UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________________ to __________________
Commission file number:
(Exact name of registrant as specified in its charter) |
| ||
State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization |
| Identification No.) |
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
☐ | (Do not check if a smaller reporting company) | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of December 20, 2024, there were
Documents Incorporated by Reference: None
Business Warrior Corporation
Consolidated Financial Statements as of and for the three months and six months ended February 29, 2024, and February 28, 2023 (Unaudited) Business Warrior Corporation
TABLE OF CONTENTS |
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Consolidated Balance Sheets as of February 29, 2024 (unaudited) and August 31, 2023 |
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BUSINESS WARRIOR CORPORATION
CONSOLIDATED BALANCE SHEETS
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Assets |
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Current assets |
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Cash and cash equivalents |
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Accounts receivable, net |
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Current portion of loans receivable, net |
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Investments, at fair value |
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Prepaids and other current assets |
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Total current assets |
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Finance right-of-use asset, net |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Total Assets |
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Liabilities and Stockholders’ Deficit |
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Current liabilities |
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Accounts payable and accrued liabilities |
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Accrued contract liability, net of discount $ |
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Accrued dividends payable |
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Current portion of finance lease liability |
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Current portion of notes payable |
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Convertible notes payable, current, net of discount of $ |
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Due to related party |
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Helix House payable |
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Total current liabilities |
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Derivative Liability |
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Line of credit, net of discount $ |
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Convertible notes payable, current, net of discount of $ |
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Helix House earnout payable, non-current |
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Finance lease liability, long term |
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SBA loan, non-current |
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Total Liabilities |
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Commitments and contingencies (Note 15) |
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Stockholders’ Deficit |
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Preferred stock, par value $ |
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Series A Preferred stock; |
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Series C Preferred stock, |
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Common stock, $ |
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Additional paid in capital |
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Treasury Stock, |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total Liabilities and Stockholders’ Deficit |
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See notes to unaudited consolidated financial statements.
F-1 |
Table of Contents |
BUSINESS WARRIOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
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Sales |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Advertising and promotion |
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Salaries and wages |
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Professional services |
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General and administrative expenses |
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Loss from operations |
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Other income (expense): |
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Interest expense, net |
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Unrealized change in fair value of investments |
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Contingent settlement costs |
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Change in fair value of derivative liability |
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Loss on exchange of debt |
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Employee retention credit |
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Other income (expense) |
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Total other income (expense) |
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Loss before income taxes |
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Provision for income taxes |
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Net loss |
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Preferred stock dividends |
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Net loss attributable to common stockholders |
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Basic and diluted loss per share |
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Weighted average shares outstanding - basic and diluted |
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See notes to unaudited consolidated financial statements.
F-2 |
Table of Contents |
BUSINESS WARRIOR CORPORATION | ||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
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| Series A Preferred Stock |
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Balance August 31, 2022 |
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Conversion of preferred stock to debt |
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Deemed dividend of Series C preferred stock |
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Net loss (restated - See Note 3) |
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Balance November 30, 2022 |
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Issuance of common stock for services |
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Conversion of preferred stock to debt |
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Deemed dividend of Preferred stock Series C |
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Net loss |
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Balance February 28, 2023 |
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F-3 |
BUSINESS WARRIOR CORPORATION |
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT |
FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29 2024 |
(Unaudited) |
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| Series A Preferred Stock |
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| Series B Preferred Stock |
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| Series C Preferred Stock |
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| Common Stock |
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| Additional Paid in |
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| Accumulated |
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Balance August 31, 2023 |
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Issuance of common stock for services |
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Conversion of debt to common stock |
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Deemed dividend of Preferred stock Series C |
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Net loss |
|
| - |
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|
| - |
|
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|
|
| - |
|
|
|
|
|
| - |
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| ( | ) |
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Balance November 30, 2023 |
|
|
|
| $ |
|
|
| - |
|
| $ |
|
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
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| $ | ( | ) | |||||||||
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Repurchase of treasury stock |
|
| - |
|
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| - |
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|
| - |
|
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| - |
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| $ | ( | ) |
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Gain on treasury stock |
|
| - |
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| - |
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| - |
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| - |
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Cancellation of preferred stock |
|
| - |
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| - |
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| ( | ) |
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| ( | ) |
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Cancellation of deemed dividends of Preferred stock Series C |
|
| - |
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| - |
|
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| - |
|
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| - |
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Net loss |
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| - |
|
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| - |
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| - |
|
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| - |
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| ( | ) |
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Balance February 29, 2024 |
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| $ |
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| - |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
See notes to unaudited consolidated financial statements
F-4 |
Table of Contents |
BUSINESS WARRIOR CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
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| Six months ended |
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| February 29, |
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| February 28, |
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| 2024 |
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| 2023 |
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Cash Flows from Operating Activities |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
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Adjustments to reconcile net loss to net cash from operating activities: |
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Depreciation and amortization |
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Change in goodwill |
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Stock based compensation |
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Change in fair value of derivative liability |
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Loss on exchange on debt |
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Amortization of debt discount |
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Unrealized change in fair value of investments |
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| ( | ) | |
Changes in operating assets and liabilities |
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Accounts receivable, net |
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| ||
Prepaids and other current assets |
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Deferred revenue |
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| ( | ) | |
Contingent Liability, net of discount |
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Accounts payable and accrued liabilities |
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Net cash from operating activities |
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| ( | ) |
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| ( | ) |
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Cash Flows from Investing Activities |
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Issuance of loans receivable |
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| ( | ) | |
Payments received on loans receivable |
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Net cash from investing activities |
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Cash Flows from Financing Activities |
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Proceeds from notes payable |
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Proceeds from line of credit |
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| |
Payments of finance lease liability |
|
| ( | ) |
|
| ( | ) |
Cancellation of preferred stock |
|
| ( | ) |
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| |
Gain on sale of treasury stock |
|
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| ||
Payments of notes payable |
|
| ( | ) |
|
| ( | ) |
Payments of notes payable, related party |
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Net cash from financing activities |
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Change in cash and cash equivalents |
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| ( | ) |
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| |
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Cash and cash equivalents at beginning of period |
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Cash and cash and equivalents at end of period |
| $ |
|
| $ |
| ||
|
|
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|
|
|
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|
|
Noncash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Conversion of preferred stock into debt, net of debt discount |
| $ |
|
| $ |
| ||
Deemed dividends of Series C preferred stock |
| $ |
|
| $ |
| ||
Issuance of warrants |
| $ |
|
| $ |
| ||
Conversion of debt to common stock |
| $ |
|
| $ |
| ||
Repurchase of treasury stock |
| $ |
|
| $ |
| ||
|
|
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Supplemental Cash Flow Information |
|
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|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
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See notes to unaudited consolidated financial statements |
F-5 |
Table of Contents |
BUSINESS WARRIOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) |
|
1. | ORGANIZATION AND NATURE OF OPERATIONS |
Organization — Business Warrior Corporation (the Company” or “Business Warrior”) was originally incorporated under the name Kading Companies, S.A., under the International Business Companies Ordinance of the Territory of the British Virgin Islands on October 10, 1995. Kading Companies was traded on the Pink Sheets of the OTC Markets under the stock ticker KDNG. On January 27, 2020, Kading Companies was redomiciled in Wyoming. Bluume, LLC was founded in 2014 and was a sales and marketing organization that provided small businesses with basic advertising, merchant services, white label Point of Sale systems, and a white label business analytics software. On January 31, 2020, Bluume, LLC completed a triangular reverse merger with Kading Companies (formerly KDNG) and changed its name to Business Warrior. It is currently an active corporation in the state of Wyoming. The previous Bluume team took over all operations of the Company and formed a new business plan, which replaced all former plans of the previous management team at Kading Companies. In July 2020, the Company changed its stock ticker to BZWR.
