Notes
to the Consolidated Financial Statements
1.
NATURE OF OPERATIONS
Nature
of Business
Awaysis
Capital, Inc., a Delaware corporation, (“Awaysis”, “the Company”, “we”, “us” or “our’)
is real estate investment and management company focused on acquisition, construction, selling and managing rentals of residential vacation
home communities in desirable travel destinations. We seek to create value through the targeting and acquisition, development, and up-cycling,
rebranding, and repositioning of currently undervalued operating and shovel ready residential/resort communities in global travel destinations,
with the intention to relaunch these assets under the “Awaysis” brand with the goals of creating a network of residential
and resort enclave communities that will optimize both sales and rental revenues, providing attractive returns to owners and exceptional
vacation experiences to travelers.
In
March 2020 the World Health Organization declared COVID-19 a pandemic. The Company is still assessing the impact COVID-19 may have on
its business, but there can be no assurance that this analysis will enable the Company to avoid part or all of any impact from the spread
of COVID-19 or its consequences, including downturns in business sentiment generally. The extent to which the COVID-19 pandemic and global
efforts to contain its spread will impact the Company’s operations will depend on future developments, which are highly uncertain
and cannot be predicted at this time, and include the duration, severity and scope of the pandemic and the actions taken to contain or
treat the COVID-19 pandemic.
We
currently have not been directly impacted by the Covid-19 outbreak due to our limited operations. However, management believes the effect
of the pandemic outbreak on the global economy has driven demand for vacation home ownership and remote work at home while travelling.
The Company believes that this will enhance its ability to raise funding for working capital and other needs and to attract an experienced
management team to take advantage of the opportunities for growth.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
summary of significant accounting policies is presented to assist in the understanding of the financial statements. These policies conform
to accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied.
The Company has selected June 30 as its financial year end. The Company did not earn any revenue for the quarter ended September 30,
2022.
Principals
of Consolidation
The
consolidated financial statements include accounts of the Company’s wholly-owned subsidiaries Awaysis Capital, LLC and Awaysis
Casamora Limited. All significant intercompany balances and transactions have been eliminated in consolidation.
Interim
Financial Statements
The
accompanying unaudited interim condensed financial statements have been prepared in accordance with GAAP for interim financial information
in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP
for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for
fair presentation have been included. While we believe that the disclosures presented herein are adequate and not misleading, these interim
condensed financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the
fiscal year ended June 30, 2022 included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 and filed on November
4, 2022. Operating results for the interim period presented are not necessarily indicative of the results for the full year.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates.
Cash
and Cash Equivalents
We
maintain cash balances in a non-interest-bearing account and unrestricted cash in escrow that currently does not exceed federally insured
limits. For the purposes of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered
to be cash equivalents. As of September 30, 2022, our cash balance was $19,431.
Cash
and cash equivalents are stated at amortized cost which approximates fair value.
Fair
Value Measurements
ASC
Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value
and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value
and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets
for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level
1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets
and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on
the New York Stock Exchange.
Level
2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported
date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced
with models using highly observable inputs.
Level
3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included
in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts
used to determine the fair value of financial transmission rights.
Our
financial instruments consist of cash and cash equivalents accounts payable, accounts payable - related party and note payable
– related party. The carrying amount of our cash and cash equivalents, accounts payable, accounts payable - related party and note
payable – related party approximate their fair values because of the short-term maturities of these instruments.
Related
Party Transactions
A
related party is generally defined as (i) any person that holds 10% or more of our membership interests including such person’s
immediate families, (ii) our management, (iii) someone that directly or indirectly controls, is controlled by or is under common control
with us, or (iv) anyone who can significantly influence our financial and operating decisions. A transaction is considered to be a related
party transaction when there is a transfer of resources or obligations between related parties. See Note 6 below for details of related
party transactions in the period presented.
Fixed
Assets
Fixed
assets are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over
the estimated useful lives. The fixed assets include property, equipment and software which ownership is maintained by the Company.
Leases
The
Company accounts for leases under the guidance of ASC Topic 841, where lessees are required to recognize assets and liabilities on the
balance sheet for the rights and obligations created by all leases. We determine if an arrangement is a lease at inception. Operating
leases are included in operating lease right-of-use (“ROU”) as assets, operating lease non-current liabilities, and operating
lease current liabilities in our balance sheet. Finance leases are property and equipment, other current liabilities, and other non-current
liabilities in the balance sheet.
ROU
assets represent the right to use an asset for the lease term and lease liability represent the obligation to make lease payment arising
from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease
payments over lease term. As most of the leases don’t provide an implicit rate, we generally use the incremental borrowing rate
on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating
ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payment is recognized on a straight-line
basis over lease term.
We
were party to an operating lease agreement during the quarter ended September 30, 2022. See Note 8 below for details of Lessee
Leases in the period presented.
