NIGHTFOOD HOLDINGS, INC.

(NGTF)
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NIGHTFOOD HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/16/2022 | 05:02pm EDT

FORWARD LOOKING STATEMENT INFORMATION

Certain statements made in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as "anticipate," "believe," "estimate," "expect," "forecast," "may," "should," "plan," "project," "will" and other words of similar meaning. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, technological developments related to business support services and outsourced business processes, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.

Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth under the headings "Business" and "Risk Factors" within our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as well as the other information set forth herein.



OVERVIEW


What you eat before bed matters. Nightfood delivers sleep-friendly nighttime snacking.

Research indicates that humans are biologically hard-wired to load up on sweets and fats at night. Loading a surplus of calories (fuel) into the body before the long nightly fast is believed to be an outdated survival mechanism from our hunter-gatherer days. Unfortunately, while modern consumers know this type of consumption isn't necessary for survival, willpower also weakens at night, so consumers are more likely to succumb to these nighttime cravings for excess "survival calories".

As a result, over 85% of adults report snacking regularly between dinner and bed, resulting in an estimated 700 million nighttime snack occasions weekly, and an annual spend on night snacks of over $50 billion. Because of our hard-wired evolutionary preferences for calorie-dense choices that increase the odds of short-term survival, the most popular nighttime snacks are ice cream, cookies, chips, and candy. These are all understood to be generally unhealthy. They can also impair sleep quality.

In recent years, billions of dollars of consumer spend have shifted to better-for-you versions of consumers' favorite snacks. But we do not believe any of those products were specifically formulated to nutritionally support better sleep. Nightfood snacks are not only formulated to be better-for-you, but they're also formulated by sleep experts and nutritionists to provide a better nutritional foundation for sleep

Almost half of all snacking takes place between dinner and bed. Nutrition is an important part of sleep-hygiene because what one eats at night impacts sleep. Recent industry surveys indicated that most modern consumers have begun to seek functional benefits from their snacks, and most consumers would also prefer better sleep.



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As the pioneers of the nighttime snacking category, Nightfood accepts the responsibility to educate consumers and build the awareness required to grow the nighttime segment of the overall snack market. Along with that responsibility comes the opportunity to be the category king. We envision a future where nighttime specific, sleep-friendly snacks comprise a multi-billion-dollar segment of the estimated $120 billion American snack market.

Management believes latent consumer demand exists for better nighttime snacking options, and that a new consumer category, consisting of nighttime specific snacks, is set to emerge in the coming years. This belief is supported by research from major consumer goods research firms such as IRI Worldwide, and Mintel, who identified nighttime specific foods and beverages as one of the "most compelling and category changing trends" for 2017 and beyond. In recent years, CEO's and other executives from major consumer goods conglomerates such as Nestle, PepsiCo, Mondelez, and Kellogg's have commented on consumer nighttime snack habits and alluded to the opportunity that might exist in solving this problem for the marketplace.

Nightfood has established a highly credentialed Scientific Advisory Board consisting of sleep and nutrition experts to drive product formulation decisions and provide consumer confidence in the brand promise. The first member of this advisory board was Dr. Michael Grandner, Director of the Sleep and Health Research Program at the University of Arizona. Dr. Grandner has been conducting research on the link between nutrition and sleep for over fifteen years, and he believes improved nighttime nutritional choices can improve sleep, resulting in many short and long-term health benefits. In March of 2018, the Company added Dr. Michael Breus to their Scientific Advisory Board. Dr. Breus, known to millions as The Sleep Doctor™, is believed to be the Nation's most trusted authority on sleep. He regularly appears in the national media to educate and inform consumers so they can sleep better and lead happier, healthier, more productive lives. In July, 2018, we completed our Scientific Advisory Board with the addition of Lauren Broch, Ph.D, M.S. Dr. Broch is a sleep therapist and former Director of Education & Training at the Sleep-Wake Disorders Center at Weill Cornell Medical College. Dr. Broch also has a master's degree in human nutrition. This combination allowed her to play an important role in the reformulation of our nutrition bars, the development of Nightfood ice cream, and formulations of future Nightfood snacks currently in development. These experts work with Company management to ensure Nightfood products deliver on their nighttime-appropriate, and sleep-friendly promises.