On March 18, 2022, the Company acquired Helix House, LLC, a premium marketing agency that provides small business advertising services including digital marketing. Additionally, on June 18, 2022, the Company acquired FluidFi Inc., dba Alchemy Technology, a lending technology company that builds fully customized lending end-to-ending lending solutions.
Nature of Operations — Business Warrior has three divisions of the company: Helix House, LLC, Alchemy Technologies, and Business Warrior. Helix House is a premium marketing agency that provides small business advertising services including digital marketing (YouTube, Google, social media), traditional marketing (billboards, mailers, fliers, etc.), and social media content. Alchemy builds and manages lending software technology for enterprise businesses which are fully customized for each client. Through the combination of services from Helix House and Alchemy, Business Warrior offers a full service lending as a service solution known as PayPlan: a comprehensive lending software platform that includes marketing services to drive applicants for lenders and merchants.
2. | GOING CONCERN |
The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern for a period of one year from the issuance of these financial statements. For the three months and six months ended February 29, 2024, the Company had $
The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
Successful integration of the Company’s recent business acquisitions and, ultimately, the attainment of profitable operations are dependent upon future events, and ultimately achieving a level of sales adequate to support the Company’s cost structure. However, there can be no assurances that the Company will be able to secure additional equity investments or achieve an adequate sales level.
3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation — The consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated and wholly owned subsidiaries. The consolidated financial statements reflect the elimination of all significant inter-company accounts and transactions.
These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
F-6 |
Table of Contents |
The financial results for the six-month period ended February 29, 2024 include adjustments that are part of our ongoing efforts to enhance financial accuracy and operational efficiency. As a result, the financial performance for this quarter may not be indicative of the results for the entire fiscal year. The adjustments made are expected to influence our financial performance over a longer period, and as such, the outcomes for this quarter should be considered in the context of a full year’s performance. A more comprehensive assessment of our annual results will be provided in our year-end financial statements.
Use of Estimates — The preparation of consolidated financial statements in conformity with 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 consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual events and results could materially differ from those assumptions and estimates.
Concentration of Credit Risk — Financial instruments that potentially subject the Company to concentrations of credit risk are cash and accounts receivable arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. 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.
Cash and Cash Equivalents — The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions, and at times, balances may exceed federally insured limits.
Intangible Assets — Certain intangible assets arose from the acquisition of Helix House, LLC on March 18, 2022 and consist of the following, which are being amortized on a straight-line basis over the following estimated useful lives, if applicable:
|
| Estimated |
| |
Asset |
| Useful Life |
| |
Customer Relationships |
|
| ||
Trademarks |
|
| ||
Non-Compete Agreements |
|
|
Property and Equipment — Property and equipment are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assets.
Cost and accumulated depreciation for property retired or disposed of are removed from the accounts, and any resulting gain or loss is included in earnings. Expenditures for maintenance and repairs are charged to expense as incurred.
Investments — The Company adopted Accounting Standards Update (“ASU”) 2016-01 Financial Instruments — Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires the Company to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. Prior to the adoption of ASU 2016-01, marketable equity securities not accounted for under the equity method were classified as trading or available-for-sale. Both realized and unrealized gains and losses on equity securities classified as trading securities were recognized in net income. The Company’s investments are securities traded over a broker-dealer network. Any unrealized gains/losses are recognized in “Other income”.
Impairment of Long-Lived Assets — Potential impairments of long-lived assets are reviewed when events or changes in circumstances indicate a potential impairment may exist. In accordance with Accounting Standard Codification (“ASC”) Subtopic 360-10, “Property, Plant and Equipment – Overall,” impairment is determined when estimated future undiscounted cash flows associated with an asset are less than the asset’s carrying value. No impairment has been recorded for the three and six months ended February 29, 2024.
Goodwill — The Company’s goodwill balance of $
F-7 |
Table of Contents |
Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable are carried at the original invoiced amount less an allowance for doubtful accounts based on the probability of future collection. The probability of future collection is based on specific considerations of historical loss patterns and an assessment of the continuation of such patterns based on past collection trends and known or anticipated future economic events that may impact collectability. The probability of future collection is also assessed by geography. Accounts receivable was evaluated as of February 29, 2024 and determined there are no uncollectible accounts.
Current portion of Notes Receivable, net — Notes receivable are recorded at their principal amounts, less any allowance for doubtful accounts. To date, losses resulting from uncollected receivables have not exceeded management’s expectations. The Company recorded an allowance for doubtful accounts of $
Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss, capital loss and tax credit carryforwards. 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 income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. Our federal tax return and any state tax returns are not currently under examination.