Income
Taxes
The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and
liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced
by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the statements of operations in the period that includes the enactment date.
The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has
a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The
estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying
balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred
tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.
Management
makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates
of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions.
In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction
varies from estimates, additional allowances or reversals of reserves may be necessary.
Revenue
Recognition
Revenue
Recognition Standard, ASC 606 is used by the Company to recognize revenue. ASC 606 standards were jointly issued by the Financial Accounting
Standards Board (FASB) and the International Accounting Standards Board (IASB). Revenues are recognized when control of the promised
goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in
exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue
to be recognized as it fulfills its obligations under each of its agreements:
Step
1: Identify the contract(s) with customers
Step
2: Identify the performance obligations in the contract
Step
3: Determine the transaction price
Step
4: Allocate the transaction price to performance obligations
Step
5: Recognize revenue when the entity satisfies a performance obligation
The Company is in its
preoperative stage. At this time, we have not identified
specific planned revenue streams, nor have we recognized any revenue during the quarter ended September 30, 2022.
Inventory
New
real estate inventory is carried at the lower of cost or net realizable value. The cost of finished inventories determined on the specific
identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In
addition, an allocation of depreciation and amortization is included in cost of goods sold. Under the specific identification method,
if finished real estate inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net
realizable value.
Inventory,
consisting of real estate under construction, was $11,409,500 as of September 30, 2022.
Advertising
and Marketing Costs
We
expense advertising costs when advertisements occur. Advertising for the Company consists primarily of the creation and marketing of
the Awaysis brand guideline, logo, wordmark, tagline, and website. Advertising expenses amounted to approximately $10,500 for the quarter
ended September 30, 2022.
Stock
Based Compensation
The
cost of equity instruments issued to employees and non-employees in return for goods and services is measured by the grant date fair
value of the equity instruments issued in accordance with ASC 718, Compensation – Stock Compensation. The related expense is recognized
as services are rendered or vesting periods elapse.
Stock-based
compensation of $82,644 was issued for services during the quarter ended September 30, 2022, and is included in the General and Administrative
expenses in the Consolidated Statements of Operations.
Net
Loss per Share Calculation
Basic
earnings (loss) per common share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income
(loss) by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Dilutive loss per share
excludes all potential common shares if their effect is anti-dilutive.
No
potentially dilutive debt or equity instruments were issued or outstanding during the quarter ended September 30, 2022.
Recently
Issued Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.
ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible
instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging,
or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated
from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation
under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements
under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible
instruments and contracts in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition
of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the
SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities,
the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.
Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those
fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. Implementation
of this ASU had no material impact on the consolidated financial statements.
As
of September 30, 2022, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these
pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting
pronouncements has had or will have a material impact on the Company’s consolidated financial statements.
3.
GOING CONCERN
The
Company adopted Accounting Standards Update No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The Company’s
financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations,
realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the financial statements, the
Company had an accumulated deficit at September 30, 2022 and 2021, a net loss and net cash used in operating activities for the reporting
periods then ended.
The
Company is commencing operations and seeking to generate sufficient revenue and have received sufficient subscriptions and funding to
support its current basic operations for at least the next 12 months; however, the Company’s cash position may not be sufficient
to support the Company’s long-term strategy. While the Company believes in the viability of its strategy to commence operations
and generate sufficient revenue to further develop its first properties through presales, there can be no assurances to that effect.
The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business
plan, generate sufficient revenue through presales or otherwise, and its ability to raise additional funds by way of private offering
or debt. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
4.
FIXED ASSETS
The
carrying basis and accumulated depreciation of fixed assets at September 30, 2022 and 2021 is as follows:
Schedule
of Fixed Assets
SCHEDULE OF FIXED ASSETS
| | |
Useful Lives | |
September 30, 2022 | | |
September 30, 2021 | |
| Furniture and fixtures | |
7 years | |
$ | 13,978 | | |
$ | 0 | |
| Computer and equipment | |
5 years | |
| 1,748 | | |
| 0 | |
| Software | |
3 years | |
| 22,145 | | |
| 0 | |
| Less depreciation and amortization | |
| |
| (214 | ) | |
| 0 | |
| Total fixed assets, net | |
| |
$ | 37,657 | | |
| 0 | |
The
Company recorded depreciation expense of $214 and $0 for the periods ended September 30, 2022, and 2021, respectively.
5.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As
of September 30, 2022, and 2021, the balance of accounts payable and accrued expenses was $166,547 and $16,903, respectively, and related
primarily to expenses relating to Prop-tech Software development, SEC filings, outstanding legal expenses and share transfer expenses.
The
current portion of operating lease liabilities of $82,170 is included in the accrued expenses as of September 30, 2022.
