company had outstanding balances of Finished Goods Inventory of $174,792 and $630,235 respectively.
For the period ended June 30, 2015 a reserve for Estimated Inventory Charges in the amount of $17,258 was established.
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 10 years; computer equipment, two to three years; buildings and improvements, five to 15 years; leasehold improvements, two to 10 years; and furniture and equipment, one to five years.
As of June 30, 2015 and June 30, 2014, Plant and Equipment consisted of the following:
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
|
|
|
|
|
Plant and Equipment
|
|
$
|
29,044
|
|
|
$
|
30,352
|
|
Accumulated Depreciation
|
|
|
(16,905
|
)
|
|
|
(20,127
|
)
|
|
|
$
|
12,139
|
|
|
$
|
10,225
|
|
Depreciation was $522 and $5,875 for the years ended June 30, 2015 and 2014, respectively.
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.
As of June 30, 2015 and 2014, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.
Earnings Per Share (EPS)
Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).
The following table sets for the computation of basic and diluted earnings per share for years ended June 30, 2015 and 2014:
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
Basic and Diluted:
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(2,004,722
|
)
|
|
$
|
(626,742
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares in computing basic and diluted net (loss) income
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
40,510,007
|
|
|
|
24,347,002
|
|
Diluted:
|
|
|
40,510,007
|
|
|
|
24,347,002
|
|
|
|
|
|
|
|
|
|
|
Net(loss)income per share
Basic and diluted:
|
|
$
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
Intangible Assets
The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset.
Finite-lived intangible assets primarily consist of software development capitalized. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 1 to 10 years. No events or changes in circumstances indicate that impairment existed as of June 30, 2015.
Recently Issued Accounting Pronouncements
There have been no new accounting pronouncements during the year ended June 30, 2015 that we believe would have a material impact on our 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 – TRADE RECEIVABLES
Trade receivables consist principally of accounts receivable from sales to small to medium sized businesses, principally in Australia, Europe and the United States. Trade receivables are recorded at the invoiced amount and net of allowances for doubtful accounts. The allowance for doubtful accounts represents management's estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. The assessment includes actually incurred historical data as well as current economic conditions. Account balances are written off against the allowance when management determines the receivable is uncollectible.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity or parent entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Trade receivables that are past their normal payment terms are overdue and once 60 days past due are considered delinquent. Minimum payment terms vary by product. The maximum payment term for all products is 90 days. All trade receivables that are overdue are individually assessed for impairment.
The allowances for doubtful accounts as of June 30, 2015 and June 30, 2014 are $140,870 and $0 respectively.
Note 4 – INTANGIBLE ASSETS
Intangible assets consist of the following as of June 30, 2015 and 2014:
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
|
|
|
|
|
Website
|
|
$
|
60,781
|
|
|
$
|
74,478
|
|
Accumulated amortization
|
|
|
(15,770
|
)
|
|
|
(11,841
|
)
|
|
|
$
|
45,011
|
|
|
$
|
62,637
|
|
The intangible assets are amortized over 1 to 10 years. Amortization expense was $6,644 and $7,139 for the years ended June 30, 2015 and 2014 respectively.
Note 5 – TRADE AND OTHER PAYABLES
As of June 30, 2015 and 2014, trade and other payable are comprised of the following:
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
|
|
|
|
|
Trade payable
|
|
$
|
463,106
|
|
|
$
|
340,468
|
|
Payroll Taxes
|
|
|
91,018
|
|
|
|
-
|
|
Employee benefits
|
|
|
82,671
|
|
|
|
3,051
|
|
Other liabilities
|
|
|
(3,402)
|
|
|
|
17,218
|
|
|
|
$
|
633,394
|
|
|
$
|
360,737
|
|
Note 6 – TRADE FINANCING
The Company has a trade financing agreement with a financial institution in Australia with a maximum limit of AUD $150,000 at an interest rate of 20.95% per annum. As of June 30, 2015 and 2014, the Company had outstanding balances of $112,436 and $146,202, respectively.