Management envisions the Nightfood brand ultimately as a "platform brand", meaning future snack offerings are expected to be introduced that would fall outside the ice cream or frozen food category. Possibilities exist to expand the product line into additional snack formats that are popular with consumers at night, including things like cookies, chips, and other formats. The Company currently has some of the aforementioned snack formats in development.

Compared to regular ice cream, Nightfood is formulated with more tryptophan, more vitamin B6, more calcium, magnesium, and zinc, more protein and more prebiotic fiber. Nightfood also contains less fat, less sugar, and fewer calories than traditional ice cream, and is lactose free.

Each new Nightfood snack format would be expected to deliver sleep-friendly snacking in a way that is most appropriate for that format. For example, Nightfood chips would not necessarily contain significantly more tryptophan than other brands of chips but may be more sleep-friendly in other ways.

In February of 2019, it was announced that Nightfood had won the 2019 Product of the Year Award in the ice cream category in a Kantar innovation survey of over 40,000 consumers. In June of 2019, it was announced that Nightfood won both the Best New Ice Cream and Best New Dairy Dessert awards at the World Dairy Innovation Awards.

In November of 2021, Nightfood won the Real California Milk Excelerator Dairy Innovation competition, with a top prize of $150,000 in marketing support. Executives and judges from the California Milk Advisory Board and corporate entities such as Hershey's, Coca-Cola, and Whole Foods commended the unique problem the Nightfood brand addresses for consumers, and the opportunities and strategic advantages afforded by widespread hotel distribution for a brand pioneering sleep-friendly nighttime snacking.

Nightfood has received media coverage in outlets such as The Today Show, Oprah Magazine, The Rachael Ray Show, Food Network Magazine, The Wall Street Journal, USA Today, The Washington Post, Fox Business News, and many more media outlets.



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RECENT EVENTS - DEVELOPMENT PLANS



Hotel Distribution


In pioneering the nascent sleep-friendly nighttime snacking category, Nightfood is in the process of executing a strategic pivot. The Company is temporarily shifting growth focus away from the crowded, expensive, and highly competitive supermarket vertical while targeting brand, revenue, and category growth through national hotel distribution.

According to The American Hotel & Lodging association, there are an estimated 56,000 hotels in the United States (this does not include motels, which are estimated at approximately 34,000 locations). By contrast, Supermarket News recently reported that there are approximately 26,000 traditional supermarkets in the United Sates.

The five largest hotel companies combine for over 26,000 hotel locations in the United States. Management believes this significant concentration, and the fact that corporate-level relationships have been established with two of these five global hotel companies, can lead to significant distribution gains in coming months.

Management believes Nightfood is uniquely advantaged over other snack brands in the potentially lucrative hospitality vertical due to an inherent and implied obligation that exists for hotels to support better sleep for their guests.

Nightfood was invited to participate in a 2021 retail pilot test of Nightfood pints for sale in hotel lobby shops, initiated and conducted by a large and prestigious international hospitality company.

That test was declared a success by that international hospitality company in summer of 2021, and Nightfood ice cream pints are now in the midst of a national hotel rollout. In April, 2022, the Company received 21 purchase orders from a leading distributor of food and beverages to the hospitality vertical, one for each of their 21 regional distribution centers. The distributor business model is typically to order the smallest amount of inventory needed to fulfill immediate customer demand. As such, the aggregate size of these purchase orders was approximately $45,000, enough to supply a few hundred hotel properties with Nightfood ice cream for a few weeks. Industry norms would dictate that significant increases in the number of retail points of distribution would lead to significant increases in average order size.

As of the time of this filing, Nightfood ice cream pints are being introduced nationally in our first hotel chain, a major extended-stay hotel brand with approximately 500 locations in the United States.