6.
ADVANCES – RELATED PARTY
As
of September 30, 2022, and 2021, the balance of advances – related party was $32,720 and $5,923, respectively, and related to both
costs paid on behalf of the Company and funding to the Company by an entity controlled by two of our directors.
7.
NOTES PAYABLE
On
June 30, 2022, the Company purchased from a non-related party, real estate asset appraised at $11,409,500 and executed two unsecured
demand promissory notes bearing annual interest rates of 0%. The first is for $2,600,000 and the second was in the amount of $280,000.
This second note was subsequently fully paid on August 8, 2022.
The
Company has notes payable as of September 30, 2022, and 2021 in the amount of approximately $2,600,000 and -0-, respectively.
8.
OPERATING LEASES - LESSEE
The
Company has an operating lease for office space, with a term of 5 years. As of September 30, 2022, the company did not have any additional
material operating leases that were entered into, but not yet commenced.
The
maturity schedule of future minimum lease payments under operating leases and the reconciliation to the operating lease liabilities reported
on the Consolidated Balance Sheets was as follows:
SCHEDULE OF FUTURE
MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES
| | |
September
30, 2022 | |
| | |
| |
| Remaining nine months ending
June 30, 2023 | |
$ | 60,491 | |
| 2024 | |
| 87,465 | |
| 2025 | |
| 89,003 | |
| 2026 | |
| 90,588 | |
| 2027 | |
| 92,220 | |
| Thereafter | |
| 31,113 | |
| Total operating lease
payments | |
| 450,880 | |
| Present value adjustment | |
| (69,907 | ) |
| Total
operating lease liabilities | |
$ | 380,973 | |
The
total operating lease liability amount consists of current and long-term portion of operating lease liabilities of $82,170 and $298,803,
respectively.
Operating
lease costs were $7,321 and -$0- for the three months ended September 30, 2022, and 2021, respectively.
The
following table summarizes the weighted-average remaining lease term and weighted-average discount rate related to the Company’s
operating leases as of September 30, 2022:
SCHEDULE OF WEIGHTED
AVERAGE REMAINING LEASE TERM AND WEIGHTED AVERAGE DISCOUNT RATE
| | |
September
30, 2022 | |
| | |
| |
| Weighted-average remaining lease
term, years | |
| 5.1 | |
| Weighted-average discount rate, % | |
| 7.0 | % |
9.
COMMITMENTS & CONTINGENCIES
Legal
Proceedings
We
were not subject to any legal proceedings during the three months ended September 30, 2022, and, to the best of our knowledge, no legal
proceedings are pending or threatened.
Purchase
Commitments
We
were not party to any purchase commitments during the three months ended September 30, 2022.
10.
STOCKHOLDERS’ EQUITY
Preferred
Stock
As
of September 30, 2022, we were authorized to issue 25,000,000 shares of preferred stock with a par value of $0.01.
No
shares of preferred stock were issued and outstanding during the three months ended September 30, 2022.
Common
Stock
As
of September 30, 2022, we were authorized to issue 1,000,000,000 shares of common stock with a par value of $0.01, which 100,218,322 shares
shares of common stock were issued and outstanding and 58,056,334 shares of common stock were subscribed, contractually obligated and
committed to be issued but not yet issued.
During
the three months ended September 30, 2022, the Company issued 369,781 common shares for payment of professional services in the amount
of $82,644.
The
Company is contractually obligated and committed to issue an aggregate of 56,863,334 common shares as partial consideration for the purchase
of real estate inventory in the amount of $8,529,500. All of such shares are deemed subscribed for and purchased by the direct or indirect
sellers of the real estate. As of September 30, 2022, all of such shares have not been issued by the Company as it waits for instructions
from such sellers.
During
the three months ended September 30, 2022, the Company sold 100,000 common shares in a private offering, at a price per share of $1.00
for $100,000 in gross proceeds.
As
of September 30, 2022, the Company has committed subscription agreements from investors, entered into during a private offering, for
1,193,000 shares, at a price per share of $1.00 for $1,193,000 and is included in the Subscription Receivable in the Consolidated Balance
Sheets.
The
Company has not declared or paid any dividends or returned any capital to common stock shareholders as of September 30, 2022 and 2021.
Warrants
No
warrants were issued or outstanding during the three months ended September 30, 2022 or 2021.
Stock
Options
The
company has adopted the 2022 Omnibus Performance Award Plan in February 2022. The Plan authorizes the granting of 19,977,931 of the Company’s
Common Stock.
No
stock options were issued or outstanding during the three months ended September 30, 2022 or 2021.
11.
SUBSEQUENT EVENTS
The
Company evaluated subsequent events after September 30, 2022, in accordance with FASB ASC 855 Subsequent Events, through the date of
the issuance of these financial statements.