UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
Or
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) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
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 requirement for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| 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 Exchange Act). Yes ☐ No
On May 20, 2026 the issuer had shares of common stock outstanding.
Table of Contents
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements (Unaudited) | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 98 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 118 |
| Item 4. | Controls and Procedures | 118 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 119 |
| Item 1A. | Risk Factors. | 119 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 119 |
| Item 3. | Defaults Upon Senior Securities. | 119 |
| Item 4. | Mine Safety Disclosures. | 119 |
| Item 5. | Other Information. | 119 |
| Item 6. | Exhibits. | 120 |
| Signatures | 124 | |
| i |
Nightfood Holdings, Inc.
Item 1. Financial Statements
Nightfood Holdings, Inc. and Subsidiaries
DBA Techforce Robotics
| 1 |
Nightfood Holdings, Inc. and Subsidiaries
DBA Techforce Robotics
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, 2026 | June 30, 2025 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable - net | ||||||||
| Inventory | ||||||||
| Deferred offering costs | ||||||||
| Prepaids and other | ||||||||
| Total Current Assets | ||||||||
| Property and equipment - net | ||||||||
| Operating lease - right-of-use asset | ||||||||
| Goodwill | ||||||||
| Intangible assets - net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable and accrued expenses - related parties | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable - net | ||||||||
| Mortgage notes payable | ||||||||
| Derivative liabilities | ||||||||
| Derivative liabilities - related parties | ||||||||
| Notes payable - net | ||||||||
| Operating lease liability | ||||||||
| Liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Convertible notes payable - net | ||||||||
| Convertible notes payable - related parties - net | ||||||||
| Mortgage notes payable | ||||||||
| Notes payable - net | ||||||||
| Operating lease liability | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Temporary Equity | ||||||||
| Series B, Convertible Preferred stock - $ par value; and shares designated and shares issued and outstanding, respectively | ||||||||
| Series C, Convertible Preferred stock - $ par value; and shares designated and shares issued and outstanding, respectively | ||||||||
| Series D, Convertible Preferred stock - $ par value; and shares designated and shares issued and outstanding, respectively | ||||||||
| Total Temporary Equity | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock - $ par value; shares authorized | ||||||||
| Series A Preferred stock - $ par value; shares designated shares issued and outstanding | ||||||||
| Series B, Convertible Preferred stock - $ par value; and shares designated shares issued and outstanding | ||||||||
| Series C, Convertible Preferred stock - $ par value; and shares designated and shares issued and outstanding, respectively | ||||||||
| Series D, Convertible Preferred stock - $ par value; and shares designated and shares issued and outstanding, respectively | ||||||||
| Common stock - $ par value, shares authorized and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities, Temporary Equity and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 2 |
Nightfood Holdings, Inc. and Subsidiaries
DBA Techforce Robotics
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended March 31, | For the Nine Months Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues - net | $ | $ | $ | $ | ||||||||||||
| Costs and expenses | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total costs and expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss on debt extinguishment | ( | ) | ||||||||||||||
| Derivative expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense (including amortization of debt discount) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liabilities | ||||||||||||||||
| Total other income (expense) - net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Deemed dividend on Series B Preferred Stock | ( | ) | ||||||||||||||
| Net loss available to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share - basic and diluted - continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Loss per share - basic and diluted - discontinued operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Loss per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 3 |
Nightfood Holdings, Inc. and Subsidiaries
DBA Techforce Robotics
Condensed Consolidated Statement of Changes in Temporary Equity and Stockholders’ Deficit
For the Three and Nine Months Ended March 31, 2026
(Unaudited)
| Preferred Stock - Classified as Temporary Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series B - Convertible | Series C - Convertible | Series D - Convertible | Additional | Total | Series A | Series C - Convertible | Series D - Convertible | Additional | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Paid-in | Temporary | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | Accumulated | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Equity | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Victorville | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Rancho Mirage | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forgiveness of pre-existing relationship with target acquiree | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of Series C - convertible preferred stock - issued as compensation | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible debt into common stock | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration - acquisition of Victorville | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration - acquisition of Rancho Mirage | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for cash | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants issued as deferred offering costs | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cashless exercise of warrants | - | - | - | - | - | - | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible debt into common stock | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of accrued interest payable into common stock | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series B preferred stock into common stock | ( | ) | ( | ) | - | - | - | - | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series D preferred stock into common stock | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of Series C - convertible preferred stock - issued as compensation | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of Series B preferred stock from temporary to permanent equity | - | - | - | - | - | - | ( | ) | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of Series C preferred stock from temporary to permanent equity | - | - | ( | ) | ( | ) | - | - | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of Series D preferred stock from temporary to permanent equity | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of contingent consideration - Victorville | - | - | - | - | - | - | ( | ) | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of contingent consideration - Rancho Mirage | - | - | - | - | - | - | ( | ) | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for intellectual property | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C preferred stock to common stock | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of Series C - convertible preferred stock - issued as compensation | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible debt and accrued interest into common stock | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | 506,271,889 | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 4 |
Nightfood Holdings, Inc. and Subsidiaries
DBA Techforce Robotics
Condensed Consolidated Statement of Changes in Stockholders’ Deficit
For the Three and Nine Months Ended March 31, 2025
(Unaudited)
| Series A | Series B - Convertible | Series C - Convertible | Series D - Convertible | Additional | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on debt extinguishment | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend - Series B preferred stock - warrant dilution adjustment | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deposit on future acquisition of SWC | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of Series C - convertible preferred stock - issued as compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of SWC | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Skytech | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 5 |
Nightfood Holdings, Inc. and Subsidiaries
DBA Techforce Robotics
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: net loss - discontinued operations | ( | ) | ( | ) | ||||
| Net loss - continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use asset | ||||||||
| Loss on debt extinguishment | ||||||||
| Derivative expense | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Bad debt expense | ||||||||
| Stock issued for services | ||||||||
| Stock issued for intellectual property | ||||||||
| Stock issued for financing costs | ||||||||
| Vesting of Series C - preferred stock - issued as compensation | ||||||||
| Interest expense incurred in connection with increase in debt principal | ||||||||
| Changes in operating assets and liabilities | ||||||||
| (Increase) decrease in | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaids and other | ( | ) | ||||||
| Increase (decrease) in | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accounts payable and accrued expenses - related party | ( | ) | ||||||
| Deferred revenues | ||||||||
| Operating lease liability | ( | ) | ||||||
| Net cash used in operating activities - continuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities - discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Cash acquired in acquisitions | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Acquisition costs secured by debt | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Financing activities | ||||||||
| Proceeds from common stock issued for cash | ||||||||
| Repayments on notes payable | ( | ) | ||||||
| Proceeds from convertible notes payable | ||||||||
| Repayments on mortgage notes payable | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Issuance of Series C - convertible preferred stock in connection with acquisition of Rancho Mirage | $ | $ | ||||||
| Issuance of Series C - convertible preferred stock in connection with acquisition of Victorville | $ | $ | ||||||
| Contingent consideration arrangement - Series C - convertible preferred stock - Victorville | $ | $ | ||||||
| Contingent consideration arrangement - Series C - convertible preferred stock - Rancho Mirage | $ | $ | ||||||
| Forgiveness of pre-existing relationship with target acquiree | $ | $ | ||||||
| Net deficit of Victorville and Rancho Mirage acquisitions | $ | $ | ||||||
| Discounts in connection with issuance of debt and warrants - convertible notes payable | $ | $ | ||||||
| Right-of-use asset obtained in exchange for new operating lease liability | $ | $ | ||||||
| Common stock issued in connection with conversion of convertible notes payable | $ | $ | ||||||
| Warrants issued as deferred offering costs | $ | $ | ||||||
| Cashless exercise of warrants | $ | $ | ||||||
| Conversion of accounts payable into convertible note payable - related party | $ | $ | ||||||
| Issuance of Series C - convertible preferred stock in connection with acquisition of SWC | $ | $ | ||||||
| Issuance of Series C - convertible preferred stock in connection with acquisition of Skytech | $ | $ | ||||||
| Deemed dividend associated with Series B, convertible preferred stock - dilutive warrant adjustments | $ | $ | ||||||
| Common stock issued in connection with conversion of preferred stock | $ | $ | ||||||
| Net equity of SWC acquired | $ | $ | ||||||
| Net equity of Skytech acquired | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 6 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 1 - Organization and Nature of Operations
Organization and Nature of Operations
Nightfood Holdings, Inc. and its subsidiaries (“Nightfood,” “NGTF,” “we,” “our,” or the “Company”) operate as an AI-Enhanced hospitality technology and service robotics company focused on the development, deployment, and commercialization of autonomous robotic and automation solutions designed to improve operational efficiency across the hospitality, foodservice, healthcare, biotech, logistics, and facilities-management industries.
Recent business developments have expanded the Company’s operational scope beyond traditional Robotics-as-a-Service (“RaaS”) offerings into enterprise-level automation, custom engineering, and integrated AI-Enhanced robotics solutions. Through strategic partnerships, distribution expansion initiatives, manufacturing relationships, and technology integration collaborations, the Company is positioning itself to support scalable deployments for enterprise customers seeking customized automation solutions tailored to their operational environments.
As part of the Company’s commercialization and market expansion strategy, Nightfood continues to pursue strategic acquisitions and vertical integration initiatives intended to expand its service offerings, technological capabilities, and operational infrastructure. The Company also seeks to increase market penetration through organic growth, strategic partnerships, established distribution channels, and relationships with industry operators and service providers.
In addition, the Company is actively pursuing collaborations with sector-leading operators, manufacturers, technology providers, and enterprise customers to co-develop industry-specific automation solutions for its target markets. These partnerships are intended to support the design, testing, refinement, and deployment of practical real-world applications within live commercial environments, enabling the Company to build solutions driven by operational use cases, customer feedback, and real-time performance requirements rather than purely conceptual development initiatives.
The Company’s operations are organized into three (3) principal business segments:
| 1. | Foodservice Packaging: |
Through its wholly owned subsidiary SWC Group, Inc. (d/b/a CarryOutSupplies.com) (“SWC”), the Company operates as a business-to-business (“B2B”) enterprise focused on the wholesale distribution of disposable foodservice packaging products.
Product offerings include printed paper cups, plastic cups, food containers, bags, and related consumables for restaurants, cafés, and other foodservice establishments. Operations are conducted primarily through the Company’s e-commerce platform, www.carryoutsupplies.com, which serves customers across the United States.
Activities include product design, sourcing from domestic and international manufacturers, quality control, warehousing, and fulfillment. Customers are primarily small to mid-sized businesses in the hospitality and foodservice industries, with no material dependence on any single customer or supplier.
This segment began operations in connection with the acquisition of SWC Group, Inc. on March 31, 2025.
| 7 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| 2. | Robotics-as-a-Service (RaaS): |
Through its subsidiaries, TechForce Robotics, Inc. (formerly Skytech Automated Solutions, Inc.) (“TechForce”) and Future Hospitality Ventures Holdings, Inc. (“FHVH”), the Company develops and delivers automation solutions aimed at enhancing efficiency and reducing labor dependency in foodservice and hospitality operations. These solutions focus on automating routine and repetitive tasks to improve service quality and operating margins.
On February 2, 2024, FHVH began operating under the trade name RoboOp365.
On September 2, 2025, Skytech Automated Solutions, Inc. changed its name to TechForce Robotics, Inc.
Business Model
The Company offers its automation solutions under a Robotics-as-a-Service (RaaS) model, generally structured as multi-year lease and service agreements following an initial pilot and site-preparation period. Under these arrangements, customers pay a recurring monthly fee for deployed equipment and related services. Fees may vary depending on the scale of deployment, number of units, and customer-specific requirements. The Company recognizes revenue on a monthly basis as services are rendered.
Equipment and Ownership
The Company owns and deploys its equipment, including robotics hardware, software, and related components. All deployed units remain the property of the Company, which is also responsible for equipment replacement and refurbishment as necessary.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Support and Maintenance
The Company provides ongoing support to ensure equipment performance, including remote technical assistance, software updates, and periodic inspections. In the event of equipment failure, replacement units are deployed to minimize customer disruption. To date, customer support needs have been minimal.
Operating Costs
Recurring operating costs consist primarily of equipment maintenance, software servicing, and connectivity. These costs are integrated into the overall RaaS model and managed as part of the Company’s service delivery.
Current Status
As of March 31, 2026, the Company had initiated early customer deployments under this model and commenced revenue-generating activities.
| 3. | Hospitality Asset Ownership: |
The Company has expanded its business model to include the acquisition, ownership, and operation of hotel properties. These properties are intended to serve both as revenue-generating hospitality operations and as dedicated deployment sites for the Company’s automation technologies, enabling the Company to test, validate, and scale operational efficiencies in live environments. The hospitality segment became active in connection with two business combinations completed during the three-month period ended September 30, 2025.