The Company has adopted ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Revenue Recognition — The Company recognizes revenue in accordance with Accounting Standards Update 2014-09, “Revenue from contracts with customers,” (Topic 606). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company’s main revenue stream is from sales of products. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
The Company has three main sources of revenue. Helix House is a premium marketing agency that charges monthly service fees and one-time project charges for providing small business advertising services including digital marketing (YouTube, Google, social media), traditional marketing (billboards, mailers, fliers, etc.), and social media content. FluidFi Inc, dba Alchemy builds fully customized lending end-to-end lending software solutions for banks, lenders, and financial technology firms. Alchemy charges monthly recurring fees for each client’s software-as-a-service as well as contracted work for custom software development. Business Warrior collects revenue for building software lending solutions, and sales and marketing solutions associated with each lending client. Business Warrior Funding collects principal and interest payments for providing business loans to small businesses.
Identify the customer contract
A customer contract is generally identified when the Company and a customer have executed an arrangement that calls for the Company to grant access to its online software products and provide professional services in exchange for consideration from the customer.
F-8 |
Table of Contents |
Identify performance obligations that are distinct
A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company has determined that subscriptions for its online software products are distinct because, once a customer has access to the online software product is fully functional and does not require any additional development, modification, or customization. Professional services sold are distinct because the customer benefits from the on-boarding and training to make better use of the online software products it purchased.
Determine the transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding sales taxes that are collected on behalf of government agencies. The Company estimates any variable consideration to which it will be entitled at contract inception, and reassesses at each reporting date, when determining the transaction price. The Company does not include variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will occur when any uncertainty associated with the variable consideration is resolved.
Allocate the transaction price to the distinct performance obligations
The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer. The Company determines the SSP of its goods and services based upon the average sales prices for each type of online software product and professional services sold. In instances where there are not sufficient data points, or the selling prices for a particular online software product or professional service are disparate, the Company estimates the SSP using other observable inputs, such as similar products or services.
Recognize revenue as the performance obligations are satisfied
Revenues are recognized when or as control of the promised goods or services is transferred to customers. Revenue from online software products is recognized ratably over the subscription period beginning on the date the Company’s online software products are made available to customers. Most subscription contracts are one year or less. The Company recognizes revenue from on-boarding, training, and consulting services as the services are provided. Cash payments received in advance of providing subscription or services are recorded to deferred revenue until the performance obligation is satisfied. Revenue from the Company’s business lending solution is recognized as interest income and origination fees, based upon the loan that is issued to each customer.
Net Income (Loss) Per Common Share — The Company computes income per common share, in accordance with ASC Topic 260, Earnings Per Share,which requires dual presentation of basic and diluted earnings per share. Basic income or loss per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted income or loss per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding, plus the issuance of common shares, if dilutive, that could result from the exercise of outstanding stock options and warrants. No potential dilutive common shares are included in the computation of any diluted per share amount when a loss is reported. There are currently
Fair Value Measurements — ASC Topic 820, Fair Value Measurements, clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
Advertising and Promotion — The Company follows the policy of charging the costs of advertising, marketing, and public relations to expense as incurred. The Company has $
F-9 |
Table of Contents |
Cost of Sales — This is comprised of referral and sales commission, advertising for our premium marketing clients, website hosting fees, and data fees for our software subscribers.
Leases — Under ASC Top 842, ”Leases”, the Company determines if an agreement is a lease at inception. Operating leases are included in operating lease – right to use, current portion of operating lease liability, and operating lease liability, less current portion in the Company’s consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of long-term debt, net and long-term debt, less current portion and debt issuance costs in the Company’s consolidated balance sheets.
As permitted under ASU Topic 842, the Company has made an accounting policy election not to apply the recognition provisions of ASU 2016-02 to short term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term.
Recently Issued Accounting Pronouncements — The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
4. | SEGMENT DISCLOSURES |
The Company has identified reportable segments as those consolidated subsidiaries that represent
EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is superior to available GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold additions. The Company’s chief operating decision maker uses EBITA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments.
As of February 29, 2024, the Company’s reportable segments were as follows:
| · | Helix House |
| · | Other |
The Other category includes the Company’s corporate headquarters and a less significant operating segment which was the FluidFi acquisition obtained during the year ended August 31, 2022.
Performance Measures of Reportable Segments
Revenue and Net loss of the Company’s reportable segments for the six months ended February 29, 2024 and February 28, 2023 was as follows:
|
| Net Sales |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Helix House |
| $ |
|
| $ |
| ||
Other |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
| |
|
| Net (Loss)/Income |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Helix House |
| $ | ( | ) |
| $ |
| |
Other |
|
| ( | ) |
|
| ( | ) |
Total |
| $ | ( | ) |
| $ | ( | ) |
F-10 |
Table of Contents |
Revenue and Net Loss of the Company’s reportable segments for the three months ended February 29, 2024 and February 28, 2023 was as follows:
|
| Net Sales |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Helix House |