On April 22, 2022, it was announced that the Company had secured "recommended brand" status with Remington Hotels. Remington is a leading hotel management company which manages 121 hotels across 28 states, and representing 25 brands, including Marriott, Hilton, Wyndham, Intercontinental, Westin, Wyndham, Doubletree, Courtyard, Crowne Plaza, Four Points, Hyatt Regency, Renaissance, Curio, Embassy Suites, Fairfield Inn, Hampton Inn, Hilton Garden Inn, Holiday Inn, Residence Inn, Springhill Suites, and more.

On April 25, 2022, the Company announced a new corporate-initiated retail pilot test of Nightfood ice cream pints by a second global hotel company, with thousands of locations in the United States. Management believes a successful test could lead to distribution in multiple additional hotel chains potentially representing thousands of properties.

The Company also recently signed its first agreement with a major hotel industry group purchasing organization ("GPO") which services over 10,000 hotel properties in the United States. We are currently in discussions with other GPOs through our relationship with iDEAL Hospitality Partners.

In September of 2021, the Company had stated the goal of having secured distribution for Nightfood snacks in 7,500 hotels by July 31, 2022. Because of modifications to launch timelines by our initial hotel partner, we have adjusted the timing of that target so that our goal is now to secure distribution in 7,500 hotel properties within nine months of our initial hotel introduction. It remains our goal to have Nightfood established as a de facto hotel industry standard, with distribution approaching 20,000 hotels by the end of 2023.

In preparing for the projected increase in volume, the Company is in the process of onboarding two new ice cream pint production facilities to replace the contract manufacturer that has produced Nightfood ice cream pints to date. As the majority of Nightfood ice cream pint sales in coming quarters project to be concentrated on the two flavors in hotel distribution (Cookies n' Dreams and Midnight Chocolate), the Company is engaging a manufacturer with high-speed production lines that can produce double the product daily of our previous manufacturer. The initial production run at that facility is tentatively scheduled for the week of June 6, 2022. The other facility is expected to be used for other pint flavors and ice cream novelties and is expected to come online during July or August.

The Company does not expect any disruption to inventory or supply as a result of these planned transitions.

The unit economics of hotel distribution project to be materially superior to the economics of operating in the supermarket space. Line items such as slotting fees, advertising, and price promotions (both to consumers and the trade) make the supermarket vertical a much more expensive, and less profitable, place to do business compared to hotels.



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Based on the results from the 2021 test, we anticipate that distribution of our ice cream pints in approximately 4,000 hotel locations would bring the company to profitability. Should we succeed in securing hotel distribution for additional snack formats, we would expect an increase in hotel revenue per property, meaning fewer properties would be needed to reach break-even.

To take maximum advantage of the opportunity presented by Nightfood's expected widespread hotel distribution, the Company is developing additional snack formats to supplement ice cream pints in that vertical. These include single-serve ice cream sandwiches as well as snacks in other, non-frozen, formats such as cookies and chips.

We have already received confirmation of interest from decision makers at a major hotel chain in testing and adding additional these Nightfood snack formats currently under development. It is believed that securing distribution for such additional snack formats in our hotel properties would help the Company reach its 2023 revenue target of $10 in wholesale revenue per hotel per day.

In addition to projected profitability resulting from a successful hotel roll-out, we believe that having additional snack formats available in hotels creates a greater opportunity for consumer visibility, awareness, and trial. Widespread hotel distribution across multiple snack formats projects to accelerate consumer adoption of the nighttime snack category, driving awareness that what one eats at night can impact their sleep quality.

We intend to leverage our national hotel distribution to advance the narrative to consumers that what you eat, especially at night, can impact your sleep. We further believe that distribution in leading global hotel chains will serve as an economic moat, providing the Nightfood brand with a measure of insulation against competitors. At the same time, the de facto endorsement from the world's most trusted hotel brands would translate to credibility for our brand, helping to establish and maintain Nightfood as the nighttime snacking "category king".