On August 14, 2014 the Company has entered into a new 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. As of June 30, 2015, the Company had an outstanding balance of $646,078.
On November 20, 2014 the Company entered into a new retail trade finance agreement with an entity in Australia for AUD $75,000 with 100 equal payments of AUD $871.80 daily. As of June 30, 2015, the Company had outstanding balances of AUD $27,500 or USD $21,139.
Note 7 –LOANS
In November 2013, the company entered into a short term loan arrangement totaling AUD $100,000 with a shareholder of the Company. Terms of the note were interest rate at 15% per annum or .0329% per day due 30 days from the loan date. The short term note was converted into a 30 day callable convertible note in January 2014. The outstanding balance as of June 30, 2014 was $100,000 AUD. In March 2015, the outstanding balance and accrued interest was refinanced by a $526,272 convertible note.
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 outstanding balance as of June 30, 2014 and as of June 30, 2015 was $100,000 and $100,000 respectively.
In January 2014, the Company entered into a convertible loan agreement totaling AUD $250,000 with a shareholder of the Company. The Convertible Note bears interest at the rate of 9% per annum and is due on the first anniversary of the date of issuance, January 12, 2015. 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 thirty cents ($0.30) per share, provided that if the Volume Weighted Average Price (VWAP) for the 30 days immediately preceding the receipt of a conversion notice is less than Ninety cents ($.60) per share, the conversion price shall be reduced to twenty cents ($.20) per share. The outstanding balance as of June 30, 2014 was $250,000 AUD. In March 2015, the outstanding balance and accrued interest was refinanced by a $526,272 convertible note.
In May 2014 the Company entered into a convertible loan agreement in the amount of $72,800 with a corporation in New York. Interest is to accrue at the rate of 8% per annum. Loan and accrued interest is due in February 2015. The loan may be converted into common stock of the Company at any time by the election of the lender at a predetermined conversion price. During the quarter ended March 31, 2015, $72,800 was converted into 2,402,141 shares. The outstanding balance as of June 30, 2014 and as of June 30, 2015 was $72,800 and $0 respectively.
In June 2014 the Company entered into a loan agreement in the amount of AUD $100,000 with a shareholder of the Company. The note bears interest at 6% per month and is due and payable in July 2014. The loan was repaid in the amount of AUD $80,000 in July 2014 and the balance of AUD $20,000 was extended to March 31, 2015. The outstanding balance as of June 30, 2014 was $100,000 AUD. In March 2015, the outstanding balance and accrued interest was refinanced by a $526,272 convertible note.
In July 2014 the Company entered into a second convertible loan agreement in the amount of $72,800 with a corporation in New York. Interest is to accrue at the rate of 8% per annum. Loan and accrued interest is due in April 2015. The loan may be converted into common stock of the Company at any time by the election of the lender at a predetermined conversion price. During the quarter ended March 31, 2015, $20,000 was converted into 943,396 shares. The remaining loan balance plus accrued interest was repaid during the quarter ended March 31, 2015.
In May 2014 the Company entered into a convertible loan agreement in the amount of $50,000 with a business firm in Texas. The note bears interest at 6% per month and is due and payable in November 2014. The loan may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price. The outstanding balance as of June 30, 2014 and as of June 30, 2015 was $50,000 and $50,000 respectively.
In June 2014 the Company entered into a convertible loan agreement in the amount of $45,000 with a business firm in Texas. The note bears interest at 6% per month and is due and payable in December 2014. The loan may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price. The outstanding balance as of June 30, 2014 and as of June 30, 2015 was $45,000 and $45,000 respectively.
In August 2014 the Company entered into a convertible loan agreement in the amount of $19,000 with a business firm in Texas. The note bears interest at 6% per month and is due and payable in February 2015. The loan may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price. The outstanding balance as of June 30, 2014 and as of June 30, 2015 was $0 and $19,000 respectively.