| $ |
|
| $ |
| ||
Other |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| Net Loss |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Helix House |
| $ | ( | ) |
| $ | ( | ) |
Other |
|
| ( | ) |
|
| ( | ) |
Total |
|
| ( | ) |
|
| ( | ) |
Balance Sheet Data of Reportable Segments
Total assets of the Company’s reportable segments at February 29, 2024 and August 31, 2023 were as follows:
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Helix House |
| $ |
|
| $ |
| ||
Other |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
|
5. | LOANS RECEIVABLE |
During the year ended August 31, 2023, the Company launched its new small business lending solution called Business Warrior Funding. The new lending solution leverages the Company’s expertise and strategic partnerships to help entrepreneurs grow their business and offset the difficulty often associated with traditional bank lending. Loans to customers range from $
F-11 |
Table of Contents |
6. | PROPERTY AND EQUIPMENT |
Property and equipment consist of the following:
|
| Useful lives |
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Software and computer equipment |
|
| $ |
|
| $ |
| |||
Furniture and fixtures and other equipment |
|
|
|
|
|
|
| |||
Total property and equipment |
|
|
|
|
|
|
|
| ||
Less accumulated depreciation |
|
|
|
| ( | ) |
|
| ( | ) |
Total property and equipment, net |
|
|
| $ |
|
| $ |
|
For the three months and six months ended February 29, 2024, depreciation expense was $
For the three months and six months ended February 28, 2023, depreciation expense was $
7. | INTANGIBLE ASSETS |
|
| Useful lives |
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Customer relationships |
|
| $ |
|
| $ |
| |||
Trademarks |
|
|
|
|
| $ |
| |||
Non-compete agreements |
|
|
|
|
|
|
| |||
Less accumulated amortization |
|
|
|
| ( | ) |
|
| ( | ) |
Total intangible assets, net |
|
|
| $ |
|
| $ |
|
For the six months ended February 29, 2024 and February 28, 2023, amortization expense was $
For the three months ended February 29, 2024 and February 28, 2023, amortization expense was $
Future intangible asset amortization expense is expected to be as follows:
Fiscal Year |
|
|
| |
Remainder of 2024 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
|
| $ |
|
8. | FINANCE RIGHT-OF-USE ASSETS AND LEASE LIABILITIES |
Finance leases
The Company leases a vehicle which meets the classification of a finance lease under ASC 842. The monthly payments are $
Finance right of use assets are summarized below:
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Finance lease |
| $ |
|
| $ |
| ||
Less accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Finance lease, net |
| $ |
|
| $ |
|
F-12 |
Table of Contents |
Depreciation expense was $
Depreciation expense was $
Finance lease liabilities are summarized below:
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Finance lease liability |
| $ |
|
| $ |
| ||
Less: current portion |
|
| ( | ) |
|
| ( | ) |
Long term portion |
| $ |
|
| $ |
|
Maturity of lease liabilities are as follows:
|
| February 29, 2024 |
| |
Year ending August 31, 2024 |
|
|
| |
Year ending August 31, 2025 |
|
|
| |
Year ending August 31, 2026 |
|
|
| |
Total future minimum lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
PV of payments |
| $ |
|
9. | NOTES PAYABLE |
As of August 31, 2022, the Company entered into a note payable due to Elev8 Advisors for $
The Company made payments of $
10. | LINE OF CREDIT |
The revolving line of credit (“LOC”) consists of notes in the principal amount of $
F-13 |
Table of Contents |
11. | CONVERTIBLE NOTES PAYABLE |
As of February 29, 2024 and August 31, 2023, the Company had the following in outstanding convertible notes payable:
|
| Date of |
| Original |
|
| Original |
|
|
| Principal Balance as of |
| ||||||||||
|
|
| Note |
| Principal |
| Issue | Note |
| February 29 |
|
| August 31, |
| ||||||||
Ref No. |
|
| Issuance |
| Balance |
|
| Discount |
|
| Category | 2024 | 2023 |
| ||||||||
| 1 |
|
|
| $ |
|
| $ | ( | ) |
| * |
| $ |
|
| $ |
| ||||
| 2 |
|
|
|
|
|
|
| ( | ) |
| * |
|
|
|
|
|
| ||||
| 3 |
|
|
|
|
|
|
| ( | ) |
| * |
|
|
|
|
|
| ||||
| 4 |
|
|
|
|
|
|
|
|
| ** |
|
|
|
|
|
| |||||
| 5 |
|
|
|
|
|
|
|
|
| ** |
|
|
|
|
|
| |||||
| 6 |
|
|
|
|
|
|
|
|
| ** |
|
| 500,073 |
|
|
|
| ||||
| 7 |
|
|
|
|
|
|
|
|
| ** |
|
|
|
|
|
| |||||
| 8 |
|
|
|
|
|
|
|
|
| ** |
|
|
|
|
|
| |||||
| 9 |
|
|
|
|
|
|
|
|
| ** |
|
|
|
|
|
| |||||
| 10 |
|
|
|
|
|
|
|
|
| ** |
|
|
|
|
|
| |||||
| 11 |
|
|
|
|
|
|
| ( | ) |
| *** |
|
| 35,715 |
|
|
| - |
| ||
| 12 |
|
|
|
|
|
|
| ( | ) |
| *** |
|
|
|
|
|
| ||||
| 13 |
|
|
|
|
|
|
| ( | ) |
| *** |
|
|
|
|
|
| ||||
| 14 |
|
|
|
| 29,762 |
|
|
| ( | ) |
| *** |
|
|
|
|
|
| |||
| 15 |
|
| 2/22/2024 |
|
|
|
|
| ( | ) |
| *** |
|
|
|
|
|
| |||
|
|
|
| Less: unamortized discount |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |
|
|
|
| Total |
| $ |
|
| $ | ( | ) |
|
|
| $ |
|
| $ |
| |||
|
|
|
| Total Current |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
| ||
|
|
|
| Total Long Term |
|
|
|
|
|
|
|
|
|
|
| $ |
|
| $ |
|
*The notes have no interest rate. The notes mature at the earlier of (i) September 30, 2024 or (ii) the date the Company’s shares are listed for trading on a National Securities Exchange. The holder has the option to convert the notes at any time at conversion price per share shall be equal to the Closing Price for the Company’s Common Stock as reported by its Principal Market on the trading day immediately prior to date which the Initial Advance is deposited with the Escrow Agent. The notes will automatically convert on the date the Company’s shares are listed for trading on a National Securities Exchange at the lower of (x) 80% of the opening price for the Shares on the first day of trading on a National Securities Exchange or if the Company is not trading on a National Securities Exchange at per share price equal to 80% of the average closing prices for the company’s common stock for the 10 trading days preceding the Conversion Date and (y) the Optional Conversion Price. The conversion option is not clearly and closely related to the debt host and as a result, it is required to be recorded as a derivative liability.
** On January 30, 2024, the Company entered into an exchange agreement with multiple debt holders whereby the Company and holders agreed to exchange debt principal and accrued interest and accrued default interest for new notes (“Exchange Notes”). The Exchange Notes have no interest rate but contain conversion options. Whenever an exchange of debt instruments adds a substantive conversion option or eliminates a conversion option that was substantive at the date of the modification or exchange, it results in recording an extinguishment gain or loss. As a result, the extinguishment charge was calculated as follows:
Reacquisition Price: |
|
|
| |
Face Value |
| $ |
| |
Redemption Feature (Derivative Liability) |
|
|
| |
Total reacquisition price |
|
|
| |
|
|
|
|
|
Carrying Value of Original Debt: |
|
|
|
|
Promissory Notes Payable |
|
|
| |
Accrued interest |
|
|
| |
Accrued interest (default interest) |
|
|
| |
Total carrying value of old debt |
|
|
| |
|
|
|
|
|
Loss on exchange of debt |
| $ |
|
F-14 |
Table of Contents |
The loss on exchange of debt is the difference between the reacquisition price and the carrying value of the old debt.