Supermarket Distribution


Nightfood is currently available in approximately 300 supermarkets, including Jewel-Osco (Chicagoland), Rouses Markets (New Orleans & Gulf Coast), Central Market (Dallas, Fort Worth, Austin, San Antonio, Houston), and Metropolitan Market, Market of Choice and Northwest Grocers in the Pacific Northwest.

We have shifted our primary focus to hotel distribution and believe that successful hotel presence will support future supermarket success.

We continue to work with our long-term partners at these select supermarket chains to devise and test programs that can drive supermarket growth.



SLOTTING FEES


Slotting fees are fees occasionally charged by supermarkets and certain retail distributors to add a new product into their product assortment.

Accounting standards require exclusion on the income statement of Gross Sales made to a customer to whom the Company is paying slotting fees and other expenses including promotions, rebates, and coupons. In those situations, the Gross Sales number is reduced, dollar for dollar, by the sum of these fees. These fees do not appear on the income statement as an expense. Rather, they are applied against Gross Sales, resulting in Net Revenue, as shown below. The netting of Gross Sales against the total of these fees, as described and shown below, results in the Net Revenue number at the top of the income statement. This is not a reflection of the amount of product shipped to customers, but rather a function of the way certain sales are accounted for when those sales are made to customers who are charging slotting fees.

Additional supermarket distribution would likely result in additional future slotting fees. Hotel distribution of Nightfood is not expected to lead to significant slotting fees, if any. Slotting fees are normal and customary in the consumer goods industry and are fees that certain retailers and distributors charge to introduce a new product into their available assortment.

In some cases, slotting fees, also called "new item placement fees" or "new item placement allowances" can be nominal. In other situations, slotting fees for certain retail and distribution partners could run hundreds of thousands of dollars.




INFLATION



Current and ongoing inflation can be expected to have an impact on our operating costs. Costs of certain ingredients and packaging have increased recently, and we expect to evaluate a wholesale price increase in the coming months. Furthermore, a prolonged period of inflation could possibly cause a general economic downturn and negatively impact our results.



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SEASONALITY


As an early-stage and growing brand, the full impact of seasonality on our Company might not be fully understood for several annual cycles. Hotels historically have their highest occupancy rates in the summer, and a pattern could develop of higher consumer spend on Nightfood products during the summer months for the period of time where the majority of the Company's sales are derived from snacks sold into hotel distribution. Over time, should the Company successfully expand into more distribution verticals and into additional snack formats, it is possible that such potential impacts of seasonality could lessen.



CORONAVIRUS (COVID-19)


There is still potential uncertainty resulting from the outbreak of the novel coronavirus (COVID-19) (the "Pandemic"), including those potentially related to measures to reduce its spread, and the impact on the economy. Rates of unemployment, recession, inflation, and other possible unforeseen factors could also have an impact.

From both public statements, and conversations between Nightfood management and current and former executives from certain global food and beverage conglomerates, it has been affirmed to management that there is increased strategic interest in the nighttime nutrition space as a potential high-growth opportunity, partially due to ongoing declines in consumer sleep quality and increases in at-home nighttime snacking, both trends believed to be accelerated by COVID.

The Company has experienced no material issues with supply chain or logistics resulting from COVID. Order processing function has been consistent with historical norms. As stated in Development Plans below, the Company is in the process of transitioning contract manufacturers to handle increased demand and does not anticipate any disruption from this transition as a result of COVID or any other causes.

It is possible that the fallout from the Pandemic could make it more difficult in the future for the Company to access required growth capital, possibly rendering the Company unable to meet certain debts and expenses.

More directly, the Pandemic has impaired the Company's ability to execute certain in-store and out-of-store marketing initiatives within the normal course of supermarket business. For example, since the inception of the Pandemic, the Company was unable to conduct in-store demonstrations and unable to participate in local pregnancy, baby expos, and health expos that were originally intended to be part of our marketing mix.

Additionally, with more consumers shopping online, both for delivery or at-store pickup, the opportunity for shoppers to learn about new brands at the supermarket shelf has been somewhat diminished. Management is working to identify opportunities to build awareness and drive supermarket trial and growth under these new circumstances, while simultaneously executing a strategic pivot to focus on hotel distribution for immediate growth.