Overview of Acquisitions
On August 27, 2025 and September 30, 2025, the Company acquired two hotel properties as part of its strategy to establish a hospitality asset ownership and operations platform. Each acquisition included the underlying real estate, buildings and improvements, hotel operating assets, and related working capital necessary to operate the facilities. The transactions also included franchise rights, liquor licenses, equipment, and other property integral to the hotels’ operations. In connection with the acquisitions, the Company assumed certain operating liabilities, including accounts payable, accrued expenses, and debt obligations secured by the properties.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Strategic Purpose
The acquired hotels support the Company’s strategy in two primary ways:
| ● | Hospitality Operations: The properties generate recurring operating revenue through the ongoing operation of branded lodging facilities, including room rentals, food and beverage offerings, and other ancillary services; and | |
| ● | Automation Deployment: The hotels provide controlled pilot environments in which the Company can implement, refine, and evaluate its robotics and workflow automation technologies prior to broader commercial deployment. |
The Company believes that insights gained from these properties will contribute to improvements in operating efficiency, labor utilization, and the long-term scalability of its automation platform.
Franchise Operations
The Company owns and operates its hotels under long-term franchise agreements with established national hotel brands. These arrangements grant the Company the right to operate its hotels using the brand’s trademarks, systems, reservation channels, and operating standards in exchange for various franchise-related fees, which generally include:
| ● | Royalty fees, typically calculated as a percentage of room revenue; | |
| ● | Marketing, loyalty, and reservation assessments supporting brand-wide advertising and distribution systems; and | |
| ● | System fees associated with participation in required brand programs and technology platforms. |
Under each franchise agreement, the Company is required to comply with the brand’s operating manuals, service standards, and property-level specifications, including ongoing maintenance, periodic upgrades, and compliance with brand-mandated property improvement plans (“PIPs”). Failure to meet these requirements may result in financial penalties or loss of franchise rights. Franchise agreements generally have initial terms of 10 to 20 years and include renewal options subject to the franchisor’s approval. Transfers, encumbrances, or material modifications of a franchised hotel typically require prior franchisor consent.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The Company engages third-party hotel management companies to operate the hotel properties, as required under applicable franchise agreements. While day-to-day operations are managed by third-party operators, the Company retains responsibility for capital expenditures, compliance with franchise brand standards, and oversight of financial and operating performance.
Integration and Operating Status
Following the acquisitions, the Company initiated integration activities across both properties, including evaluations of site layouts, staffing structures, and operational workflows in preparation for automation deployments. Revenue from hotel operations is recognized in accordance with ASC 606 and reported within the hospitality segment beginning in the period in which operations commenced post-acquisition.
Financial Statement Impact
The hotel acquisitions have been accounted for as business combinations under ASC 805, Business Combinations. The related purchase price allocations — including the fair values of property and equipment, identifiable intangible assets, acquired working capital (deficit), and goodwill — are presented in Note 9 for the acquisitions completed on August 27, 2025 and September 30, 2025.
| 4. | Snack and Beverages (Discontinued Operations): |
The Company previously operated a small legacy business related to the sale of snacks and beverages. These activities have since been discontinued and will not contribute to future revenues. Accordingly, revenues from this line are presented within discontinued operations and excluded from the Company’s disclosure of continuing revenue streams.
Discontinued Operations – Snack and Beverages Legacy Line
Management’s Decision
On June 30, 2025, the Company’s management elected to discontinue its nominal operations related to the legacy sale of snacks and beverages. This decision was made as part of a broader strategic reassessment of the Company’s business lines and a reaffirmation of management’s focus on its core revenue-generating operations. The Chief Operating Decision Maker (“CODM,” our Chief Executive Officer) had periodically evaluated the financial contribution of this line and determined that its continued operation was not aligned with the Company’s long-term strategic objectives.
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MARCH 31, 2026
Discontinued Operations Assessment (ASC 205-20)
The Company evaluated whether the discontinuation of its Snack and Beverages legacy business meets the criteria for classification as a discontinued operation. ASU 2014-08 provides that a discontinued operation must represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.
Although the Snack and Beverages line generated only a quantitatively immaterial contribution to consolidated revenues and assets, management determined that the exit nonetheless represents a strategic shift under ASC 205-20 for the following reasons:
| ● | Qualitative Materiality: As referenced in SEC Staff Accounting Bulletin (SAB) Topic 1.M, Materiality, the evaluation of materiality requires consideration of both quantitative and qualitative factors. While the revenues and assets associated with the discontinued business are not significant in magnitude, the discontinuation is qualitatively material because it marks the complete exit from a non-core, consumer-oriented business activity that differs fundamentally from the Company’s current focus on technology-driven operations. | |
| ● | Strategic Realignment: The Snack and Beverages activity was a legacy line of business, not aligned with the Company’s current and expected future strategy. Its discontinuation evidences management’s focus on refining the Company’s business model around its primary service offerings. | |
| ● | Distinct Nature of Operations: The product-based consumer business model of the Snack and Beverages activity was markedly different from the service-oriented and technology-enabled activities that form the basis of the Company’s continuing operations. Discontinuation therefore represents a qualitative shift in the scope and nature of the Company’s operations. | |
| ● | ASC 205-20 Criteria: While the quantitative impact does not by itself meet the “major effect” threshold, the qualitative considerations described above support classification as a discontinued operation consistent with the intent of ASC 205-20 and ASU 2014-08. |
Accordingly, the Company has concluded that the discontinuation of its Snack and Beverages legacy business qualifies for presentation as a discontinued operation in the consolidated financial statements. The results of this activity will therefore be presented separately from continuing operations in the accompanying financial statements, with prior-period amounts reclassified for comparability.
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Segment Reporting (ASC 280) Considerations
The Snack and Beverages activity was never managed or evaluated as a separate operating segment by the CODM, as the Company has historically operated and reported as a single segment. Accordingly, it was not disclosed as a reportable segment.
However, in connection with the discontinuation, management determined that this activity, while not separately reportable, represents a strategic shift away from a legacy business that is qualitatively distinct from the Company’s continuing operations.
In light of this discontinuation and the adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, effective July 1, 2024, the Company has reviewed its segment disclosures and determined:
| ● | Significant Expense Disclosures: The Snack and Beverages activity did not generate significant expenses regularly reviewed by the CODM. Therefore, no incremental expense disclosures are required under the new guidance. | |
| ● | Other Disclosures: The Company will continue to present the historical results of this activity as discontinued operations, separate from continuing operations, and will provide appropriate narrative disclosures to describe the composition of “Other” activities, consistent with the requirements of ASC 280 and ASU 2023-07. |
Accounting and Financial Statement Impact
Because the activity is being abandoned rather than sold, it does not qualify as “held for sale”. However, the Company has concluded that the discontinuation represents a discontinued operation and will present the historical results of the Snack and Beverages line separately from continuing operations in the consolidated financial statements.
The Company does not anticipate recognizing any material exit costs, impairment losses, or restructuring charges associated with the discontinuation. Any remaining minor assets or liabilities will be derecognized in accordance with applicable accounting guidance.
Future Business Operations
The Snack and Beverages activity had no dedicated workforce, significant customer base, or ongoing contractual commitments. Its discontinuation will not result in employee layoffs, customer transitions, or contract terminations. The exit reflects management’s strategic decision to eliminate a non-core, consumer product line and to reinforce focus on the Company’s core operations, which generate the substantial majority of revenues and are expected to drive sustainable long-term growth.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
See Note 14 for summary of the Company’s discontinued operations for the three and nine months ended March 31, 2026 and 2025, respectively.
Fiscal Year
The Company’s fiscal year end is June 30.
Organizational Structure
| Company Name | Incorporation Date | State of Incorporation | ||
| Nightfood Holdings, Inc. (“NGTF”) DBA TechForce Robotics | ||||
| Nightfood, Inc. (“Nightfood”) | 2 | |||
| Future Hospitality Ventures Holdings, Inc. (“FHVH”) DBA RoboOp365 | ||||
| SWC Group, Inc. (“SWC”) DBA CarryoutSupplies.com | 1 | |||
| TechForce Robotics, Inc. FKA Skytech Automated Solutions, Inc. (“Skytech”) | 1 | |||
| Victorville Treasure Holdings, LLC DBA Holiday Inn (“VV”) | 3 | |||
| Treasure Mountain Holdings, LLC DBA Hilton Garden Inn (“RM”) | 4 |
| 1 Acquired on March 31, 2025. | ||||
| 2 Discontinued operations effective June 30, 2025. | ||||
| 3 Acquired August 27, 2025. | ||||
| 4 Acquired September 30, 2025. |
Basis of Presentation
The unaudited interim consolidated financial statements are condensed and should be read in conjunction with the Company’s latest annual audited 2025 condensed consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on October 14, 2025 (the “Form 10-K”). The results of operations for interim periods are not necessarily indicative of results to be expected for the fiscal year ending June 30, 2026 or for any other future annual or interim period.
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MARCH 31, 2026
Liquidity and Going Concern
As reflected in the accompanying unaudited condensed consolidated financial statements, for the nine months ended March 31, 2026, the Company had:
| ● | Net
loss attributable to common stockholders of $ |
| ● | Net
cash used in operating activities was $ |
Additionally, at March 31, 2026, the Company had:
| ● | Accumulated
deficit of $ |
| ● | Working
capital deficit of $ |
| ● | Cash
on hand of $ |
Following the acquisitions of SWC Group, Inc. and TechForce Robotics, Inc. (formerly Skytech Automated Solutions, Inc.) during the fiscal year ended June 30, 2025, the Company initiated early customer deployments under its Robotics-as-a-Service (“RaaS”) model and commenced revenue-generating activities. While these deployments represent an important step toward building recurring revenue, revenues to date have not been sufficient to fund ongoing operations.
Similarly, following the acquisitions of the Victorville and Rancho Mirage hotel properties during the nine months ended March 31, 2026, the Company began generating revenue within its hospitality segment. Although these hotels provide recurring operating revenue from lodging and related guest services, current levels of hotel revenue are also insufficient to support the Company’s ongoing operating and development activities.
Liquidity Outlook
Based on current operating levels and cash usage forecasts, the Company’s existing cash resources are not sufficient to fund operations for the twelve months following the issuance of these consolidated financial statements without obtaining additional financing.
Historically, the Company has relied on both third-party and related-party debt financing to fund operations. There can be no assurance that additional financing will be available on commercially acceptable terms, or at all. Further, there is no assurance that any financing obtained will be sufficient to enable the Company to complete its strategic initiatives or achieve profitable operations.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The Company’s future capital requirements will depend on many factors, including its ability to scale the Foodservice Packaging and RaaS businesses, expand into new markets, invest in automation technology, respond to competitive pressures, and pursue strategic opportunities. Current capital needs include:
| ● | Scaling RaaS deployments to new customers and markets; | |
| ● | Maintaining and upgrading robotic systems deployed in the field; and | |
| ● | Funding working capital needs and ongoing operating activities. |
If the Company is unable to secure sufficient capital, it may be required to slow expansion efforts, reduce operating expenditures, or modify its strategic plans.
While the Company sees significant opportunity to grow recurring revenue through RaaS, its ability to execute on this opportunity depends on securing additional financing. If sufficient capital is not raised, the Company may be required to slow expansion plans, reduce operating activities, or adjust its overall strategy.
Going Concern
These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these consolidated financial statements are issued.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Management’s plans to address these matters include the following:
| ● | Expanding into new and existing markets, with an emphasis on the RaaS model; | |
| ● | Obtaining additional debt and/or equity financing to support working capital and growth; | |
| ● | Pursuing strategic collaborations and partnerships; and | |
| ● | Selectively evaluating acquisitions that enhance or complement the Company’s business model. |
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MARCH 31, 2026
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. The Company consolidates entities where it has a controlling financial interest, as defined by ASC 810, “Consolidation”.
In accordance with ASC 810-10, consolidation applies to:
| ● | Entities with more than 50% voting interest, unless control is not with the Company; and | |
| ● | Variable Interest Entities (VIEs), where the Company is the primary beneficiary, possessing both (i) power over significant activities and (ii) the obligation to absorb losses or receive benefits. |
All intercompany transactions and balances are eliminated in consolidation. The Company continuously evaluates its investments and relationships to assess consolidation requirements.
Business Combinations and Asset Acquisitions
The Company accounts for acquisitions in accordance with ASC 805, Business Combinations. Transactions that meet the definition of a business are accounted for using the acquisition method of accounting. Transactions that do not meet the definition of a business are accounted for as asset acquisitions under ASC 805-50. The Company also evaluates whether a transaction should be accounted for as a reverse acquisition under ASC 805-40.
In connection with acquisitions, the Company assesses the applicable SEC reporting requirements, including Regulation S-X Rule 3-05 for financial statements of significant businesses acquired and Regulation S-X Article 11 for pro forma financial information.
Disclosures related to the nature of the acquired business and the impact of the acquisition on the Company’s operations are provided in accordance with Regulation S-K Items 101 and 303. For hotel property acquisitions, the Company also evaluates the applicability of Regulation S-X Rule 3-14.
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MARCH 31, 2026
Business Combinations
For transactions classified as business combinations, the Company:
| ● | Recognizes and measures identifiable assets acquired, liabilities assumed, and noncontrolling interests at their fair values at the acquisition. | |
| ● | Records goodwill as the excess of the fair value of consideration transferred over the fair value of net assets acquired, including any previously held equity interests. | |
| ● | Expenses acquisition-related costs as incurred. | |
| ● | Uses preliminary purchase price allocations, with adjustments permitted within the measurement period (not exceeding one year). Adjustments beyond the measurement period are recorded in earnings. |
Significant judgments in fair value determinations include:
| ● | Intangible asset valuations, based on estimates of future cash flows and discount rates. | |
| ● | Useful life assessments, impacting amortization and financial results. |
For SEC registrants, Regulation S-X, Rule 3-05 may require audited financial statements of the acquired business if the acquisition is significant. The determination of significance follows Rule 1-02(w) of Regulation S-X, which considers investment, asset, and income tests.