The notes mature at the earlier of (i) December 31, 2025 or (ii) the date the Company’s shares are listed for trading on a National Securities Exchange. The holder has the option to convert the notes at a conversion price per equal to the closing price for the company’s common stock as reported by its Principal Market on the trading day immediately prior to the day the Company’s shares are listed for trading on a National Securities Exchange. If the holder converts at any time prior to the day the Company’s shares are listed for trading on a National Securities Exchange, the conversion price is equal to the closing price closing price for the company’s common stock as reported by its Principal Market on the trading day immediately prior to the day of conversion. The conversion option is not clearly and closely related to the debt host and as a result, it is required to be recorded as a derivative liability.
*** The notes have no interest rate. The notes mature at the earlier of (i) December 31, 2025 or (ii) the date the Company’s shares are listed for trading on a National Securities Exchange. The holder has the option to convert the notes at a conversion price per equal to the closing price for the company’s common stock as reported by its Principal Market on the trading day immediately prior to the day the Company’s shares are listed for trading on a National Securities Exchange. If the holder converts at any time prior to the day the Company’s shares are listed for trading on a National Securities Exchange, the conversion price is equal to the closing price closing price for the company’s common stock as reported by its Principal Market on the trading day immediately prior to the day of conversion. The conversion option is not clearly and closely related to the debt host and as a result, it is required to be recorded as a derivative liability.
12. | SBA LOANS |
The Company also entered into a normal SBA loan during 2020 with a principal amount of $
Aggregate principal maturities of the SBA loan is as follows:
Year ending August 31, 2024 |
| $ |
| |
Year ending August 31, 2025 |
|
|
| |
Year ending August 31, 2026 |
|
|
| |
Year ending August 31, 2027 |
|
|
| |
Year ending August 31, 2028 |
|
|
| |
Thereafter |
|
|
| |
|
| $ |
|
13. | DERIVATIVE FINANCIAL INSTRUMENTS |
Certain promissory notes were issued with detachable warrants and embedded derivatives which contained terms that did not achieve equity classification.
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of February 29, 2024 and August 31, 2023 and the amounts that were reflected in income related to derivatives for the period ended:
|
| February 29, 2024 |
| |||||
| Indexed |
|
| Fair |
| |||
The financings giving rise to derivative financial instruments |
| Shares |
| Values |
| |||
Warrant Derivatives |
|
|
|
| $ |
| ||
Redemption Feature Derivatives |
|
|
|
|
|
| ||
Total |
|
|
|
| $ |
|
|
| August 31, 2023 |
| |||||
| Indexed |
|
| Fair |
| |||
The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
Warrant Derivatives |
|
|
|
| $ |
| ||
Total |
|
|
|
| $ |
|
F-15 |
Table of Contents |
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three and six months ended February 28, 2024:
|
| For the Three Months Ended |
| |||||
|
| February 29, 2024 |
|
|
| February 28, 2023 |
| |
Change in fair value of derivative liability |
| $ |
|
| $ |
| ||
Loss on issuance of derivative |
|
| ( | ) |
|
|
| |
Total |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
| |||
For the Six Months Ended |
| |||||||
| February 29, 2024 |
| February 28, 2023 |
| ||||
Change in fair value of derivative liability |
| $ |
|
| $ |
| ||
Loss on issuance of derivative |
|
| ( | ) |
|
|
| |
Total |
| $ | ( | ) |
| $ |
|
The Company utilized the Black Scholes Merton (“BSM”) technique for the warrant derivatives. The significant assumptions utilized in the BSM is risk-free interest, volatility, time to expiration, strike price and underlying price.
Significant inputs and results arising from the BSM calculations are as follows for the warrant derivatives classified in liabilities:
|
| Inception Dates |
|
| Quarter Ended |
| ||
Quoted market price on valuation date |
| $ |
|
| $ |
| ||
Effective contractual conversion rates |
| $ |
|
| $ |
| ||
Contractual term to maturity |
|
|
|
| ||||
Market volatility: |
|
|
|
|
|
|
|
|
Volatility |
|
|
|
| ||||
Risk-adjusted interest rate |
|
|
|
The Company utilized the Binomial Lattice Model technique for the redemption feature derivatives. The significant assumptions utilized in the lattice model is risk-free interest, volatility, time to expiration, strike price and underlying price.
Significant inputs and results arising from the lattice calculations are as follows for the warrant derivatives classified in liabilities:
|
| Inception Dates |
| Quarter Ended |
| |
Quoted market price on valuation date |
| $ |
| $ |
| |
Effective contractual conversion rates |
| $ |
| $ |
| |
Contractual term to maturity |
|
|
| |||
Market volatility: |
|
|
|
|
|
|
Volatility |
|
|
| |||
Risk-adjusted interest rate |
|
|
|
The following table reflects the issuances of embedded derivatives and changes in fair value inputs and assumptions related to the embedded derivatives as of February 29, 2024.
|
| Period Ended |
|
| Period Ended |
| ||
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Balances at beginning of period |
| $ |
|
| $ |
| ||
Issuances: |
|
|
|
|
|
|
|
|
Warrant derivatives |
|
|
|
|
|
| ||
Redemption feature derivatives |
|
|
|
|
|
| ||
Conversions |
|
|
|
|
|
| ||
Warrant exercise |
|
|
|
|
|
| ||
Changes in fair value inputs and assumptions reflected in income |
|
| ( | ) |
|
| ( | ) |
Balances at end of period |
| $ |
|
| $ |
|
F-16 |
Table of Contents |
14. | RELATED PARTIES |
The Board of Directors has adopted a written related party transaction policy. This policy applies to all transactions that qualify for disclosure. Information about transactions involving related persons is reviewed by management. Related persons include Company directors and executive officers, as well as their immediate family members. If a related person has a direct or indirect material interest in any Company transaction, then management would decide whether or not to approve or ratify the transaction. Amounts due to related parties were $
15. | COMMITMENTS AND CONTINGENCIES |
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.
As of August 31, 2023, the Company has recognized a contingent liability related to a contractual agreement with a customer. Under the terms of this agreement, Business Warrior Corporation is obliged to ensure that customer’s revenue share percentage yields payments totaling a minimum of $
The Company has accrued the full $
16. | LEGAL PROCEEDINGS |
On November 28, 2022, the Company filed a complaint in United States District Court for the Central District of California, against Timothy Li, alleging breach of fiduciary duty, fraudulent concealment, civil theft under California Penal Code §§484 and 496, breach of duty of loyalty, and unfair competition in violation of CA Bus, & Prof. Code §§17200 et seq., in connection with the acquisition of FluidFi Inc. d/b/a Alchemy and the transfer by Timothy Li of $
In a recent settlement on September 24, 2024, Business Warrior Corporation (BWC) and multiple associated parties have resolved ongoing disputes across several legal cases. This settlement includes actions filed in both federal and state courts involving claims and counterclaims among BWC, FluidFi, Constellation, Timothy Li, and other parties. The terms encompass the dismissal of all claims and the mutual release of all parties from further liability, effectively bringing closure to a series of protracted litigations.