We experienced some Pandemic-related delays to our national hotel rollout. However, hotel sales testing conducted by a leading global hotel brand showed strong sales velocities in hotel lobby shops during early and mid-2021. As the testing itself was conducted during the Pandemic, we are of the belief that strong sales can be expected as the rollout is executed. We do not expect significant hotel shutdowns or reductions in hotel occupancy the likes of which were seen in the early and middle part of 2020, unless the Pandemic again surges through new variants or for other reasons.

It is impossible to know what the future holds with regard to the Pandemic, both for the Company and in the broader sense. Emergence of recent variants such as Delta and Omicron have shown us that there remain many uncertainties regarding the Pandemic, and the Company is closely monitoring the impact of the Pandemic on all aspects of its business, including how it will impact its customers, vendors, and business partners. It is difficult to know if the Pandemic has materially impacted the results of operations of the Company, and it is unable to predict the impact that the Pandemic will have on its financial position and operating results due to numerous uncertainties. The Company expects to continue to assess the evolving impact of the Pandemic and intends to make adjustments accordingly, if necessary.



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RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2022 and 2021.



For the three months ended March 31, 2022 and 2021 we had Gross Sales of
$176,020 and $181,172 and Net Revenues (Net Revenues are defined as Gross Sales,
less Slotting Fees, Sales Discounts, and certain other revenue reductions) of
$127,173 and $96,726, respectively, and incurred an operating loss of $333,473
and $391,240, respectively.



                                                      Three Months Ended
                                                           March 31,
                                                      2022          2021
Gross product sales                                 $ 176,020     $ 181,172
Less:
Slotting fees                                       $             $  (4,435 )

Sales discounts, promotions, and other reductions (48,847 ) (80,011 ) Net Revenues

                                        $ 127,173     $  96,726




In the three months ended March 31, 2022, Grocery Outlet was the Company's largest customer, with Gross Sales of $50,994, and Walmart, which is not currently an active customer of the Company, was the Company's second largest customer, with Gross Sales of $44,330. The Company built inventory in early 2021 to prepare for planned expansion, including our national hotel rollout which was originally expected to occur in Summer of 2021. Through the Company's sales to Grocery Outlet, which buys surplus manufacturer inventory at a discount, some of that excess inventory was relieved.

We expect that our Gross Sales attributable to supermarket sales will be lower in the next few quarters due to having been rotated out of Walmart and the fact that Grocery Outlet sales are episodic in nature. However, we expect that anticipated hotel expansion will offset the loss of these sales, resulting in higher gross sales and net revenues in future quarters. To quantify, gross sales to Walmart totaled $44,330 during the three months ended March 31, 2022. During this time, we were in over 900 Walmart stores. Based on the results of the 2021 hotel retail pilot test, our projections indicate that new distribution in approximately 200-300 hotel locations would bring an increase in gross sales that would offset the decrease from this reduction in Walmart and supermarket distribution, with significantly stronger gross and net margins.Hotel sales project to be significantly more profitable on a per unit basis, as sales are expected to be conducted at a higher wholesale price, and line items such as slotting, advertising, and pricing promotions project to be greatly reduced or entirely eliminated.

For the three months ended March 31, 2022 and 2021, Cost of Product Sold increased to $146,766 from $102,922 as we discounted certain product prior to expiration of its code date and executed a write-off of unusable packaging.

For the three months ended March 31 2022 and 2021, Selling, General, and Administrative expenses decreased to $313,880 from $374,645. This decrease was largely due to decreases in certain consulting fees related to capital formation and marketing activities.

For the three months ended March 31 2022 and 2021, total Operating Expenses decreased to $460,646 from $487,567. This is due largely to the decrease in Selling General, and Administrative expenses mentioned in the previous paragraph.

For the three months ended March 31 2022 and 2021, total Other Expenses decreased to $100,295 from $1,548,474. A large component of the other expenses category from 2021 is expenses related to financing events.