Asset Acquisitions
For transactions classified as asset acquisitions under ASC 805-50, the Company:
| ● | Applies the “screen test” to determine whether substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or group of similar assets. | |
| ● | Allocates the purchase price using a cost accumulation model, assigning costs to acquired assets based on their relative fair values. | |
| ● | Capitalizes direct acquisition costs as part of the asset’s cost, unlike business combinations where such costs are expensed. |
The classification between business combinations and asset acquisitions requires significant judgment, particularly when applying the screen test. Incorrect classification can materially impact:
| ● | The recognition of goodwill (only in business combinations). | |
| ● | The measurement and presentation of acquired assets and assumed liabilities. | |
| ● | The Company’s financial position and results of operations. |
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Regulatory and Financial Reporting Considerations
For SEC registrants, acquisitions may trigger additional disclosure and reporting requirements:
Regulation S-X, Rule 3-05 (Business Acquisitions):
Applies to acquisitions of operating businesses. If significance thresholds are met, the registrant must provide separate business-level financial statements (up to three years).
Regulation S-X, Article 11:
Requires pro forma financial information when an acquisition is significant, including adjustments reflecting the impact of the acquisition
on the registrant’s financial statements.
Form 8-K, Item 2.01:
Requires timely reporting of material acquisitions, including disclosure of the nature of the acquired business or property and, when
applicable, financial statements and pro forma information under Item 9.01.
The Company continuously evaluates acquisitions, to ensure proper classification and compliance with ASC 805, SEC reporting requirements, and regulatory guidance.
Acquisition of BIM-E Intellectual Property and Technology Assets (Asset Purchase)
1. Overview
On February 17, 2026 (the “Effective Date”), the Company acquired certain intellectual property and technology assets (the “BIM-E Assets”) from an individual seller (the “Seller”) pursuant to an Asset Purchase and IP Assignment Agreement. The BIM-E Assets relate to an autonomous beverage dispensing robotics platform historically known as “Beer Bot” and its evolved platform “BIM-E,” consisting of patents and patent applications, copyrights and software (source code, object code, and firmware), artificial intelligence and machine learning models and datasets, trade secrets and engineering know-how, trademarks (including the “BIM-E” and “Beer Bot” names), and related domain names, code repositories, and digital infrastructure. No liabilities of the Seller were assumed.
Concurrently, the Company entered into an Employment Agreement engaging the Seller as Chief Mechatronics Architect and an Incentive Award Agreement providing for performance-based equity tied to revenue milestones of the BIM-E platform.
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MARCH 31, 2026
2. Asset Acquisition Treatment
The Company evaluated the acquisition under Accounting Standards Codification (ASC) 805, Business Combinations, and concluded that the transaction does not constitute a business combination. The BIM-E Assets represent pre-commercialization intellectual property with no revenue-generating activity, no organized workforce, no customer base, and no outputs. Substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset group (developed technology intellectual property), and the acquired set therefore meets the screen test in ASC 805-10-55-5A and fails to meet the definition of a business under ASC 805-10-55. The transaction has been accounted for as an asset acquisition.
3. Consideration and Accounting Treatment
A.
Consideration Transferred. The aggregate consideration consisted of fully vested, non-forfeitable shares of the
Company’s common stock (the “Consideration Shares”) issued to the Seller on the Effective Date at a fair value of
per share (the closing market price on February 17, 2026), or approximately $
B.
Expensing as Research and Development. The BIM-E Assets consist entirely of in-process research and development intellectual
property that has not achieved technological feasibility and has no alternative future use. In accordance with ASC 730-10-25-2(c), the
aggregate consideration of $
C. Separation of Purchase Price from Employment Compensation. The Asset Purchase Agreement expressly provides that the consideration is solely for the BIM-E Assets and does not represent wages, salary, or compensation for post-closing services. Based on the arm’s-length terms of the Asset Purchase Agreement, the Board’s determination that the consideration is commensurate with the fair value of the assets received, and the explicit contractual separation, the Company concluded that no portion of the Consideration Shares should be attributed to the Seller’s concurrent employment.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
4. Employment Agreement and Performance-Based Warrants
The
Employment Agreement, effective February 17, 2026, provides the Seller an annual base salary of $
The
Earn-Out Warrants are earned in tranches of warrants for each incremental $ of trailing twelve-month (TTM) revenue
attributable to the BIM-E platform, up to a cumulative maximum of warrants at $
A. Stock-Based Compensation Recognition. The Earn-Out Warrants are accounted for as performance-based stock compensation under ASC 718, Compensation - Stock Compensation. Compensation cost will be recognized when, and to the extent that, achievement of the applicable TTM revenue performance condition becomes probable. As of the reporting date, no TTM revenue milestones have been achieved, no Earn-Out Warrants have vested, and no compensation cost has been recognized.
B. Warrant Classification. The Company evaluated the Earn-Out Warrants under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity, and ASC 480, Distinguishing Liabilities from Equity. The cashless exercise feature results in a fixed-for-fixed settlement in the Company’s own shares, and the warrants contain only standard anti-dilution adjustments that do not preclude equity classification. Accordingly, the Earn-Out Warrants are indexed to the Company’s own stock and meet the conditions for equity classification under ASC 815-40-25. If and when issued, the warrants will be classified within stockholders’ equity.
Goodwill and Impairment
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment at least annually (in the fourth quarter) or more frequently if events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
For impairment testing purposes, goodwill is assigned to the reporting unit(s) expected to benefit from the synergies of the acquisition. The Company performs either a qualitative assessment (“Step 0”) to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, or a quantitative assessment when required.
| ● | If the qualitative assessment indicates potential impairment, the Company estimates the fair value of the reporting unit and compares it with its carrying amount, including goodwill. | |
| ● | If the carrying amount exceeds fair value, an impairment charge is recognized for the difference, not to exceed the carrying value of goodwill. |
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Significant judgments in goodwill impairment testing include:
| ● | Determining the appropriate reporting units. | |
| ● | Forecasting future cash flows. | |
| ● | Selecting appropriate discount rates and market multiples. | |
| ● | Assessing macroeconomic factors, industry trends, and Company-specific performance. |
Impairment Charges
Fiscal Year End June 30, 2026
The Company did not record any goodwill impairments during the three and nine months ended March 31, 2026 and 2025, respectively.
Fiscal Year End June 30, 2025
The
Company recorded a goodwill impairment charge of $
The 2025 impairment charge relates to goodwill arising from the acquisition of FHVH (recorded during the fiscal year ended June 30, 2024), which was determined to be not recoverable based on the Company’s annual impairment testing under ASC 350, Intangibles—Goodwill and Other. The impairment was recognized after management concluded that the carrying amount of the related reporting unit exceeded its fair value.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Business Segments and Expense Disclosure
The Company follows ASC 280, Segment Reporting, which requires public entities to report financial and descriptive information about their reportable operating segments.
An operating segment is a component of a public entity that:
| ● | Engages in business activities from which it may earn revenues and incur expenses; | |
| ● | Has operating results that are regularly reviewed by the Chief Operating Decision Maker (“CODM,” which is our Chief Executive Officer) to make decisions about resource allocation and performance assessment; and | |
| ● | Has discrete financial information available. |
Based on the nature of the Company’s operations and the information regularly reviewed by the CODM, management has determined that the Company operates in three reportable segments: Foodservice Packaging Distribution, Robotics-as-a-Service (RaaS), and Hotel Operations.
Reportable Segments
Following the acquisition of SWC Group, Inc. (d/b/a CarryOutSupplies.com) on March 31, 2025, the commencement of commercial activities under the Robotics-as-a-Service (“RaaS”) model, and the acquisitions of two hotel properties during the nine months ended March 31, 2026, management determined that the Company operates in three reportable segments:
1. Foodservice Packaging Distribution
Conducted through SWC Group, Inc. (d/b/a CarryOutSupplies.com).
This segment provides wholesale distribution of disposable foodservice packaging products, including printed paper cups, plastic cups, food containers, bags, and related consumable items. Revenue is generated from the sale and shipment of products to customers. This segment commenced operations in connection with the acquisition on March 31, 2025.
2. Robotics-as-a-Service (RaaS)
Conducted through TechForce Robotics, Inc. (formerly Skytech Automated Solutions, Inc.) and Future Hospitality Ventures Holdings, Inc.
This segment provides automation solutions for foodservice and hospitality environments under multi-year lease and service arrangements. Revenue is generated from recurring monthly service fees for the use of robotics equipment, remote monitoring, software services, and maintenance support.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
3. Hotel Operations
Conducted through Victorville Treasure Holdings, LLC and Treasure Mountain Holdings, LLC, the Company’s wholly owned subsidiaries that own the hotel properties acquired in Victorville and Rancho Mirage, California, respectively.
This segment generates revenue from lodging and related guest services, including room rentals and ancillary offerings such as food, beverage, and other guest amenities. The hotels also serve as deployment and testing environments for the Company’s automation technologies. This segment commenced operations in connection with the acquisitions completed on August 27, 2025 and September 30, 2025.
The CODM evaluates performance and allocates resources based on segment-level financial information, including revenues and operating results. As such, management has concluded that Foodservice Packaging Distribution, RaaS, and Hotel Operations represent separate reportable operating segments under ASC 280. See Note 13 - Segment Information.
Discontinued Operations
The Company’s legacy Snacks and Beverages activity has been discontinued. The results of this activity are presented separately from continuing operations.
Segment Expense Disclosure
Effective for the fiscal year ending June 30, 2026, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amended guidance requires enhanced disclosures about reportable segment expenses, including:
| ● | Significant segment expenses that are regularly provided to and reviewed by the CODM | |
| ● | The measure of segment profit or loss used by the CODM | |
| ● | A description of other segment items included in that measure | |
| ● | How expense amounts are allocated among segments |
The CODM evaluates segment performance based on segment revenues and segment operating income (loss). The CODM is not provided with, nor does he review further disaggregated expense information below the operating income (loss) level, other than consolidated-level expenses that are not allocated to the segments.
Accordingly, the Company’s disclosures include the segment revenues and segment operating income (loss) reviewed by the CODM, as well as “other segment items” necessary to reconcile segment profit (loss) to consolidated loss before income taxes. No additional segment-level expense categories are required to be presented under ASU 2023-07 because no such detailed expense information is provided to or used by the CODM in assessing segment performance.
| 24 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Use of Estimates and Assumptions
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date, and the recognition of revenues and expenses during the reporting period. Actual results may differ from those estimates, and such differences may be material.
Estimates and assumptions are evaluated on an ongoing basis and are based on historical experience, current economic conditions, industry trends, and other relevant quantitative and qualitative factors. Changes in estimates are recorded in the period in which they become known and are accounted for prospectively.
Significant estimates for the nine months ended March 31, 2026 and the year ended June 30, 2025, respectively, include:
| ● | Allowance for doubtful accounts and other receivables; |
| ● | Inventory valuation and obsolescence reserves; |
| ● | Fair value measurements related to business combinations under ASC 805, including: |
| ● | Purchase price consideration, including the fair value of Series C Convertible |
| Preferred Stock issued as acquisition consideration; |
| ● | Identifiable intangible assets; | |
| ● | Property and equipment; | |
| ● | Contingent consideration; and | |
| ● | Allocation of purchase price to identifiable assets and liabilities, including the resulting goodwill; |
| ● | Impairment assessment of goodwill and indefinite-lived intangible assets; |
| ● | Impairment assessment of long-lived assets, including finite-lived intangible assets and property and equipment; |
| ● | Fair value of derivative liabilities; |
| ● | Classification of convertible preferred stock between temporary equity and permanent equity; |
| ● | Valuation of stock-based compensation; |
| ● | Estimated useful lives of property and equipment and finite-lived intangible assets; |
| ● | Assessment of the Company’s ability to continue as a going concern; |
| ● | Valuation of loss contingencies; and |
| ● | Valuation allowance on deferred tax assets and assessment of uncertain tax positions. |
| 25 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Risks, Uncertainties and Concentrations
The Company operates across multiple industries — including foodservice packaging distribution, robotics-as-a-service (“RaaS”), and hotel operations — that are each subject to competitive, economic, and operational risks. In accordance with ASC 275, *Risks and Uncertainties*, the Company evaluates and discloses risks that could significantly affect the amounts reported in the near term, including risks arising from the use of estimates and current vulnerability due to concentrations.
Concentrations of Risk
Revenue and Asset Concentration
Substantially all of the Company’s hospitality segment revenue is generated from two hotel properties located in Victorville and Rancho Mirage, California. These properties also represent a significant portion of the Company’s total assets. A decline in performance at either property — whether due to local economic conditions, competitive pressures, natural disasters, or loss of franchise rights — could have a material adverse effect on the Company’s consolidated financial position and results of operations.