The following details associated with the settlement have been reflected in the current period’s financial statement:
| · | BZWR Series C Preferred Stock: Constellation will surrender, and Business Warrior Corporation will cancel, 50,000 shares of Series C Preferred Stock. Additionally, Constellation waives all past and future dividends associated with these shares. As of November 30, 2024, the Company recorded a $ |
| · | Release of Claims: Timothy Li will release all wage and hour claims against BWC, FluidFi, and other parties. Constellation also releases BWC and FluidFi from any claims related to the lease of the property at 732 East Utah Valley Drive, Suite 400, American Fork, Utah. The Company had previously booked a liability in the amount of $ |
| · | Settlement Payments: Constellation and Li will |
Management evaluates legal proceedings on an ongoing basis and makes provisions for estimated losses when those losses are both probable and reasonably estimable. The ultimate resolution of these legal proceedings may differ from current estimates, and changes in these estimates could materially impact the Company’s financial position and results of operations.
F-17 |
Table of Contents |
17. | WARRANTS |
As of February 29, 2024 and August 31, 2023, the Company had
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Life | |||
Warrants Outstanding – August 31, 2023 |
|
|
|
| $ |
|
| | |||
Issued |
|
| - |
|
|
|
|
|
|
| |
Exercised |
|
| - |
|
|
|
|
|
|
| |
Expired |
|
| - |
|
|
|
|
|
|
| |
Warrants Outstanding – February 29, 2024 |
|
|
|
| $ |
|
| | |||
Outstanding Exercisable – February 29, 2024 |
|
|
|
| $ |
|
|
18. | REVENUE |
The Company’s operations primarily consist of providing Software as a Service (“SaaS”), Software development, and Marketing services. The following table disaggregates the Company’s revenue by service type for the three and six months ended February 29, 2024 and February 28, 2023:
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| February 29, |
|
| February 2, |
|
| February 29, |
|
| February 28, |
| ||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
SaaS and Software development |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Marketing services |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
19. | EQUITY |
Series A preferred shares
As of February 29, 2024 and August 31, 2023,
Series B preferred shares
In May 2022, the Company authorized
Series C preferred shares
In June 2022, the Company authorized
F-18 |
Table of Contents |
Stock options
The Company selected the Black-Scholes-Merton (“BSM”) valuation technique to calculate the grant date fair values for the stock options because it believes that this technique is reflective of all the inputs that market participants would likely consider in transactions involving warrants. The inputs include the strike price, underlying price, term to expiration, volatility, and risk-free interest rate.
20. | CONCENTRATIONS |
For the three months ended February 29, 2024 and February 28 2023, the Company had three customers representing
21. | INCOME TAXES |
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. Federal income tax rate is
The provision for Federal income tax consists of the following three months and six months ended February 29, 2024 and February 28, 2023, respectively.
The Company files income tax returns for federal purposes and in many states. The Company’s tax filings remain subject to examination by applicable tax authorities for certain length of time, generally three to four years, following the tax year to which these filings related. The statute of limitations for adjustment of the net operating losses utilized on these tax returns remains open an additional three to four years, depending on jurisdiction, from the date these returns were filed. As of February 29, 2024, the tax returns for year ended August 31, 2023 have not been filed.
22. | SUBSEQUENT EVENTS |
Subsequent to the Company’s second quarter and through the date of this report, the Company entered into Unsecured Convertible Promissory Notes in the total principal amount of $
In May of 2024, the Company entered into Unsecured Convertible Promissory Notes in the total principal amount of $
F-19 |
Table of Contents |
On June 21, 2024, the Company entered into a Secured Convertible Promissory Note in the total principal amount of $
Additionally, the Company entered into the following additional Unsecured Promissory Notes:
| · | $ |
| · | $ |
| · | $ |
| · | $ |
On January 30, 2024, the Company restructured the notes issued pursuant to a $
From time-to-time after the Company’s fiscal year end, certain directors loaned the Company a total of $
On August 2, 2024, the Company filed an 8-K report outlining the terms of a merger with Innovative Payment Solutions (IPSI).
In a recent settlement on September 24, 2024, Business Warrior Corporation (BWC) and multiple associated parties have resolved ongoing disputes across several legal cases. This settlement includes actions filed in both federal and state courts involving claims and counterclaims among BWC, FluidFi, Constellation, Timothy Li, and other parties. The terms encompass the dismissal of all claims and the mutual release of all parties from further liability, effectively bringing closure to a series of protracted litigations.
Key Settlement Terms and Case Details
| · | Federal Action: | |
|
| o | Case Number: United States District Court, Central District of California, Case No. 8:22-CV-02144-DOC-ADS. |
|
| o | Background: This federal lawsuit was initiated by BWC against Constellation, Li, and others, with a Second Amended Complaint filed on May 22, 2024. Constellation and Li responded with counterclaims and cross-claims on June 12, 2024. |
| · | State Action: | |
|
| o | Case Number: Superior Court of California, County of Orange, Case No. 30-2023-01322081-CU-FR-CJC. |
|
| o | Background: This state case was filed by MBOCAL and LEVEL against FluidFi, BWC, and Li, with a Second Amended Complaint submitted on August 18, 2023. Both FluidFi/BWC and Constellation/Li filed cross-complaints against each other. |
Settlement Highlights
| · | BZWR Series C Preferred Stock: Constellation will surrender, and Business Warrior Corporation will cancel, |
| · | Release of Claims: Timothy Li will release all wage and hour claims against BWC, FluidFi, and other parties. Constellation also releases BWC and FluidFi from any claims related to the lease of the property at 732 East Utah Valley Drive, Suite 400, American Fork, Utah, which had an amount due of $ |
| · | Settlement Payments: |
| · | Finalization and Dismissal: The agreement, fully executed on September 24, 2024, requires all parties to file for dismissal with prejudice in both the federal and state actions, effectively concluding these cases |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our management’s discussion and analysis provides a narrative about our financial performance and condition that should be read in conjunction with the audited and unaudited consolidated financial statements and related notes thereto included in this quarterly report on Form 10-Q. This discussion contains forward looking statements reflecting our current expectations and estimates and assumptions about events and trends that may affect our future operating results or financial position. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements due to a number of factors, including, but not limited to, those set forth in the sections of our annual report on Form 10-K titled “Risk Factors”.