For the three months ended March 31 2022 and 2021 we incurred net losses of $433,768 and $1,910,613, respectively. This decrease in net losses is due largely the absence in the current quarter of expenses that existed in the previous year related to the financing event in April, 2021.



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RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED MARCH 31, 2022 and 2021.

For the nine months ended March 31, 2022 and 2021 we had Gross Sales of $470,019 and 643,359 and Net Revenues of $321,000 and $270,919, respectively, and incurred an operating loss of $1,645,538 and $1,379,102, respectively.



                                                        Nine Months Ended
                                                            March 31,
                                                       2022           2021
Gross product sales                                 $  470,019     $  643,359
Less:
Slotting fees                                                      $ (190,295 )

Sales discounts, promotions, and other reductions (147,810 ) (182,145 ) Net Revenues

                                        $  321,000     $  270,919




The decrease in Gross Sales, is largely due to the fact that we had fewer traditional supermarket points of distribution ordering product during the nine months ended March 31, 2022 due to being rotated out of Harris Teeter and Shaw's, as well as decreased promotional activity at the point of purchase. While Nightfood ice cream was available in Walmart stores during the nine months ended March 31, 2022, the majority of product the Company sold to Walmart occurred during the three month period from April 1, 2021 through June 30, 2021, and is therefore not reflected in either of the nine month periods shown above.

We expect that our Gross Sales attributable to supermarket sales will be lower in the next few quarters due to having been rotated out of Walmart and the fact that Grocery Outlet sales are episodic in nature. However, we expect that anticipated hotel expansion will offset the loss of these sales, resulting in higher gross sales and net revenues in future quarters. Furthermore, the hotel sales project to be significantly more profitable on a per unit basis, as sales are expected to be conducted at full wholesale pricing, and line items such as slotting, advertising, and pricing promotions project to be greatly reduced or entirely eliminated.

For the nine months ended March 31, 2022, and 2021, Cost of Product Sold decreased to $359,745 from $443,083 as commensurate with lower gross sales.

For the nine months ended March 31, 2022, and 2021, Selling, General, and Administrative expenses increased to $1,606,793 from $1,206,938. To fully capitalize on the hotel opportunity, we have made certain investments in marketing consulting related to category development and design, as well as investing in the development of additional snack formats which the Company believes can more rapidly scale revenue and consumer trial. Those investments, along with elevated spending on advertising and promotion during the first two quarters of the current fiscal year, accounts for much of this increase.

For the nine months ended March 31, 2022, and 2021, Total Operating Expenses increased to $1,966,538 from $1,650,021. This is due largely to the increase in Selling General, and Administrative expenses mentioned in the previous paragraph.

For the nine months ended March 31, 2022, and 2021, total Other Expenses decreased to $402,824 from $2,074.040. A large component of the other expenses category from 2021 is expenses related to financing events.

For the nine months ended March 31, 2022, and 2021 we incurred net losses of $2,048,362 and $3,453,142 respectively. This decrease in net losses is due largely the absence in the current quarter of expenses that existed in the previous year related to the financing event in April, 2021.



Customers


During the nine months ended March 31, 2022, the Company had one customer account for approximately 31% of the gross sales. One other customer accounted for approximately 24% of gross sales, and one other customer accounted for approximately 14% of gross sales. During the nine months ended March 31, 2021, one customer accounted for approximately 45% of the gross sales.

During the three months ended March 31, 2022, the Company had one customer account for approximately 44% of the gross sales. During the three months ended March 31, 2021, one customer accounted for approximately 36% of the gross sales while three other customers accounted for over 10% of gross sales.



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LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2022, we had cash on hand of $522,057, receivables of $85,113 and inventory value of $291,789.

While most of the Company's internal financial model scenarios project it reaching profitability early in Fiscal 2023, cash on hand does not project to be adequate to satisfy the Company's mid-range working capital needs to get it both to profitability and also cash flow positive. As a result, the Company anticipates raising capital early in Fiscal 2023.

The Company believes that forthcoming business developments along with its current capitalization structure will enable it to successfully secure required financing to continue its growth in the hotel vertical.