Geographic Concentration
The Company’s hotel operations, robotics deployment activities, and warehouse and distribution facilities are concentrated in the State of California. As a result, the Company is disproportionately exposed to regulatory changes, economic conditions, natural disasters, and labor market dynamics specific to that state.
Franchise Concentration
The Company’s hotel properties operate under franchise agreements with established national hotel brands. The Company’s ability to generate hospitality revenue depends on maintaining compliance with franchise brand standards, including property maintenance requirements, periodic upgrades, and participation in brand programs. Loss of one or both franchise agreements could materially impair the Company’s hospitality operations and the carrying value of the related assets.
| 26 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Customer Concentration
As
of March 31, 2026, no single customer accounted for
Within the Foodservice Packaging Distribution segment, the Company serves a diversified base of small to mid-sized foodservice operators, with no material dependence on any single customer.
Supplier Concentration
The Company sources robotics components and hardware from a limited number of domestic and international suppliers. Certain components used in the Company’s robotic systems may be available from sole or limited sources. An interruption in supply, quality issues, or changes in supplier pricing or availability could delay deployments and adversely affect the Company’s RaaS operations. Within the Foodservice Packaging Distribution segment, the Company sources products from multiple domestic and international manufacturers, with no material dependence on any single supplier.
Key Personnel
The
Company is dependent on the continued services of its Chief Executive Officer, who also serves as Chief Financial Officer and controls
Significant Estimates Subject to Near-Term Variability
Certain of the Company’s estimates are particularly sensitive to changes in conditions in the near term. These include:
Fair value of acquired assets and assumed liabilities
The Company completed two hotel property acquisitions during the nine months ended March 31, 2026. The purchase price allocations involve significant estimates regarding the fair values of property and equipment, identifiable intangible assets, contingent consideration, and goodwill. Adjustments to preliminary valuations within the measurement period could materially affect reported amounts. See Note 9.
| 27 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Goodwill and intangible asset impairment
The Company has recorded goodwill and intangible assets in connection with its business combinations. Declines in projected revenues, changes in market conditions, or other adverse developments could result in impairment charges that may be material.
Derivative liabilities
The Company has outstanding convertible instruments with variable conversion features that require fair value measurement at each reporting date. Changes in the Company’s stock price, volatility assumptions, or other inputs could result in material changes to the reported fair value of these liabilities.
Going concern
As discussed in the Liquidity and Going Concern note, the Company’s ability to continue as a going concern is dependent on obtaining additional financing. The outcome of this uncertainty could materially affect the recoverability and classification of recorded asset amounts and the amounts and classification of liabilities.
Other Risks
The Company’s financial performance may also be affected by broader macroeconomic factors, including inflationary pressures, interest rate fluctuations, labor market constraints, supply chain disruptions, and changes in consumer demand. The Company is also subject to federal, state, and local regulations related to manufacturing and distribution, automation equipment, franchise operations, hotel licensing, labor practices, and financial reporting. Noncompliance could result in fines, penalties, or operational restrictions.
The Company operates across multiple industries - including foodservice packaging distribution, robotics-as-a-service (“RaaS”), and hotel operations - that are each subject to unique competitive, economic, and operational risks. These industries are characterized by rapid changes in market dynamics, evolving customer preferences, technological innovation, and sensitivity to macroeconomic conditions. As a result, the Company is exposed to various risks and uncertainties that may materially impact its financial condition, results of operations, cash flows, and strategic objectives.
| 28 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with Financial Accounting Standards Board (FASB) ASC 820, Fair Value Measurements, which establishes a framework for measuring fair value and requires related disclosures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the Company’s principal market or, if none exists, the most advantageous market for the asset or liability.
Fair Value Hierarchy
ASC 820 requires the use of observable inputs whenever available and establishes a three-tier hierarchy for measuring fair value:
| ● | Level 1 – Quoted market prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 – Observable inputs other than quoted prices in active markets, such as quoted prices for similar assets and liabilities or inputs that are directly or indirectly observable. | |
| ● | Level 3 – Unobservable inputs that require significant judgment, including management assumptions and estimates based on available market data. |
The classification of an asset or liability within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Level 3 valuations generally require more judgment and complexity, often involving a combination of cost, market, or income approaches, as well as assumptions about market conditions, pricing, and other factors.
Fair Value Determination and Use of External Advisors
The Company assesses the fair value of its financial instruments and, where appropriate, may engage external valuation specialists to assist in determining fair value. While management believes that recorded fair values are reasonable, they may not necessarily reflect net realizable values or future fair values.
Financial Instruments Carried at Historical Cost
The Company’s financial instruments—including cash, accounts receivable, accounts payable and accrued expenses (including related party balances), and certain debt instruments—are recorded at historical cost. As of March 31, 2026 and June 30, 2025, respectively, the carrying amounts of these instruments approximated their fair values due to their short-term maturities.
| 29 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Cash and Cash Equivalents and Concentration of Credit Risk
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.
At
March 31, 2026 and June 30, 2025, respectively, the Company did
The
Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent
account balances exceed the amount insured by the FDIC, which is $
At March 31, 2026 and June 30, 2025, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.
Accounts Receivable
The Company accounts for accounts receivable in accordance with ASC 310, Receivables. Accounts receivable are stated at their net realizable value, which represents the amounts expected to be collected from customers.
Trade receivables primarily arise from:
| ● | Foodservice Packaging Distribution – invoiced product sales | |
| ● | RaaS – monthly service fees billed in advance | |
| ● | Hotel Operations – |
● Guest ledger receivables, representing charges incurred by in-house guests prior to settlement at check-out
● City ledger receivables, representing amounts due from corporate accounts, groups, travel agencies, and other third-party billing arrangements
The Company does not require collateral and does not accrue interest on past-due balances.
| 30 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Allowance for Expected Credit Losses
The Company evaluates the collectability of accounts receivable and records an allowance for credit losses in accordance with ASC 326, Financial Instruments—Credit Losses (“CECL”). The allowance is estimated using a provision matrix approach based on:
| ● | historical loss experience by revenue stream, | |
| ● | customer aging and payment trends, | |
| ● | current economic conditions, and | |
| ● | reasonable and supportable forecasts. |
Guest ledger balances generally have short settlement periods and historically low loss experience, while city ledger balances and trade receivables are evaluated based on aging, customer credit quality, and historical write-offs.
Receivables sharing similar risk characteristics are evaluated collectively. Amounts determined to be uncollectible are written off against the allowance when collection efforts have been exhausted.
Allowance
for expected credit losses was $
The following is a summary of the Company’s accounts receivable at March 31, 2026 and June 30, 2025:
| March 31, 2026 | June 30, 2025 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ||||||||
| Accounts receivable - net | $ | $ | ||||||
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Bad Debt Expense
For the three and nine months ended March 31, 2026 and 2025, bad debt was as follows:
| Three Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | ( | ) | $ | |||
| Nine Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.
Bad debt expense related to the discontinued Snack and Beverages business, has been presented within discontinued operations.
Inventory
The Company accounts for inventory in accordance with ASC 330, Inventory. Inventory is stated at the lower of cost or net realizable value (“LCNRV”) using the first-in, first-out (FIFO) method. Inventory consists of items held for sale or use in the ordinary course of business across the Company’s operating segments.
Continuing Operations
As of March 31, 2026 and June 30, 2025, inventory consisted primarily of:
| ● | Foodservice Packaging Distribution: |
Finished goods including paper cups, plastic cups, food containers, bags, and other disposable consumables.
| ● | Robotics-as-a-Service (RaaS): |
None. Inventory used in RaaS deployments (e.g., spare parts, components) is expensed as incurred and not carried as inventory.
| 32 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| ● | Hotel Operations: |
Food and beverage inventory and retail/minibar items held for sale. Hotel operating supplies not held for sale—such as guest amenities, linens, and cleaning supplies—are expensed as incurred and excluded from inventory.
Inventory Valuation and Reserves
Management evaluates inventory at each reporting date to determine whether reserves are required for slow-moving, obsolete, or impaired items. In performing this assessment, management considers:
| ● | aging and turnover trends; | |
| ● | expected future demand; | |
| ● | historical usage and spoilage (particularly for perishable hotel F&B items); | |
| ● | current market and pricing conditions; and | |
| ● | estimated net realizable value. |
Adjustments to inventory reserves are recorded within cost of revenues in the period identified.
At March 31, 2026 and June 30, 2025, inventory was as follows:
| Classification | March 31, 2026 | June 30, 2025 | ||||||
| Packaging and supplies | $ | $ | ||||||
| Food and beverage | ||||||||
| Total Inventory | $ | $ | ||||||
Included
in these amounts were $
Property and Equipment
Property and equipment are recorded at cost, net of accumulated depreciation, in accordance with ASC 360, “Property, Plant, and Equipment.” Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
Repairs and maintenance expenditures that do not materially extend the useful life of an asset are expensed as incurred. Significant improvements or upgrades that increase the asset’s productivity, efficiency, or useful life are capitalized.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Property Improvement Plans (“PIPs”)
In connection with operating franchised hotel properties, the Company is periodically required under its franchise agreements to complete Property Improvement Plans (“PIPs”), which generally include renovations, replacements, and upgrades to guestrooms, public areas, building systems, and other components of the hotels.
PIP-related expenditures are evaluated under ASC 360 to determine whether they should be capitalized or expensed:
| ● | Capitalized PIP costs |
PIP costs are capitalized when they represent betterments or improvements that:
● extend the useful life of the asset;
● increase the asset’s capacity or efficiency;
● materially upgrade the property to meet current brand standards; or
● replace major components of the hotel.
Capitalized PIP costs are recorded as part of buildings and improvements or FF&E and depreciated over their estimated useful lives.
| ● | Expensed as incurred |
Routine repairs, maintenance, cosmetic refreshes, and other PIP activities that do not extend useful life or enhance the asset’s functionality are expensed as incurred.
The determination of whether a PIP expenditure should be capitalized or expensed requires judgment and is based on the nature of the work performed, the condition of the underlying assets, and the extent to which the PIP activity enhances or extends the property’s utility.
Disposals
Upon disposal or sale of property and equipment, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the statement of operations.
Impairment of Long-lived Assets
The Company evaluates the recoverability of long-lived assets, including identifiable intangible assets, in accordance with FASB ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
| 34 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
An impairment review is triggered when events or circumstances indicate that the carrying value of an asset group may not be recoverable. Factors considered include, but are not limited to:
| ● | Significant changes in expected performance compared to prior forecasts, | |
| ● | Changes in asset utilization, including discontinued or modified use, | |
| ● | Negative industry or economic trends that impact asset value, and | |
| ● | Strategic shifts in the Company’s business operations. |
Impairment Assessment Process
When impairment indicators exist, the Company performs a recoverability test by comparing the undiscounted future cash flows expected to be generated from the use and ultimate disposition of the asset group to its carrying amount.
| ● | If the undiscounted cash flows exceed the carrying amount, no impairment is recognized. | |
| ● | If the undiscounted cash flows are less than the carrying amount, an impairment loss is recognized, measured as the excess of the carrying amount over the fair value of the asset. |
Impairment Results
For
the three and nine months ended March 31, 2026 and 2025, respectively, the Company did
Derivative Liabilities
The Company evaluates financial instruments containing characteristics of both liabilities and equity in accordance with FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging.
Accounting for Derivative Liabilities
Derivative liabilities are revalued at fair value at each reporting period, with changes in fair value recognized in the results of operations as a gain or loss on derivative remeasurement. The Company uses a Black-Scholes option pricing model to determine the fair value of these instruments.
| 35 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Conversion and Extinguishment of Derivative Liabilities
When a debt instrument with an embedded conversion option (e.g., convertible debt or warrants) is converted into shares of common stock or repaid, the Company:
| ● | Records the newly issued shares at fair value; | |
| ● | Derecognizes all related debt, derivative liabilities, and unamortized debt discounts; and | |
| ● | Recognizes a gain or loss on debt extinguishment, if applicable. |
For equity-based derivative liabilities (e.g., warrants) that are extinguished, any remaining liability balance is reclassified to additional paid-in capital.
Reclassification of Equity Instruments to Liabilities
Equity instruments initially classified as equity may be reclassified as liabilities if they no longer meet equity classification criteria. In such cases, they are remeasured at fair value on the date of reclassification, with changes recognized in earnings.
Derivative Liability Balances
As
of March 31, 2026 and June 30, 2025, the Company had derivative liabilities of $
Included
in these totals are amounts to related parties of $
See Notes 11 and 12.
Original Issue Discounts and Other Debt Discounts
The Company accounts for original issue discounts (OID) and other debt discounts in accordance with FASB ASC 835-30, Interest - Imputation of Interest. These discounts are recorded as a reduction of the carrying amount of the related debt and are amortized to interest expense over the term of the debt using the effective interest method, unless the straight-line method is materially similar.
Original Issue Discounts (OID)
For certain notes issued, the Company may provide the debt holder with an original issue discount (OID), which is recorded as a debt discount, reducing the face value of the note. The discount is amortized to interest expense over the term of the debt in the Consolidated Statements of Operations.
| 36 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Stock and Other Equity Issued with Debt
The Company may issue common stock or other equity instruments in connection with debt issuance. When stock is issued, it is recorded at fair value and treated as a debt discount, reducing the carrying amount of the note. These discounts are amortized to interest expense over the life of the debt.