Results of Operations
For the Three Months Ended February 29, 2024 and February 28, 2023
Revenues
For the three months ended February 29, 2024, and February 28, 2023 the Company had revenues of $678,276 and $877,281, respectively. The decrease is a result of a loss of clients in the FluidFi subsidiary due the previous ownership groups commitments to clients that were impossible to achieve, coupled with an overall objective of the Company to only keep clients software projects that could be served at a profit or a return on investment in a reasonable amount of time. The decrease in cost of sales for the three months ended February 29, 2024 was $506,916, compared to $609,208 for the three months ended February 28, 2023, which is in relation to the decrease in revenue.
Operating Expenses
Operating expenses for the three months period ending on February 29, 2024 were $749,283 down from $983,920 for the three months ended February 28, 2023. This reduction was due to lower salaries and wages, which decreased from $611,600 to $407,489. Professional services also saw a notable reduction from $139,970 to $114,794, and general and administrative expenses decreased from $206,342 to $148,431, reflecting the Company’s efforts to streamline operations and reduce overhead costs. Professional services expenses increased to $157,910 from $101,635, due to an increase in legal expenses. The net effect was a decrease in the operating loss for the period ending February 29, 2024 of $137,789 compared to the period ended February 28, 2023. This is the second period in a row that The Company has had a significant reduction in operating losses for the period as it seeks to achieve its goal of reaching profitability as efficiently and promptly as possible.
Net Loss
For the three months ended February 29, 2024 and February 28, 2023 we had Net (Loss) of $(3,194,774) and $(2,496,253) respectively. The majority of the increased net loss was attributable an increase in interest expense from $95,327 in the previous year compared to $465,554 in the current period, which is attributable to the Company renegotiating terms on some institutional debt, so no monthly payments would be due until December of 2025.
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For the Six Months Ended February 29, 2024 and February 28, 2023
Revenues
For the six months ended February 29, 2024 and February 28, 2023, the Company had revenues of $1,797,329 and $2,333,023, respectively. The decrease is a result of a loss of clients in the FluidFi subsidiary due the previous ownership groups commitments to clients that were impossible to achieve, coupled with an overall objective of the Company to only keep clients software projects that could be served at a profit or a return on investment in a reasonable amount of time. The decrease in cost of sales for the six months ended February 29, 2024 was $306,647, which is in relation to the decrease in revenue.
Operating Expenses
Operating expenses for the six months period ending on February 29, 2024 were $1,525,343 down from $2,154,776 for the six months ended February 28, 2023. This reduction was due to lower salaries and wages, which decreased from $1,389,907 to $858,739. General and administrative expenses decreased from $431,010 to $277,503 reflecting the Company’s efforts to streamline operations and reduce overhead costs. Professional services expenses increased to $272,704 from $241,605, due to an increase in legal expenses. The net effect was a decrease in the operating loss for the six months ending February 29, 2024 of $400,386 compared to the six months ended February 28, 2023. This is the second period in a row that The Company has had a significant reduction in operating losses for the period as it seeks to achieve its goal of reaching profitability as efficiently and promptly as possible.
Net Loss
For the six months ended February 29, 2024 and February 28, 2023 we had a net loss of $4,217,343 and $3,486,494, respectively. The majority of the increased net loss was attributable to an increase in interest expense from $283,216 in the previous year compared to $974,923 for the six months ended February 29, 2024, which is attributable to the Company renegotiating terms on some institutional debt, so no monthly payments would be due until December of 2025
Assets and Liabilities
As of February 29, 2024, total assets were $2,163,485, down from $2,469,268 as of August 31, 2023. The decrease in assets was due to a reduction in cash and cash equivalents, which declined to $46,308 from $144,171, and a reduction in the current portion of loans receivables from $46,260 to $4,638 as we collected the last payments from our small business lending solution that we stopped offering to customers. Accounts receivable decreased as well to $125,262 from $174,520, reflecting that we were able to collect from our clients more quickly.
Total current liabilities as of February 29, 2024, decreased to $5,420,182 from $6,264,834 as of August 31, 2023. The majority of the decrease is attributable to the payable associated with the acquisition of Helix House of $950,000, which was converted to equity. The contingent liability is $2,916,860 as of February 29, 2024.
Total liabilities were $11,760,926 as of February 29, 2024, which was an increase from $8,707,254 as of August 31, 2023. This increase was mainly due to the issuance of convertible notes payable with a carrying value of $3,422,016. The Company continues to manage its liabilities carefully to maintain financial stability.
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Liquidity and Capital Resources
Cash used by operating activities
The Company’s net cash from operating activities was $(577,157) for the six months ended February 29, 2024 compared to $(777,892) for the six months ended February 28, 2023. This reduction in cash outflow is primarily attributed to the following significant changes:
| · | Net Loss: The net loss for the period increased to $4,217,343 from $3,486,494, reflecting an improvement in operational results. |
| · | Amortization of Debt Discount: Amortization expense increased to $797,195, compared to $160,316 in the previous period, contributing to the higher cash outflows. |
| · | Derivative Liability: The change in the fair value of the derivative liability generated a positive adjustment of $2,090, compared to ($196,666) in the prior period, which provided a smaller non-cash offset to the net loss. |
| · | Accounts Payable and Accrued Liabilities: This line decreased, with an addition of $462,393 in the current period versus $534,786 in the prior period, impacting operating cash flow positively. |
| · | Contingent Liability: The contingent liability, net of discount, was $0 in the current period but contributed $2,509,620 in the prior period, impacting the comparative cash outflows. |
Cash provided by investing activities
Net cash from investing activities was $41,622 for the six-month period ended February 29, 2024, as compared to net cash of $96,584 for the same period the previous year ended February 28, 2023. This decrease primarily resulted from payments on loans receivable totaled $41,622, a decline from $98,436 in the prior period. This reduction was due to lower collections from loan repayments during the period because the company shut the program down and stopped offering new loans, so there was less money to collect.