In December 2014 the Company entered into a convertible loan agreement in the amount of $7,500 with a business firm in Texas. The note bears interest at 6% per month and is due and payable in May 2015. The loan may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price. The outstanding balance as of June 30, 2014 and as of June 30, 2015 was $0 and $7,500 respectively.
In December 2014 the Company entered into a loan agreement in the amount of $10,000 AUD with an individual in Australia. The note was repaid in full in July 2015.
In March 2015, the Company entered into a convertible loan agreement totaling AUD $526,272 with a shareholder of the Company. The note consolidates all previous amounts owed to this shareholder by the Company. 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. Principle payments of $9,929 AUD weekly are 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 thirty cents ($0.05) per share, subject to various standard provisions. The outstanding balance as of June 30, 2015 was $526,272 AUD.The Company determined that the fair value of the convertible note using the Black – Scholes model with the variable listed below:
|
·
|
Volatility: 416%
|
|
|
|
|
·
|
Risk free rate of return: 0.68%
|
|
|
|
|
·
|
Expected term: 2.13 years
|
In connection with the issuance of the above notes, the Company recorded a note discount of $344,745 AUD for the year ended June 30, 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 is due 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 Banjo & Matilda, Inc. at a price of $.08 in whole or in part. The outstanding balance as of June 30, 2015 was $500,000. The Company determined that the fair value of the warrants using the Black – Scholes model with the variable listed below:
|
·
|
Volatility: 329%
|
|
|
|
|
·
|
Risk free rate of return: 0.67%
|
|
|
|
|
·
|
Expected term: 2.04 years
|
In connection with the issuance of the above notes, the Company recorded a note discount of $115,274 for the year ended June 30, 2015.
Related Party Payable
The Company has liabilities payable in the amount of $221,792 and $123,082 to shareholders and officers of the Company as of June 30, 2015 and June 30, 2014, respectively. The note bears interest at the rate of 3% per annum and is 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 pre-determined rate. The Company has granted the Lenders a security interest in the intellectual property of the Borrower.
Scheduled principal payments on loans are as follow;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending June 30,
|
|
Loan 1
|
|
|
Loan 2
|
|
|
Loan 3
|
|
|
Misc
|
|
|
Total
|
|
2016
|
|
|
100,000
|
|
|
|
76,329
|
|
|
|
238,119
|
|
|
|
129,187
|
|
|
|
545,652
|
|
2017
|
|
|
-
|
|
|
|
328,216
|
|
|
|
261,881
|
|
|
|
-
|
|
|
|
592,114
|
|
Total
|
|
|
100,000
|
|
|
|
404,545
|
|
|
|
500,000
|
|
|
|
129,187
|
|
|
|
1,137,765
|
|
Note 8 – COMMITMENTS
The Company leases commercial space in Sydney, Australia that serves as its flagship as well as a retail store. We lease approximately 2,500 square feet of space pursuant to a three year lease agreement expiring October 14, 2014. After expiration, the lease converted to a month-to-month basis. The annual rent for the premises is AUD $57,200.
The Company also leases space on an as needed basis in Santa Monica, California that serves as its corporate headquarters. We utilize approximately 1,000 square feet of space pursuant to a month-to-month basis.
For the years ended June 30, 2015 and 2014 the aggregate rental expense was $73,085 and $54,375, respectively.
Note 9 – INCOME TAXES
Based on the available information and other factors, management believes it is more likely than not that the net deferred tax assets at June 30, 2015 and 2014 will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at June 30, 2015 and 2014. At June 30, 2015 and 2014, the Company had federal net operating loss carry-forwards of approximately $2,555,000 and $550,000, respectively, expiring beginning in 2034.