The combined debt discounts, including OID and stock-related discounts, cannot exceed the face amount of the debt.
Debt Issuance Costs
Debt issuance costs, including fees paid to lenders or third parties, are capitalized as a debt discount and amortized to interest expense over the life of the debt. These costs are presented as a direct deduction from the carrying amount of the debt liability rather than as a separate asset.
Right of Use Assets and Lease Obligations
The Company accounts for right-of-use (ROU) assets and lease liabilities in accordance with FASB ASC 842, Leases. These amounts reflect the present value of the Company’s estimated future minimum lease payments over the lease term, including any reasonably certain renewal options, discounted using a collateralized incremental borrowing rate.
The Company classifies its leases as either operating or finance leases. The Company’s leases primarily consist of operating leases, which are included as Right-of-Use Assets and Operating Lease Liabilities on the consolidated balance sheets.
Short-Term Leases
The Company has elected the short-term lease exemption, whereby leases with a term of 12 months or less are not recorded on the balance sheet. Instead, lease payments are expensed on a straight-line basis over the lease term.
Lease Term and Renewal Options
In determining the lease term, the Company evaluates whether renewal options are reasonably certain to be exercised. Factors considered include:
| ● | The useful life of leasehold improvements relative to the lease term, | |
| ● | The economic performance of the business at the leased location, | |
| ● | The comparative cost of renewal rates versus market rates, and | |
| ● | The presence of any significant economic penalties for non-renewal. |
| 37 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
If a renewal option is deemed reasonably certain to be exercised, the ROU asset and lease liability reflect those additional future lease payments. The Company’s operating leases contain renewal options with no residual value guarantees. Currently, management does not expect to exercise any renewal options, which are therefore excluded in the measurement of lease obligations.
Discount Rate and Lease Liability Measurement
Since the implicit rate in the leases is not readily determinable, the Company applies an incremental borrowing rate that represents the rate it would incur to borrow on a collateralized basis over a similar term and currency environment.
Lease Impairment
The
Company evaluates ROU assets for impairment indicators whenever events or changes in circumstances suggest the carrying amount may not
be recoverable.
See Note 15.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of promised goods or services transfers to customers, in an amount that reflects the consideration expected to be received. The Company applies the five-step revenue recognition model prescribed by ASC 606, as described below.
Revenue Streams
The Company currently generates revenue primarily from the following three (3) sources:
| 1. | Foodservice Packaging – Revenues from the wholesale distribution of disposable foodservice packaging products, including both custom-printed and stock paper cups, plastic cups, food containers, bags, and related consumable items. Sales are primarily transacted through the Company’s e-commerce platform and are recognized upon shipment or delivery of goods to the customer, depending on the terms of sale. | |
| 2. | Robotics-as-a-Service (RaaS) – Revenues generated under multi-year service arrangements for automation solutions deployed in the foodservice and hospitality industries. These arrangements generally include recurring monthly service fees for the use of robotic systems, together with implementation and integration services, maintenance, and technical support. Revenue is recognized over time as services are rendered in accordance with the terms of each contract. |
| 38 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| 3. | Hospitality Operations – Revenues derived from the ownership and operation of hotel properties, including room rentals, food and beverage sales, and ancillary guest services such as event hosting, parking, and other amenities. Revenue is recognized at the time the related goods or services are provided to guests. |
The Company previously generated revenues from the sale of packaged snack and beverage products. This activity has been discontinued and is presented separately as discontinued operations (see Note 14 – Discontinued Operations).
A. Foodservice Packaging Distribution
Revenue from the distribution of disposable foodservice packaging products is derived exclusively from business customers on a wholesale
basis through the Company’s e-commerce platform and direct sales channels. Customer contracts typically contain a single performance
obligation: delivery of the ordered products.
The Company has elected to account for shipping and handling activities that occur after the customer obtains control as fulfillment costs rather than as separate performance obligations, in accordance with the practical expedient under ASC 606-10-25-18A. Because sales are exclusively to registered businesses, the Company collects and remits sales taxes where required; sales to businesses are exempt only when valid resale or exemption certificates are obtained.
B. Robotics as a Service
Revenue from Robotics-as-a-Service (“RaaS”) arrangements is recognized over time as services are provided under multi-year customer service agreements, which typically follow an initial pilot and site-preparation period. Contracts generally include a recurring monthly service fee covering access to robotic equipment, automation software, monitoring, and support services. Although agreements are typically multi-year in duration, the related performance obligation is the continuous provision of RaaS services, and revenue is recognized ratably each month as services are delivered.
The Company owns and deploys all robotic equipment, including hardware, software, and related components, which remain the property of the Company throughout the term of the arrangement. Customers do not obtain control over the deployed units. The Company retains physical possession of the equipment, directs how and when the robotic systems perform their designated tasks through proprietary software, determines operational parameters and scheduling, performs all servicing, maintenance, and software updates, and retains the right to substitute units at its discretion without customer approval. Because the customer does not have the right to obtain substantially all of the economic benefits from the equipment or the right to direct its use, management has concluded that these arrangements do not contain a lease component under ASC 842, Leases. Accordingly, the entire arrangement is accounted for under ASC 606, Revenue from Contracts with Customers.
| 39 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Certain arrangements may include one-time activities such as installation, integration, or training. These activities are not distinct performance obligations and are accounted for as part of the overall service contract, with related fees recognized over the contract term. Ongoing support includes remote technical assistance, software updates, and maintenance, all of which are included in the recurring monthly service fee.
The Company generally invoices customers monthly in arrears for services rendered. Because the Company has a right to consideration in an amount that corresponds directly with the value of performance completed to date, revenue is measured using the right-to-invoice practical expedient under ASC 606-10-55-18. Contract assets and contract liabilities (deferred revenue) related to RaaS arrangements are not significant.
C. Hospitality Operations
Revenue from hospitality operations is generated primarily from the ownership and management of hotel properties. The Company’s hotel revenues consist of (i) room revenues, (ii) food and beverage revenues, and (iii) other ancillary revenues such as meeting and event space rentals, parking, and miscellaneous guest services.
| 1. | Room Revenues. Revenue from room rentals is recognized on a daily basis as rooms are occupied, as each night of occupancy represents a distinct performance obligation with control transferring to the guest at the point the room is made available and occupied. Payments are typically due at check-out or are settled by credit card upon completion of the stay. Advance deposits received prior to guest arrival are recorded as contract liabilities (deferred revenue) until the related stay occurs. |
| 2. | Food and Beverage Revenues. Revenue from restaurant, bar, catering, and banquet operations is recognized at the point in time the related goods or services are provided to the guest. In cases where deposits are received for catered events or group bookings, such amounts are recorded as deferred revenue until the event takes place. |
| 3. | Other Ancillary Revenues. Revenue from parking, resort fees, event space rentals, and other guest services is recognized when the service is rendered or the rental period has elapsed. |
The Company acts as the principal in substantially all hospitality transactions, as it controls the goods and services prior to transfer to the customer. Revenues are presented net of any sales or occupancy taxes collected on behalf of governmental authorities.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The timing of billing and payment for hotel operations typically coincides with the satisfaction of performance obligations; therefore, contract assets and contract liabilities related to hospitality revenues are not significant.
D. Snacks and Beverages (Discontinued Operations)
The Company previously generated revenue from the sale of snack and beverage products. This activity has been discontinued and is presented as discontinued operations in the accompanying consolidated financial statements.
For periods prior to discontinuation, revenue was recognized net of slotting fees, trade promotions, discounts, and other sales incentives, which were classified as variable consideration. Variable consideration was estimated based on historical experience, contractual terms, and current promotional strategies. Estimates were reviewed and updated each reporting period, and revenue was recognized only to the extent it was probable that a significant reversal would not occur.
No revenues or expenses from this activity are expected to contribute to the Company’s future results.
The Company follows the five-step revenue recognition model:
1. Identify the Contract with a Customer
A contract exists when:
| ● | The agreement creates enforceable rights and obligations; | |
| ● | It has commercial substance; | |
| ● | Payment terms are defined and consideration is determinable; | |
| ● | Collection is probable |
Customer credit risk is assessed at contract inception and updated periodically.
For Robotics-as-a-Service (“RaaS”) contracts, agreements are non-cancellable for an initial 36-month term (except for breach), and automatically renew for one-year periods unless terminated. Management accounts for renewals as new contracts.
For Hospitality Operations, contracts with customers are typically short-term in nature. Individual room bookings, restaurant transactions, and event bookings constitute distinct contracts with clearly defined payment terms. Deposits received in advance of stays or events represent contract liabilities until performance obligations are satisfied.
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DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
2. Identify the Performance Obligations
Foodservice Packaging – Each order represents a single performance obligation: shipment or delivery of the ordered goods.
Robotics-as-a-Service (RaaS) – Each contract contains a single bundled performance obligation, representing the continuous provision of robotic equipment and related services, including installation, integration, training, maintenance, and technical support. Installation and training are not distinct, as customers cannot benefit from the robots without integration. One-time implementation activities, when billed, are included in the overall service obligation and recognized over the contract term.
Hospitality Operations – Each guest contract contains one or more distinct performance obligations, depending on the nature of the service:
● Room revenue: each night of occupancy represents a distinct performance obligation satisfied over time.
● Food and beverage: each sale represents a distinct performance obligation satisfied at the point in time when the good or service is provided.
● Event or banquet services: represent a single performance obligation satisfied when the event occurs.
● Other ancillary services (e.g., parking, resort fees): represent distinct performance obligations satisfied when the service is rendered.
Snacks and Beverages (Discontinued) – Historically, each sale represented a single performance obligation for delivery of products. These activities were discontinued as of June 30, 2025, and results are presented as discontinued operations.
3. Determine the Transaction Price
Foodservice Packaging – Transaction price consists primarily of fixed consideration based on contract or list pricing.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
RaaS – Transaction price consists of fixed monthly service fees over the 36-month initial term. Invoices are issued monthly, and payments are generally due as services are provided. Contracts do not include material variable consideration, and the Company historically has not collected consideration prior to performance. As a result, contract liabilities (deferred revenue) are not significant.
Hospitality Operations – Transaction price consists primarily of fixed consideration stated in room rates, menu prices, or event contracts. Room and restaurant sales are typically settled at the point of sale, while deposits for group or event bookings are collected in advance and recorded as deferred revenue until the related service is provided. Variable consideration, such as discounts or promotional rates, is reflected in the transaction price when known. Taxes collected on behalf of governmental authorities (e.g., sales or occupancy taxes) are excluded from revenue.
Snacks and Beverages (Discontinued) – Transaction price included fixed consideration plus variable consideration such as slotting fees, promotions, and rebates.
4. Allocate the Transaction Price
Contracts generally contain only a single performance obligation (product delivery for Packaging, continuous monthly service for RaaS, or a single stay, sale, or event for Hospitality). Accordingly, the entire transaction price is allocated to that performance obligation.
5. Recognize Revenue When (or As) Performance Obligations Are Satisfied
Foodservice Packaging – Revenue is recognized at a point in time when control of the goods transfers to the customer (generally upon shipment or delivery).
RaaS – Revenue is recognized over time, ratably each month, as customers simultaneously receive and consume the benefits of the continuous service.
Hospitality Operations –
● Room revenue: recognized over time on a daily basis as each night of occupancy occurs.
● Food and beverage: recognized at a point in time when goods or services are provided.
● Event, banquet, and ancillary services: recognized when the event occurs or the service is rendered.
Advance deposits for rooms or events are recorded as deferred revenue until performance obligations are satisfied.
Snacks and Beverages (Discontinued) – Revenue was historically recognized at a point in time upon shipment or delivery.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Principal vs. Agent Considerations
In accordance with ASC 606-10-55-36 through 55-40, the Company evaluated whether it acts as principal or agent in each of its revenue streams. The assessment considers whether the Company (i) obtains control of goods or services before transfer to the customer, (ii) has discretion in establishing pricing, (iii) is primarily responsible for fulfillment, and (iv) is exposed to inventory or service-level risks.
Based on this analysis, the Company reached the following conclusions:
1. Foodservice Packaging Distribution
The Company acts as a principal in foodservice packaging sales.
| ● | The Company designs, sources, and controls products prior to transfer. | |
| ● | The Company has discretion in pricing. | |
| ● | The Company is responsible for fulfillment, including warehousing and logistics. | |
| ● | The Company bears inventory risk prior to transfer. |
Revenue is recognized on a gross basis for foodservice packaging sales.
2. Robotics-as-a-Service (RaaS)
The Company acts as a principal in RaaS arrangements.
| ● | The Company provides customers with continuous access to robotic equipment and related services. | |
| ● | The Company controls the equipment and services before and during the transfer period. | |
| ● | The Company has discretion over pricing and contract terms. | |
| ● | The Company is responsible for providing and maintaining the service throughout the contract term. |
Revenue is recognized on a gross basis for RaaS service contracts.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
3. Hospitality Operations
The Company acts as a principal in all hospitality operations.
● The Company owns and operates all hotels and controls the goods and services prior to transfer.
● The Company sets room rates, menu prices, and event charges at its discretion.
● The Company is responsible for providing accommodations, food and beverage, and related services directly to guests.