Because the business has limited operating history and sales, no certainty of continuation can be stated. Management has devoted a significant amount of time in the raising of capital from additional debt and equity financing. However, the Company's ability to continue as a going concern will again be dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations long-term.

The Company cannot give any assurance that it will, in the future, be able to achieve a level of profitability from the sale of its products to sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern for one year from the date the financials are issued. The accompanying financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Since our inception, we have sustained operating losses. During the nine months ended March 31, 2022, we incurred a net loss of $2,048,362 (comprised of operating loss of $1,645,538 and other expenses of $402,824) compared to $3,453,142 (comprised of operating loss of $1,389,501 and other expenses of $2,074,040, most of which is comprised of changes in derivative liability and amortization of Beneficial Conversion Features related to convertible note financing and changes in the share price of the common stock) for the nine months ended March 31, 2021. A significant portion of these losses is largely a function of the way certain financing activities are recorded and does not represent actual operating losses.

During the nine months ended March 31, 2022, net cash used in operating activities was $1,728,876 compared to $841,133 for the nine months ended March 31, 2021. The reason for the increase in recorded net cash used in operating activities is largely due to the fact that more cash was allocated to current assets and current liabilities in the current quarter than in the prior year.

During the nine months ended March 31, 2022, net cash of $0 was used in investing activities, compared to $0 for the nine months ended March 31, 2021.

During the nine months ended March 31, 2022, net cash aggregating $1,209,034 was provided by financing activities, compared to $716,692 for the nine months ended March 31, 2021.

From our inception in January 2010 through March 31, 2022, we have generated an accumulated deficit of approximately $27,603,890, compared to $25,196,871 from inception through June 30, 2021. This is not debt, and this is not an amount that needs to be paid out at any point in the future. An accumulated deficit reflects a negative balance of retained earnings and an accumulation of historical losses over time, related to both operations and financing activities. It is not unusual for growing companies to have significant accumulated deficit (also known as negative retained earnings), even after turning profitable. Many large, fast growing, and successful companies have recently reported accumulated deficits, such as Warby Parker, The Honest Company, Beyond Meat, Roblox, Robinhood, Sweetgreen, Oatly, Rivian, Celsius Holdings, and Chobani, as well as Tesla (as recently as their 2020 fiscal year). In our case, like many of these others, an accumulated deficit is a function of losses sustained over time, along with the costs associated with raising operating capital.

Assuming we raise additional funds and continue operations, we expect to incur additional operating losses during the next one to three quarters and possibly thereafter. We plan to continue to pay or satisfy existing obligation and commitments and finance our operations, as we have in the past, primarily through the sale of our securities and other forms of external financing until such time that we are able to generate sufficient funds from the sale of our products to finance our operations, of which we can give no assurance.

We intend to rely on the sale of stock and the issuance of new debt, to fund our operations. If we are unable to raise cash through the sale of our stock, we may be required to severely restrict our operations.



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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates, including those related to allowance for doubtful accounts, allowance for inventory write-downs and write offs, deferred income taxes, provision for contractual obligations and our ability to continue as a going concern. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

© Edgar Online, source Glimpses

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Financials ()
Sales 2021 0,70 M - -
Net income 2021 -3,48 M - -
Net cash 2021 1,04 M - -
P/E ratio 2021 -2,86x
Yield 2021 -
Capitalization 16,1 M 16,1 M -
EV / Sales 2020 58,8x
EV / Sales 2021 29,0x
Nbr of Employees 1
Free-Float 81,2%
Chart NIGHTFOOD HOLDINGS, INC.
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Nightfood Holdings, Inc. Technical Analysis Chart | MarketScreener
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Income Statement Evolution
Managers and Directors
Sean J. Folkson Chairman, President & Chief Executive Officer
Jerry Isaacson Chief Financial Officer
Jennifer Mitchell Chief Operating Officer & Director-National Sales
Nisa Amoils Independent Director
Thanuja Hamilton Independent Director
Sector and Competitors
1st jan.Capi. (M$)
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