Cash provided by financing activities
Net cash from financing activities amounted to $437,672 for the six months ended February 29, 2024, compared to $756,656 in the same period of 2023. The key changes in financing cash flows include:
| · | Proceeds from convertible notes payable: This new source of cash generated $402,385, which did not occur in the prior period. |
| · | Payments of Notes Payable, Related Party: Payments on related party notes payable increased significantly, amounting to $54,156, up from $3,128 in the prior period. |
Overall Cash Flow and Ending Balance
The total decrease in cash and cash equivalents was $97,863 for the six months ended February 29, 2024, compared to an increase of $75,349 in the previous period. This decline is largely driven by reduced collections in investing activities and increased reliance on financing activities for liquidity. The ending cash balance as of February 29, 2024, was $46,308.
We currently do not have sufficient capital to fund our cash needs for the next 12 months. We intend to rely on financing from convertible debt, promissory notes, and sale of stock to fund our operations.
Going concern
The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern for a period of one year from the issuance of these financial statements. For the six months ended February 29, 2024, the Company had $1,797,329 in revenues, a net loss of $4,217,343 and had net cash used in operations of $577,157. Additionally, as of February 29, 2024, the Company had a working capital deficit, stockholders’ deficit and accumulated deficit of $5,167,714, $9,597,441, and $20,559,643, respectively. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of the issuance of these financial statements.
The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
Successful integration of the Company’s recent business acquisitions and, ultimately, the attainment of profitable operations are dependent upon future events, and ultimately achieving a level of sales adequate to support the Company’s cost structure. However, there can be no assurances that the Company will be able to secure additional equity investments or achieve an adequate sales level.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 4. Controls and Procedures.
Our management, including our Chief Executive Officer, is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Based on such an evaluation, the Company’s management has identified what it believes are material weaknesses in the Company’s disclosure controls and procedures and concluded that we did not have effective disclosure controls and procedures.
The deficiencies in our disclosure controls and procedures included (i) lack of segregation of duties and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms.
The Company intends to take corrective action to ensure that information required to be disclosed by the Company pursuant to the reports that the Company files or submits to the SEC is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Business Warrior Corporation vs. Timothy Li, CASE #: 8:22-cv-02144-DOC-ADS, United Stated District Court for the Central District of California
On November 28, 2022, the Company filed a complaint in United States District Court for the Central District of California, against Timothy Li, alleging breach of fiduciary duty, fraudulent concealment, civil theft under California Penal Code §§484 and 496, breach of duty of loyalty, and unfair competition in violation of CA Bus, & Prof. Code §§17200 et seq., in connection with the acquisition of FluidFi Inc. d/b/a Alchemy and the transfer by Timothy Li of $200,000 from accounts of FluidFi to Timothy Li after the closing of acquisition.
Mbocal And JKB Financial, Inc. Dba Level Finance, v. Fluidfi, Inc., Dba Alchemy Technologies; Business Warrior, Inc., and Business Warrior Funding, Inc.
Case No. 30-2023-01322081-CU-FR-CJC, Superior Court of California, Orange County, California
On April 25, 2023, MBOCAL and JKB Financial Inc. filed a lawsuit against FluidFi and two of the Company’s subsidiaries regarding a contract entered into by FluidFi prior to the Company’s acquisition of FluidFi. Plaintiffs are alleging fraud, fraudulent business practices, and breach of written contract. The complaint alleges that the contract at issue was entered into by Fluidfi and the Plaintiffs on August 10, 2020. The Company is vigorously defending the action and will seek indemnification for any adverse outcome.
In a recent settlement on September 24, 2024, Business Warrior Corporation (BWC) and multiple associated parties have resolved ongoing disputes across several legal cases mentioned above. This settlement includes actions filed in both federal and state courts involving claims and counterclaims among BWC, FluidFi, Constellation, Timothy Li, MBOCAL, JKB Financial, Inc Dba Level Finance, and other parties. The terms encompass the dismissal of all claims and the mutual release of all parties from further liability, effectively bringing closure to a series of protracted litigations. The details of that settlement have been included in the subsequent events section of this filing.
Adam Spencer, ELEV8 Advisors Group LLC, EVRGRN Industries LLC v Business Warrior Corporation, Case No. CV2024-001136, Superior Court of Arizona, Maricopa County, Arizona
On January 26, 2024, Business Warrior Corporation was named in a lawsuit filed by Adam Spencer, ELEV8 Advisors Group LLC, EVRGRN Industries LLC, and derivatively on behalf of Business Warrior, alleging various causes of action related to the Company’s prior disclosed agreements with EVRGRN and ELEV8. The resolution of this dispute may influence the contingent liability recorded with EVRGRN. The Company believes that the lawsuit is without merit and is vigorously defending it. The Company is also contemplating filing a counterclaim in this matter.
American Express Travel Relates Services Company, Inc. vs. Business Warrior Corporation, Index No: 651767/2024, Supreme Cour of the State of New York.
On April 5, 2024, American Express Travel Related Services Company, Inc. filed a lawsuit against Business Warrior Corporation for breach of a commercial credit agreement seeking judgment for the sum of $72,186.52 plus legal fees. Business Warrior Corporation is working to settle this case.
Other than as set forth above, we are not a party to any material legal proceedings, nor is our property the subject of any material legal proceeding.
Item 1a. Risk Factors.
There have been no material changes to the risk factors disclosed in Part 1, Item 1a of our Annual Report on Form 10-K for the year ended August 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
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Item 4. Mine Safety Disclosures.
Not applicable
Item 5. Other Information.
None
Item 6. Exhibits.
Exhibit Number |
| Description |
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(31) |
| Rule 13a-14(a)/15d-14(a) Certification |
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(32) |
| Section 1350 Certification |
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101.INSXBRL | Instance Document | |
101.SCHXBRL | Taxonomy Extension Schema Document | |
101.CALXBRL | Taxonomy Extension Calculation Linkbase Document | |
101.LABXBRL | Taxonomy Extension Label Linkbase Document | |
101.PREXBRL | Taxonomy Extension Presentation Linkbase Document | |
101. DEFXBRL | Taxonomy Extension Definition Linkbase Document |
* | Previously Filed |
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** | Filed herewith. |
+ | In accordance with SEC Release 33-8238, Exhibits 32.1 is being furnished and not filed. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BUSINESS WARRIOR CORPORATION |
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Date: December 20, 2024 | By: | /s/ Rhett Doolittle |
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| Name: Rhett Doolittle |
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| Title: Chief Executive Officer and Director (Principal Executive Officer) (Principal Financial and Accounting Officer) |
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