● The Company bears the risks and rewards associated with hotel operations, including occupancy, cost, and service delivery risks.
Revenue is recognized on a gross basis for all hospitality activities.
4. Snacks and Beverages (Discontinued Operations)
Prior to discontinuation, the Company acted as a principal in snack and beverage sales.
| ● | The Company controlled inventory prior to transfer. | |
| ● | The Company set pricing at its discretion. | |
| ● | The Company was responsible for fulfillment of its performance obligations. | |
| ● | The Company bore inventory risk until sale. |
Revenue was recognized on a gross basis for snack and beverage sales, prior to classification as discontinued operations.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Summary of Compliance with ASC 606 and ASU Updates
| Revenue Stream | Entity | Performance Obligation | Recognition Timing | Consideration Type | ||||
| Foodservice Packaging | SWC | Shipment of goods to customer | Point in time - revenue is recognized when control transfers upon shipment | Fixed price (wholesale contracts); excludes sales tax | ||||
| Robotics as a Service (RaaS) | Techforce and FHVH | Provision of robotics equipment access, remote monitoring software, and related support services over the contract term | Over time - revenue is recognized ratably over the 36-month contract term, as the Company has a contractual right to payment for services rendered to date. | Fixed monthly consideration, billed in advance Non-cancellable 36-month contracts with auto renewals | ||||
| Hotel Operations | Victorville/Rancho Mirage | Provision of lodging and related guest services (rooms, food, beverage, and other ancillary services) | Point in time – revenue is recognized when the performance obligation is satisfied, typically upon guest occupancy (for rooms) or at the time goods/services are provided (for food, beverage, and ancillary services). | Fixed transaction price, generally settled at check-out. Prices exclude sales tax. |
Contract Liabilities (Deferred Revenue)
Contract liabilities represent amounts received in advance of performance obligations being satisfied. These primarily relate to deposits for future hotel stays, events, or banquet services, which are recognized as revenue when the related lodging or services are provided.
For the Company’s Robotics-as-a-Service (“RaaS”) and foodservice packaging operations, invoicing and payment generally occur as performance obligations are satisfied; therefore, deferred revenue balances in these segments are not material.
As
of March 31, 2026 and June 30, 2025, the Company had deferred revenue of $
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The following represents the Company’s disaggregation of revenues for the nine months ended March 31, 2026 and 2025:
| Nine Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Revenue | % of Revenues | Revenue | % of Revenues | |||||||||||||
| Foodservice Packaging | $ | % | $ | % | ||||||||||||
| Robotics as a Service (RaaS) | % | % | ||||||||||||||
| Hotels | % | % | ||||||||||||||
| Total revenues - net | $ | % | $ | % | ||||||||||||
Revenue is disaggregated by primary revenue stream, consistent with the Company’s reportable segments and the nature, timing, and uncertainty of revenue recognition described herein.
The Company did not generate revenues from continuing operations during the nine months ended March 31, 2025.
Revenues from discontinued snack and beverage operations are presented separately in Note 14.
Cost of Sales
1. Continuing Operations – Cost of Sales
Foodservice Packaging
Cost of sales for foodservice packaging consists of direct costs incurred to source, warehouse, and distribute packaging products. These
costs are recognized in the same period as the related revenue.
Cost components primarily include:
● Purchased Materials – Packaging products sourced from third-party manufacturers and suppliers.
● Freight and Distribution – Outbound shipping costs, warehouse handling, and fuel surcharges.
● Warehousing and Logistics – Facility, labor, and utilities associated with storage and inventory management.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Robotics-as-a-Service (RaaS)
Cost of sales for RaaS consists of direct costs incurred to provide robotic services under multi-year service contracts. These costs
are recognized in the same period as the related revenue.
Cost components primarily include:
● Equipment Depreciation – Depreciation of robotic units deployed to customer sites.
● Installation and Training Costs – Initial setup, integration, and training services provided to customers.
● Maintenance and Support – Ongoing technical support, repair, and software updates.
● Hosting and Connectivity – Cloud infrastructure and communication costs to enable remote monitoring and performance of robots.
These costs are recognized ratably over the contract term, consistent with the recognition of RaaS revenue.
Hotel Operations
Cost of sales for hotel operations consists of direct costs incurred to provide lodging, food and beverage, and related guest services. These costs are recognized in the same period as the related revenue.
Cost components primarily include:
● Room Operations – Housekeeping, front office, maintenance, laundry, and utilities directly related to guest accommodations.
● Food and Beverage – Cost of food, beverages, and related consumables used in restaurant, bar, and banquet operations.
● Labor and Benefits – Wages, benefits, and payroll taxes for personnel directly involved in providing guest services.
● Operating Supplies and Guest Amenities – Costs of linens, toiletries, and other consumables provided to guests.
● Other Direct Costs – Contract services, credit card commissions, and minor operating equipment.
Depreciation of hotel buildings, furnishings, and equipment is not included in cost of sales and is presented separately as Depreciation and Amortization within operating expenses.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
2. Discontinued Operations – Cost of Sales
Cost of sales related to the Company’s legacy Snacks and Beverages business is presented within discontinued operations and excluded from the amounts above.
Income Taxes
The Company accounts for income taxes using the asset and liability method prescribed by FASB ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These deferred amounts are measured using enacted tax rates expected to apply in the periods when the temporary differences are expected to reverse.
The effect of a change in tax law or tax rates on deferred tax balances is recognized in the period in which the change is enacted.
All deferred tax assets and liabilities are presented as noncurrent in the Company’s consolidated balance sheet, regardless of the classification of the related asset or liability for financial reporting purposes.
Uncertain Tax Positions
The Company evaluates uncertain tax positions, which requires that a tax position be recognized in the financial statements only if it is more likely than not (greater than 50% likelihood) to be sustained upon examination by tax authorities.
As of March 31, 2026 and June 30, 2025, respectively, the Company had no uncertain tax positions that qualified for recognition or disclosure in the financial.
The
Company also recognizes interest and penalties related to uncertain tax positions in other expense in the consolidated statement of operations.
Valuation of Deferred Tax Assets
The Company’s deferred tax assets include certain future tax benefits, such as net operating losses (NOLs), tax credits, and deductible temporary differences. A valuation allowance is required if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.
The Company reviews the realizability of deferred tax assets on a quarterly basis, or more frequently if circumstances warrant, considering both positive and negative.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Factors Considered in Valuation Allowance Assessment
The Company evaluates multiple factors in determining whether a valuation allowance is necessary, including:
| ● | Historical earnings trends (cumulative pre-tax income or losses in the most recent three-year period) | |
| ● | Future financial projections, including expected taxable income based on long-term estimates of business performance and market conditions | |
| ● | Statutory carryforward periods for net operating losses and other deferred tax assets | |
| ● | Prudent and feasible tax planning strategies that could impact the realization of deferred tax assets | |
| ● | Nature and predictability of temporary differences and the timing of their reversal | |
| ● | Sensitivity of financial forecasts to external factors such as commodity prices, market demand, and operational risks |
While cumulative three-year losses are a strong indicator that a valuation allowance may be needed, a valuation allowance determination is not solely based on past losses—all available positive and negative evidence must be considered.
Valuation Allowance Determination
At March 31, 2026 and June 30, 2025, respectively, the Company recorded a full valuation allowance against its deferred tax assets, resulting in a net carrying amount of $. This determination was based on cumulative losses in recent years and the lack of sufficient positive evidence to support the realization of deferred tax assets in the near term.
The Company will continue to evaluate its valuation allowance each reporting period and will recognize deferred tax assets in the future if sufficient positive evidence emerges to support their realization.
Advertising Costs
Advertising costs are expensed as incurred, “Advertising Costs.” These costs are recognized as operating expenses in the period in which they are incurred and are classified within general and administrative expenses in the consolidated statements of operations.
Advertising expense related to the discontinued Snack and Beverages business, has been presented within discontinued operations.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The Company recognized marketing and advertising costs during the three and nine months ended March 31, 2026 and 2025, respectively as follows:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Total Sales and Marketing | $ | $ | ||||||
| Nine Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Total Sales and Marketing | $ | $ | ||||||
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation,” using the fair value-based method. Under this guidance, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, typically the vesting period.
ASC 718 establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. It also applies to transactions where an entity incurs liabilities based on the fair value of its equity instruments or liabilities that may be settled using equity instruments.
The Company applies the fair value method for equity instruments granted to both employees and non-employees, aligning non-employee share-based payment accounting with that of employees. The fair value of stock-based compensation is determined as of the grant date or the measurement date (i.e., when the performance obligation is completed) and is recognized over the vesting period.
The Company determines the fair value of stock options using the Black-Scholes option pricing model, considering the following key assumptions:
| ● | Exercise price – The agreed-upon price at which the option can be exercised. | |
| ● | Expected dividends – The anticipated dividend yield over the expected life of the option. | |
| ● | Expected volatility – Based on historical stock price fluctuations. | |
| ● | Risk-free interest rate – Derived from U.S. Treasury securities with similar maturities. | |
| ● | Expected life of the option – Estimated based on historical exercise patterns and contractual terms. |
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DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Additionally, the Company follows the guidance under ASU 2016-09, which introduced amendments to simplify certain accounting aspects of share-based compensation, including:
| ● | The treatment of tax benefits and tax deficiencies in income tax reporting. | |
| ● | The option to recognize forfeitures as they occur rather than estimating them upfront. | |
| ● | Cash flow classification for certain tax-related transactions. |
The Company continues to evaluate and apply the latest Accounting Standards Updates (ASUs) and interpretive releases related to stock-based compensation to ensure compliance with evolving financial reporting requirements.
Stock Warrants
In connection with certain financing transactions (debt or equity), consulting arrangements, or strategic partnerships, the Company may issue warrants to purchase shares of its common stock. These standalone warrants are not puttable or mandatorily redeemable by the holder and are classified as equity instruments in accordance with ASC 480, “Distinguishing Liabilities from Equity.”
The fair value of warrants issued for compensation purposes is measured using the Black-Scholes option pricing model.
Accounting Treatment of Warrants
| ● | Warrants issued in conjunction with common stock issuance are initially recorded at fair value as a reduction in Additional Paid-In Capital (APIC), | |
| ● | Warrants issued for services are recorded at fair value and expensed over the requisite service period or immediately upon issuance if no service period exists; and | |
| ● | Warrants classified as liabilities due to settlement features or pricing adjustments are remeasured at fair value each reporting period, with changes recognized in earnings. |
The Company computes net loss per share in accordance with ASC 260, Earnings Per Share. Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.
During all periods presented, the Company reported a net loss. Accordingly, all potentially dilutive common stock equivalents were excluded from the computation of diluted net loss per share because their inclusion would have been anti-dilutive. As a result, diluted net loss per share is equal to basic net loss per share for all periods presented.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Anti-Dilutive Securities
| March 31, 2026 | March 31, 2025 | |||||||
| Convertible debt | ||||||||
| Series B, convertible preferred stock (8,366:1) | ||||||||
| Series C, convertible preferred stock (6,000:1) | ||||||||
| Series D, convertible preferred stock (6,000:1) | ||||||||
| Warrants | ||||||||
| Total common stock equivalents | ||||||||
All financial instruments listed above included as common stock equivalents represent those that are fully vested and exercisable.
Series C Convertible Preferred Stock - Lock-Up Provisions
Certain shares of Series C Convertible Preferred Stock issued as compensation and as acquisition consideration are subject to contractual lock-up provisions that restrict conversion into common stock for a specified period following issuance.
As
of March 31, 2026, the Company had shares of Series C Convertible Preferred Stock issued and outstanding,
Of the total outstanding, shares, representing common share equivalents, are subject to contractual lock-up provisions and are not currently eligible for conversion. The lock-up provisions restrict conversion until the Company has completed an uplisting to a senior national stock exchange and effected a reverse stock split such that the Company’s authorized common shares are sufficient to accommodate conversion of all outstanding convertible securities. The remaining shares, convertible into shares of common stock, are currently eligible for conversion and are included in the anti-dilutive securities table above. The locked-up shares (representing common share equivalents) are excluded from both the anti-dilutive securities table above and the authorized share sufficiency analysis for all periods in which the lock-up restrictions remain in effect. Upon expiration of the applicable lock-up periods, such shares will be included in the anti-dilutive securities table to the extent the Company continues to report a net loss, or in diluted net loss per share if the Company reports net income.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Temporary Equity Classification at June 30, 2025
As of June 30, 2025, the Company had shares of common stock authorized. The total potential common stock equivalents issuable upon conversion or exercise of the Company’s outstanding Series B, Series C, and Series D Convertible Preferred Stock, warrants, and convertible notes payable exceeded the Company’s authorized common shares, resulting in an insufficiency of authorized shares to settle all potential conversions and exercises.
Because certain instruments could not be settled solely in shares, they were not entirely within the Company’s control for share settlement. In accordance with ASC 480-10-S99-3A and ASC 815-40-25, the Company classified its Series B, Series C, and Series D Convertible Preferred Stock as temporary equity (mezzanine equity) in the consolidated balance sheet as of June 30, 2025. These instruments are not redeemable; the temporary equity classification was based solely on the insufficiency of authorized shares to permit full conversion. The Company’s convertible debt was classified as a liability, and its warrants were classified within equity, each in accordance with the relevant accounting guidance.
