PART I – FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended June 30, 2023 Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended June 30, 2023, highlighting a net income driven by non-cash derivative gains despite a significant operating loss and critical liquidity Condensed Consolidated Balance Sheets The balance sheets as of June 30, 2023, show total assets of $22.7 million, total liabilities of $28.2 million, and a stockholders' deficit of $5.5 million, with critically low cash Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2023 ($) | March 31, 2023 ($) | | :--- | :--- | :--- | | Total Current Assets | $11,422,111 | $11,804,495 | | Total Assets | $22,658,026 | $23,775,517 | | Total Current Liabilities | $27,395,927 | $36,900,445 | | Total Liabilities | $28,171,969 | $37,719,641 | | Total Stockholders' Deficit | $(5,513,943) | $(13,944,124) | Condensed Consolidated Statements of Operations The statements of operations show a net income of $5.46 million for the quarter, primarily driven by non-cash derivative gains, masking an operating loss of $12.2 million Statement of Operations Summary (Unaudited, Three Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Hospitality and VIP experience revenue | $45,150 | $0 | | Gross loss | $(41,150) | $(93,862) | | Operating loss | $(12,233,599) | $(8,369,971) | | Total other income (expense) | $18,837,624 | $(430,360) | | Net income (loss) | $5,460,722 | $(10,724,644) | | Net income (loss) per share | $3.02 | $(12.19) | Condensed Consolidated Statement of Changes in Stockholders' Deficit The stockholders' deficit improved from $13.9 million to $5.5 million, primarily due to net income from derivative gains and capital increases from stock issuance - The stockholders' deficit decreased from $(13,944,124) on March 31, 2023, to $(5,513,943) on June 30, 202312 - Key changes included $5.9 million in net income attributable to controlling interest, $1.78 million from shares issued for cash under the ATM, and $0.63 million for shares issued for services12 Condensed Consolidated Statements of Cash Flows Cash flows show a net usage of $6.8 million in operating activities, largely offset by $6.7 million from financing, resulting in a critical cash balance of $2,005 Cash Flow Summary (Unaudited, Three Months Ended June 30) | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,804,358) | $(8,513,699) | | Net cash provided by investing activities | $0 | $5,083,299 | | Net cash provided by financing activities | $6,739,519 | $11,607,590 | | Net (decrease) increase in cash | $(64,839) | $8,177,190 | | Cash at end of period | $2,005 | $8,262,263 | Notes to Condensed Consolidated Financial Statements The notes detail the company's name change, BNC acquisition, significant going concern warning, derivative liabilities, and ongoing legal and Nasdaq compliance challenges - The company has substantial doubt about its ability to continue as a going concern, as current cash of $2,005 is not sufficient to fund planned operations for one year26 - The acquisition of BNC was accounted for as an asset purchase, not a business combination, resulting in a recognized loss on acquisition of $54.5 million in the prior fiscal year4749 - The company has significant derivative liabilities related to convertible notes, warrants, and Series A, B, and C preferred stock, with changes in fair value causing a net gain of over $21 million in the quarter7585116 - The company has received multiple non-compliance notices from Nasdaq regarding listing rules for stockholder approval, voting rights, and minimum bid price, posing a significant delisting risk139147 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift to the metaverse, noting a widened operating loss of $12.2 million, and reiterates that net income is due to non-cash derivative gains, highlighting critical liquidity issues and going concern doubts - Operating loss increased by $3.9 million year-over-year, primarily due to increased advertising (~$7 million), hospitality (~$1 million), and travel (~$1 million) expenses, partially offset by a decrease in salaries and professional fees (~$5 million)185 - The reported income from continuing operations was driven by a $21 million non-cash gain from the change in fair value of derivative liabilities, which offset the operating loss186 - The company's cash position is critical, with only $2,005 in cash and cash equivalents as of June 30, 2023, which management states is insufficient to fund operations for the next year, raising substantial doubt about its ability to continue as a going concern190 - Recent financing activities to address liquidity include raising approximately $3.5 million from an ATM offering (now terminated) and $5.5 million in gross proceeds from a senior secured convertible note issuance in April 2023174190 Quantitative and Qualitative Disclosures About Market Risk This section is reported as not applicable, indicating the company does not have material exposure to market risks requiring quantitative and qualitative disclosure - The company states this item is 'Not applicable'202 Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2023, due to material weaknesses, and is implementing a remediation plan for key financial areas - Management concluded that disclosure controls and procedures were not effective as of the end of the reporting period due to previously identified material weaknesses203 - The company is implementing a remediation plan to address weaknesses in Revenue Recognition, Accounts Receivable, Complex Financial Instruments, and Fair value estimates206207208209 PART II – OTHER INFORMATION This section covers other information including legal proceedings, risk factors, unregistered sales of equity, defaults on senior securities, mine safety disclosures, and exhibits Legal Proceedings No material developments in legal proceedings were reported for the quarter, though ongoing litigation includes a $110 million jury award against Walmart and claims against subsidiaries for unpaid bills - The company states there were no material developments in legal proceedings during the period covered by the report213 - Ongoing litigation detailed in the notes includes a $110 million jury award against Walmart (under appeal) and claims against subsidiaries for unpaid equipment and services, for which the company has fully accrued140 Risk Factors This section highlights critical risks, including misleading net income from non-cash derivative gains, substantial doubt about going concern, and significant Nasdaq delisting risks due to multiple compliance violations - The company explicitly warns that its reported net income for Q2 2023 is unrelated to actual performance and is a non-cash result of GAAP accounting for derivative liabilities, which move inversely to the company's stock price215 - There is substantial doubt about the company's ability to continue as a going concern due to insufficient cash to fund operations for one year216217 - The company faces a significant risk of being delisted from Nasdaq due to multiple violation notices concerning stockholder approval requirements, voting rights rules, and minimum bid price rules219228232 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period covered by this report - The company reported 'None' for this item235 Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - The company reported 'None' for this item236 Mine Safety Disclosures This section is reported as not applicable, as the company is not engaged in mining operations - The company reported this item as 'Not applicable'237 Other Information The company reported no other information required for Form 8-K disclosure during the quarter that was not already disclosed - The company reported 'None' for this item238 Exhibits This section lists all exhibits filed with the 10-Q report, including corporate governance documents, preferred stock certificates, securities agreements, and certifications - The report includes numerous exhibits, such as amendments to Articles of Incorporation, Certificates of Designation for Series A, B, and C Preferred Stock, a Securities Purchase Agreement dated April 27, 2023, and Sarbanes-Oxley Act certifications240241
RiskOn International(ROI) - 2024 Q1 - Quarterly Report