Deferred tax assets consist of the following components:
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
|
|
|
|
|
Net loss carryforward
|
|
$
|
767,000
|
|
|
$
|
165,000
|
|
Valuation allowance
|
|
|
(767,000
|
)
|
|
|
(165,000
|
)
|
Total deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Note 10 – 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 the Executives.
Common Stock
Pursuant to the Exchange Agreement on November 14, 2013, the Company issued 18,505,539 Common Stock, par value $0.00001 per share for the acquisition of Banjo & Matilda, Pty Ltd.
On November 22, 2013, the Company agreed to issue 250,000 shares of the Company stock for $50,000 or $0.20 per share to an individual investor.
On November 27, 2013, the Company agreed to issue 250,000 shares of the Company stock for $50,000 or $0.20 per share to an individual investor.
On December 2, 2013, the Company agreed to issue 100,000 shares of the Company stock for $20,000 or $0.20 per share to an individual investor.
On January 9, 2014, the Company agreed to issue 250,000 shares of the Company stock for $50,000 or $0.20 per share to a corporate investor.
On January 10, 2014, the Company agreed to issue 125,000 shares of the Company stock for $25,000 or $0.20 per share to a corporate investor.
On May 14, 2014, the Company agreed to issue 100,000 shares of the Company stock for $100,000 or $1.00 per share to an individual.
On July 24, 2014, the Company agreed to issue 55,200 shares of the Company stock for $13,800 or $0.25 per share to an individual investor.
On October 28, 2014, the Company agreed to issue 5,833,333 shares of the Company stock to the original shareholders of Banjo & Matilda Pty Ltd related to the merger and reorganization based on the original agreement.
On October 28, 2014, the Company agreed to issue 92,593 shares of common stock to an individual for compensation from Banjo Australia. The shares were valued at $15,339 or approximately $0.17 per share.
On November 3, 2014, the Company issued 25,000 shares of common stock to an individual in exchange for interest expense. The shares were valued at $5,000 or $.25 per share.
During the quarter ended March 31, 2015, the Company agreed to convert $92,800 of convertible debt for 3,345,537 shares of common stock at prices from $0.02 to $0.0901 per share to a corporate investor.
During the quarter ended March 31, 2015, the Company agreed to issue 400,000 shares of the Company stock for $60,000 or $0.15 per share to a company for consulting services. The terms of the service agreement is from January 1, 2015 to June 1, 2015. As of June 30, 2015, the Company recognized consulting expense of $60,000.
During the first and second quarter of 2015, the Company agreed to issue 21,039,970 shares of the Company stock for $450,799 or approximately $0.02 per share to five investors.
During the fiscal year ended June 30, 2015, the Company voided 475,000 shares of the Company stock for the value of $95,000. The shares were originally considered converted from debt when they were in fact not converted. The debt is still outstanding.
Note 11 –
SUBSEQUENT EVENTS
On August 7, 2015, The Company issued 500,000 shares of company stock to an individual for $35,000 or $0.07 per share.
On October 27, 2015, the Company entered into a convertible loan agreement in the amount of $10,000 with a business firm in Texas. The note bears interest at 6% per month and is due and payable in six months. The loan may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price.
On November 17, 2015, The Company reached a settlement with its obligation with Moneytech, an Australian entity in the amount of $165,523. The amount is to be paid through application of its EMDG grant and up to 25% of the Company's store sales in Australia. All of the amounts referenced are in Australian dollars.
On February 5, 2016, The Company signed an amendment to the secured promissory note with a Delaware statutory trust. The amendment extended the maturity date by one year to July 17, 2018. The amendment changed the terms of the credit card receipts used to fund payments required by the note. The amendment also inserted a section referencing the warrants issued.
On February 17, 2016, The Company cancelled the existing warrant to purchase 6,000,000 shares of company stock to an affiliate of the Delaware statutory trust and granted a warrant to purchase 2,000,000 shares of company stock at $0.02 which expires 5 years from date of issuance.
F-19