Increase in Authorized Shares
On October 7, 2025, the Company’s majority voting stockholder approved an increase in the Company’s authorized common stock from to shares. The Board of Directors approved the change on the same date. In accordance with SEC Rule 14c-2, the amendment became effective 20 days after the Company mailed a definitive information statement on Schedule 14C to stockholders. The amendment to the Company’s Articles of Incorporation was filed with the Nevada Secretary of State and became effective on November 19, 2025. This change increased only the number of authorized shares and had no impact on the number of shares outstanding or on the rights of existing stockholders.
Resolution of Authorized Share Insufficiency and Reclassification to Permanent Equity
Following the increase in authorized common stock to shares effective November 19, 2025, management reassessed whether sufficient authorized shares existed to settle all currently convertible or exercisable instruments. Excluding shares of Series C Convertible Preferred Stock (convertible into shares of common stock) that are contractually prohibited from conversion under the lock-up provisions described above, the Company’s remaining potential common stock equivalents did not exceed the authorized shares as of the effective date of the amendment.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Because
the condition that gave rise to the temporary equity classification - the insufficiency of authorized common shares - was resolved, the
Company reclassified its Series B, Series C, and Series D Convertible Preferred Stock from temporary equity to permanent stockholders’
equity effective November 19, 2025. The reclassification was recorded at the then-existing carrying values, with no gain or loss recognized.
The aggregate carrying value reclassified was $
Contingent Consideration - Series C Convertible Preferred Stock
In connection with the acquisitions of the Victorville and Rancho Mirage hotel properties, the Company agreed to issue additional shares of Series C Convertible Preferred Stock upon the achievement of certain post-acquisition milestones As of March 31, 2026, the contingencies had not been resolved and no shares had been issued under these arrangements.
The contingent consideration provides for the issuance of up to shares related to the Victorville acquisition and up to shares related to the Rancho Mirage acquisition, for a combined total of up to shares, representing shares of common stock on an as-converted basis. As of March 31, 2026, no milestones have been achieved and no shares have been issued under these arrangements. Accordingly, the contingent shares have not been included in the authorized share sufficiency analysis. In the event the milestones are achieved and the contingent shares are issued, the Company will reassess authorized share sufficiency at that time, as the equivalent shares would exceed the Company’s remaining available authorized shares of as of March 31, 2026.
The
contingent consideration was initially measured at fair value in accordance with ASC 805, Business Combinations, and classified
as temporary equity due to the authorized share insufficiency described above. The fair value of the contingent consideration as of March
31, 2026 was $
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Contingent consideration classified in stockholders’ equity is not subsequently remeasured; adjustments are recognized only upon resolution of the contingency.
Ongoing Monitoring
The Company will continue to monitor its authorized share capacity relative to total potential common stock equivalents, including upon expiration of the Series C lock-up provisions, the resolution of the contingent consideration arrangements, the issuance of additional convertible instruments, and any changes to outstanding warrants or conversion terms. If at any future date the Company’s total potential common stock equivalents (including previously locked-up Series C shares and any Series C shares issued upon resolution of contingent consideration) exceed its authorized shares, the Company will reassess the equity classification of its convertible preferred stock at that time.
See Note 8.
Related Parties
The Company defines related parties in accordance with ASC 850, “Related Party Disclosures,” and SEC Regulation S-X, Rule 4-08(k). Related parties include entities and individuals that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.
Related parties include, but are not limited to:
| ● | Principal owners of the Company. | |
| ● | Members of management (including directors, executive officers, and key employees). | |
| ● | Immediate family members of principal owners and members of management. | |
| ● | Entities affiliated with principal owners or management through direct or indirect ownership. | |
| ● | Entities with which the Company has significant transactions, where one party has the ability to exercise control or significant influence over the management or operating policies of the other. |
A party is considered related if it has the ability to control or significantly influence the management or operating policies of the Company in a manner that could prevent either party from fully pursuing its own separate economic interests.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The Company discloses all material related party transactions, including:
| ● | The nature of the relationship between the parties. | |
| ● | A description of the transaction(s), including terms and amounts involved. | |
| ● | Any amounts due to or from related parties as of the reporting date. | |
| ● | Any other elements necessary for a clear understanding of the transactions’ effects on the financial statements. |
Related party disclosures are presented in accordance with ASC 850-10-50-1 through 50-6, which require disclosure of the nature, terms, and financial effects of material related party transactions. The Company also complies with SEC Regulation S-X, Rule 4-08(k), which requires disclosure of material related party balances and transactions, including their effect on the Company’s consolidated financial position and results of operations
Recent Accounting Standards
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures of significant segment expenses regularly provided to the Chief Operating Decision Maker (CODM) and the measure of segment profit or loss used by the CODM. The Company adopted ASU 2023-07 effective July 1, 2025. Adoption resulted in enhanced segment disclosures and did not have a material impact on the consolidated financial statements. See Note 13, Segments.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances disclosure requirements for income tax rate reconciliation (including disaggregation into specified categories) and income taxes paid by jurisdiction. The Company adopted ASU 2023-09 effective July 1, 2025. Adoption did not have a material impact on the consolidated financial statements.
Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses, as subsequently clarified by ASU 2025-01 issued in January 2025, which requires expanded disclosure of certain expense categories. The standard is effective for the Company’s annual period ending June 30, 2028 and interim periods beginning in fiscal year 2029. As the standard is disclosure-only, adoption will not affect the Company’s financial position, results of operations, or cash flows. The Company is evaluating the enhanced disclosure requirements.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20), which clarifies the requirements for determining whether settlements of convertible debt instruments should be accounted for as induced conversions. The standard is effective for the Company’s fiscal year beginning July 1, 2026. The Company is evaluating the impact, which is not expected to be material.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments, Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient that allows entities to assume current economic conditions persist over the forecast period when estimating expected credit losses on current accounts receivable and contract assets within the scope of ASC 606. The standard is effective for the Company’s fiscal year beginning July 1, 2026. The Company plans to adopt ASU 2025-05 in fiscal 2027 and does not expect a material impact.
Other Accounting Standards Updates
The FASB has issued other technical corrections and narrow-scope amendments across various accounting topics. These updates are not expected to have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year presentation. These reclassifications had no material impact on the Company’s consolidated results of operations, stockholders’ equity (deficit), or cash flows.
As a result of the classification of the Company’s Snacks and Beverages segment as discontinued operations, the related results of operations, cash flows, and disclosures have been reclassified and presented separately from continuing operations for all periods presented.
| 58 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 3 – Property and Equipment
Property and equipment consisted of the following:
| Estimated Useful | ||||||||||
| March 31, 2026 | June 30, 2025 | Lives (Years) | ||||||||
| Building and Improvements | $ | |||||||||
| Land | N/A | |||||||||
| Furniture, fixtures and equipment | ||||||||||
| Machinery and equipment | ||||||||||
| Vehicles | ||||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||||
| Total property and equipment - net | $ | $ | ||||||||
Assets Acquired in Business Combinations
During fiscal years 2025 and 2026, the Company completed several acquisitions in connection with its expansion into robotics and hospitality operations. See Note 9.
Fiscal Year Ended June 30, 2026
On
August 27, 2025, and September 30, 2025, the Company acquired Victorville and Rancho Mirage, respectively, obtaining land, buildings
and improvements, and furniture and equipment with an aggregate fair value of approximately $
Fiscal Year Ended June 30, 2025
On
March 31, 2025, the Company acquired SWC and Skytech, obtaining property and equipment with an aggregate fair value of approximately
$
The Company measured all acquired property and equipment at fair value as of each acquisition date. Fair values were determined using a combination of market comparable and replacement cost approaches, depending on asset type. Any difference between the fair value of the assets acquired and their historical carrying amounts was recognized as part of the purchase price allocation, and the excess of purchase consideration over the fair value of net identifiable assets was recorded as goodwill.
| 59 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Depreciation expense for the three and nine months ended March 31, 2026 and 2025 was as follows. See Note 10 for amortization expense related to finite-lived intangible assets and Note 15 for amortization of operating lease right-of-use assets, all of which are included in the “Depreciation and amortization” line on the consolidated statements of operations.
| Three Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | ||||||
| Nine Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
Note 4 – Accounts Payable and Accrued Liabilities including Related Parties
Accounts payable and accrued liabilities consist of amounts due to vendors, service providers, and related parties for goods and services received but not yet paid as of the balance sheet date. These obligations are typically settled within normal operating cycles.
Accrued liabilities include payroll and related benefits, professional fees, interest, taxes, and other routine operating accruals. The Company also records accruals for expenses incurred but not yet invoiced at period end, based on management’s estimates.
Balances due to related parties primarily represent amounts payable for shared services, management fees, and reimbursements of operating expenses. Such transactions are conducted in the ordinary course of business and settled in cash.
Management believes that all accounts payable and accrued liabilities are current and that recorded amounts approximate fair value due to their short-term maturities.
Accounts payable and accrued liabilities were as follows:
| March 31, 2026 | June 30, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued interest payable | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
| March 31, 2026 | June 30, 2025 | |||||||
| Accounts payable | $ | |||||||
| Accrued liabilities | ||||||||
| Accrued interest payable | ||||||||
| Accrued director fees | ||||||||
| Accrued bonuses | ||||||||
| Total accounts payable and accrued liabilities - related parties | $ | $ | ||||||
| 60 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 5 – Debt
The following table summarizes the Company’s outstanding debt obligations as of March 31, 2026 and June 30, 2025:
| Issue Date | Maturity Date | Interest Rate | Default Interest Rate | Collateral | Related Party | Conversion Price | Equivalent Shares | Debt Type | ||||||||||||||||||
| Loan #1 | % | % | No | $ | ||||||||||||||||||||||
| Loan #2 | % | % | No | $ | ||||||||||||||||||||||
| Loan #3 | % | % | No | $ | ||||||||||||||||||||||
| Loan #4 | % | % | No | $ | ||||||||||||||||||||||
| Loan #5 | % | % | No | $ | ||||||||||||||||||||||
| Loan #6 | % | % | No | $ | ||||||||||||||||||||||
| Loan #7 | % | % | No | $ | ||||||||||||||||||||||
| Loan #8 | % | % | No | $ | ||||||||||||||||||||||
| Loan #9 | % | % | No | $ | ||||||||||||||||||||||
| Loan #10 | % | % | No | $ | ||||||||||||||||||||||
| Loan #11 | % | % | No | $ | ||||||||||||||||||||||
| Loan #12 | % | % | No | $ | ||||||||||||||||||||||
| Loan #13 | % | % | No | $ | ||||||||||||||||||||||
| Loan #14 | % | % | No | $ | ||||||||||||||||||||||
| Loan #15 | % | % | No | $ | ||||||||||||||||||||||
| Loan #16 | % | % | No | $ | ||||||||||||||||||||||
| Loan #17 | % | % | No | $ | ||||||||||||||||||||||
| Loan #18 | % | No | $ | |||||||||||||||||||||||
| Loan #19 | % | % | Yes | $ | ||||||||||||||||||||||
| Loan #20 | % | % | No | $ | ||||||||||||||||||||||
| Loan #21 | % | % | No | $ | ||||||||||||||||||||||
| Loan #22 | % | % | No | $ | ||||||||||||||||||||||
| Loan #23 | % | % | No | $ | ||||||||||||||||||||||
| Loan #24 | % | % | No | $ | ||||||||||||||||||||||
| Loan #25 | % | % | No | $ | ||||||||||||||||||||||
| Loan #26 | % | % | No | $ | ||||||||||||||||||||||
| Loan #27 | % | % | No | $ | ||||||||||||||||||||||
| Loan #28 | % | % | Yes | $ | ||||||||||||||||||||||
| Loan #29 | % | % | No | $ | ||||||||||||||||||||||
| Loan #30 | % | % | No | $ | ||||||||||||||||||||||
| Loan #31 | % | % | No | $ | ||||||||||||||||||||||
| Loan #32 | % | % | No | $ | ||||||||||||||||||||||
| Loan #33 | % | % | No | $ | ||||||||||||||||||||||
| Loan #34 | % | % | No | $ | | |||||||||||||||||||||
| Loan #35 | % | % | No | $ | | |||||||||||||||||||||
| Loan #36 | % | % | No | $ | | |||||||||||||||||||||
| Loan #37 | % | % | No | $ | | |||||||||||||||||||||
| Loan #38 | % | % | No | $ | | |||||||||||||||||||||
| Loan #39 | % | % | No | $ | | |||||||||||||||||||||
| Loan #40 | % | % | No | $ | | |||||||||||||||||||||
| Loan #41 | % | % | No | $ | | |||||||||||||||||||||
| Loan #42 | % | % | No | $ | ||||||||||||||||||||||
Loans #1-#14, #18, and #29 were in default as of March 31, 2026. Loans #16 and #17 were settled by conversion during the nine months ended March 31, 2026 and were no longer outstanding at March 31, 2026.
The common stock equivalents presented above include shares subject to contractual lock-up provisions that are not currently eligible for conversion. See the potentially dilutive securities summary above for additional information regarding the locked-up shares.
| 61 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The following represents a summary of the Company’s convertible notes payable at March 31, 2026 and June 30, 2025:
| June 30, 2024 | $ | |||
| Advances | ||||
| Debt Discount | ( | ) | ||
| Amortization of debt discount | ||||
| Conversions of debt to equity | ( | ) | ||
| Non-cash increase of principal | ||||
| Debt acquired in acquisition - SWC | ||||
| June 30, 2025 | ||||
| Advances | ||||
| Debt Discount | ( | ) | ||
| Amortization of debt discount | ||||
| Conversions of debt to equity | ( | ) | ||
| Non-cash increase of principal | ||||
| March 31, 2026 | $ |
The following represents a detail of the Company’s convertible notes payable at March 31, 2026 and June 30, 2025:
| Convertible Notes Payable | ||||||||||||||||||||||||||||||||||||||||
| Note # | June
30, 2024 | Face amount of note | Non-cash increase of principal | Acquired in acquisitions | Debt discounts | Amortization | Conversion of debt
to | June
30, 2025 | In Default | Unamortized Debt | ||||||||||||||||||||||||||||||
| Note #1 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Note #2 | ||||||||||||||||||||||||||||||||||||||||
| Note #3 | ||||||||||||||||||||||||||||||||||||||||
| Note #4 | ||||||||||||||||||||||||||||||||||||||||
| Note #5 | ||||||||||||||||||||||||||||||||||||||||
| Note #6 | ||||||||||||||||||||||||||||||||||||||||
| Note #7 | ||||||||||||||||||||||||||||||||||||||||
| Note #8 | ||||||||||||||||||||||||||||||||||||||||
| Note #9 | ||||||||||||||||||||||||||||||||||||||||
| Note #10 | ||||||||||||||||||||||||||||||||||||||||
| Note #11 | ||||||||||||||||||||||||||||||||||||||||
| Note #12 | ||||||||||||||||||||||||||||||||||||||||
| Note #13 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #14 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #15 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #16 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #17 | ||||||||||||||||||||||||||||||||||||||||
| Note #20* | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #21* | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #22* | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #23* | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #24* | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #25* | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #39 | ||||||||||||||||||||||||||||||||||||||||
| Note #40 | ||||||||||||||||||||||||||||||||||||||||
| Note #41 | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Short Term | $ | |||||||||||||||||||||||||||||||||||||||
| Long Term | $ | |||||||||||||||||||||||||||||||||||||||
| 62 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| Convertible Notes Payable | ||||||||||||||||||||||||||||||||||||||||
| Note # | June
30, 2025 | Face of note | Non-cash of principal | Acquired in acquisitions | Debt discounts | Amortization of debt discount | Conversion | March
31, 2026 | In Default | Unamortized Debt | ||||||||||||||||||||||||||||||
| Note #1 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
| Note #2 | ||||||||||||||||||||||||||||||||||||||||
| Note #3 | ||||||||||||||||||||||||||||||||||||||||
| Note #4 | ||||||||||||||||||||||||||||||||||||||||
| Note #5 | ||||||||||||||||||||||||||||||||||||||||
| Note #6 | ||||||||||||||||||||||||||||||||||||||||
| Note #7 | ||||||||||||||||||||||||||||||||||||||||
| Note #8 | ||||||||||||||||||||||||||||||||||||||||
| Note #9 | ||||||||||||||||||||||||||||||||||||||||
| Note #10 | ||||||||||||||||||||||||||||||||||||||||
| Note #11 | ||||||||||||||||||||||||||||||||||||||||
| Note #12 | ||||||||||||||||||||||||||||||||||||||||
| Note #13 | ||||||||||||||||||||||||||||||||||||||||
| Note #14 | ||||||||||||||||||||||||||||||||||||||||
| Note #15 | ||||||||||||||||||||||||||||||||||||||||
| Note #16 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #17 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #20* | ||||||||||||||||||||||||||||||||||||||||
| Note
#21 * | ||||||||||||||||||||||||||||||||||||||||
| Note
#22 * | ||||||||||||||||||||||||||||||||||||||||
| Note
#23 * | ||||||||||||||||||||||||||||||||||||||||
| Note
#24 * | ||||||||||||||||||||||||||||||||||||||||
| Note
#25 * | ||||||||||||||||||||||||||||||||||||||||
| Note #39 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #40 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Note #41 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Short Term | $ | |||||||||||||||||||||||||||||||||||||||
| Long Term | $ | |||||||||||||||||||||||||||||||||||||||
| * |
| 63 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Nine Months Ended March 31, 2026
Convertible Notes Payable
During the nine months ended March 31, 2026, the Company entered into three Securities Purchase Agreements with an institutional investor and issued senior secured convertible notes (collectively, the “Notes”) with substantially identical terms. The principal terms of the Notes are summarized below:
| Note # | Issuance Date | Maturity Date | Principal | Original Issue Discount | Net Proceeds | |||||||||||
| 39 | $ | $ | $ | |||||||||||||
| 40 | ||||||||||||||||
| 41 | ||||||||||||||||
| $ | $ | $ | ||||||||||||||
Each
Note bears interest at
Each Note is convertible into shares of the Company’s common stock at the lower of:
(i)
a fixed conversion price of $
(ii) 80% of the lowest volume-weighted average price (VWAP) during the five trading days prior to conversion.
Because the conversion price contains a variable component that can result in settlement in a variable number of shares, the Company determined that the embedded conversion feature in each Note requires bifurcation from the host debt instrument as a derivative liability.
At the issuance date of each Note, the Company measured the bifurcated conversion feature at fair value. The resulting debt discount, together with the original issue discount, was limited to the face amount of the applicable Note, and the excess of the derivative fair value over the net proceeds was recognized as a charge to derivative expense during the nine months ended March 31, 2026. The aggregate debt discount associated with each Note is being amortized to interest expense over the one-year term of the Note using the effective interest method.
| 64 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The amounts recognized at issuance for each Note are summarized below:
| Initial Derivative | Aggregate | Derivative | ||||||||||||
| Note # | Issuance Date | Fair Value | Debt Discount | Expense | ||||||||||
| 39 | $ | $ | $ | |||||||||||
| 40 | ||||||||||||||
| 41 | ||||||||||||||
| $ | $ | $ | ||||||||||||
The derivative liabilities are remeasured at fair value at each reporting date, with changes recognized in the consolidated statements of operations as a component of other income (expense), net.
See Notes 11 and 12.
Fiscal Year Ended June 30, 2025
Convertible Notes Payable - Settlement of SWC Vendor Obligations
In connection with the acquisition of SWC Group Inc. on March 31, 2025, the Company entered into settlement agreements with certain former vendors and creditors of SWC. Under these agreements, SWC’s outstanding trade payable obligations were extinguished and replaced with new convertible promissory notes issued by the Company to the respective creditors.
The
notes have an aggregate face value of $
Each note contained a conversion feature, conditional upon completion of the SWC merger, permitting the holder to convert outstanding principal and accrued interest into shares of the Company’s common stock at a conversion price equal to 65% of the lowest trading price during the 20 trading days preceding the conversion date. The conversion features became exercisable upon the closing of the acquisition on March 31, 2025. Because the conversion price is variable and can result in settlement in a variable number of shares, the Company determined that the embedded conversion features require bifurcation from the host debt instruments as derivative liabilities.
At
the issuance date, the Company measured the bifurcated conversion features at an aggregate fair value of $
| 65 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The
resulting debt discounts were limited to the face amounts of the respective notes, resulting in aggregate debt discounts of $
The debt discounts are being amortized to interest expense over the remaining terms of the notes.
The derivative liabilities are remeasured at fair value at each reporting date, with changes recognized in the consolidated statements of operations as a component of other income (expense) - net.
See Notes 11 and 12.
Loans #16/#17 – Amendments
On July 23, 2024, the Company amended the terms of these notes to remove the right to adjust the conversion price. In exchange, the Company increased the amount due under the notes by 10%, and issue shares of Series D, convertible preferred stock.
Upon amendment of terms, the Company evaluated the changes under ASC 470-50-40, Debt Modifications and Extinguishments, and determined the modification constituted a substantial change, resulting in a loss on debt extinguishment as follows:
In connection with this transaction, the Company recorded a loss on debt extinguishment as follows:
| Fair value of debt (10% increase) and Series D, preferred stock on extinguishment date | $ | |||
| Loss on debt extinguishment | $ |
See Note 8 for additional information regarding the issuance of the Series D, convertible preferred stock in connection with these debt extinguishments.
In April 2025, the maturity date of the notes was extended from April 2025 to November 1, 2025. No additional consideration was paid in connection with the extensions.
The Company evaluated the terms of the modification and concluded that the changes did not result in a substantially different instrument. As a result, the modification was accounted for as a continuation of the existing debt arrangement, with no gain or loss recognized and no impact on the consolidated financial statements.
| 66 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Debt Conversions
Nine Months Ended March 31, 2026
During
the nine months ended March 31, 2026, the Company issued an aggregate of shares of common stock in connection with conversions
of outstanding amounts due under three convertible loans (loans #1, #16, and #17). Pursuant to the underlying debt agreements, all shares
were issued at a fixed contractual conversion price of $
| Note # | Shares Issued | Principal | Accrued Interest | Default Interest | Fees | Total Converted | ||||||||||||||||||
| 1 | $ | $ | $ | $ | $ | |||||||||||||||||||
| 16 | ||||||||||||||||||||||||
| 17 | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
Loans #16 and #17 were fully settled upon completion of the conversions described above. Loan #1 remains outstanding as of March 31, 2026.
Fiscal Year Ended June 30, 2025
During
the fiscal year ended June 30, 2025, the Company issued an aggregate of shares of common stock in connection with conversions
of outstanding amounts due under two convertible loans (loans #2 and #16). Pursuant to the underlying debt agreements, all shares were
issued at a fixed contractual conversion price of $
| Note # | Shares Issued | Principal | Accrued Interest | Default Interest | Fees | Total Converted | ||||||||||||||||||
| 2 | $ | $ | $ | $ | $ | |||||||||||||||||||
| 16 | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
Debt Extinguishments
The Company accounted for these debt conversions as debt extinguishments. As the fair value of the equity issued equaled the carrying value of the extinguished debt, no gain or loss was recognized upon conversion.
| 67 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Notes Payable
The following represents a summary of the Company’s notes payable at March 31, 2026 and June 30, 2025:
| June 30, 2024 | $ | |||
| Proceeds | ||||
| Repayments | ( | ) | ||
| Debt acquired in acquisition | ||||
| June 30, 2025 | ||||
| Repayments | ( | ) | ||
| Debt acquired in acquisition - net - Victorville | ||||
| Debt acquired in acquisition - net - Rancho Mirage | ||||
| Settlement of pre-existing debt of target acquisition | ( | ) | ||
| Amortization of debt discount | ||||
| March 31, 2026 | $ |
The following represents a detail of the Company’s notes payable at March 31, 2026 and June 30, 2025:
| Loans #26 and #27 | Various Loans#18, #29, #30 and #31 | Acquired Debt Loan #36 | Acquired Debt Loan #37 | Acquired Debt Loan #38 | Total | |||||||||||||||||||
| Date of Note | ||||||||||||||||||||||||
| Maturity Date of Note | Demand | |||||||||||||||||||||||
| Interest Rate | % | % | % | % | ||||||||||||||||||||
| Default Interest Rate | % | % | % | % | ||||||||||||||||||||
| In-Default | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Collateral | ||||||||||||||||||||||||
| June 30, 2025 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Settlement of pre-existing debt of target acquisition | ( | ) | ( | ) | ||||||||||||||||||||
| Debt acquired in acquisition - Victorville | ||||||||||||||||||||||||
| Debt discount | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Debt acquired in acquisition - Rancho Mirage | ||||||||||||||||||||||||
| Amortization of debt discount | ||||||||||||||||||||||||
| Repayments | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||||||
| Less: short term | ||||||||||||||||||||||||
| Long term | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| June 30, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Proceeds | ||||||||||||||||||||||||
| Debt acquired in acquisition - SWC | ||||||||||||||||||||||||
| Repayments | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| June 30, 2025 | ||||||||||||||||||||||||
| Less: short term | ||||||||||||||||||||||||
| Long term | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 68 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Loans #30/#31
Notes Payable – Victorville Hotel Acquisition
During
April and June 2025, the Company entered into two loan agreements with the seller of the Victorville hotel property. Under these agreements,
the seller advanced the Company an aggregate of $
The
Victorville acquisition closed on August 27, 2025, and the aggregate balance of $
Convertible Notes Payable – Related Parties
The following represents a summary of the Company’s convertible notes payable – related parties at March 31, 2026 and June 30, 2025:
| June 30, 2024 | $ | |||
| Debt acquired in acquisition - SWC | ||||
| Debt Discount | ( | ) | ||
| Amortization of debt discount | ||||
| Repayments | ( | ) | ||
| June 30, 2025 | ||||
| Conversion of accounts payable to | ||||
| convertible note payable - related party | ||||
| Amortization of debt discount | ||||
| March 31, 2026 | $ |
| 69 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The following represents a detail of the Company’s convertible notes payable – related parties at March 31, 2026 and June 30, 2025:
| Loan #19 | Loan #28 | Loan #42 | Total | |||||||||||||
| Holder | Chief Executive Officer | Chief Revenue Officer | Chief Revenue Officer | |||||||||||||
| Board Director | Board Director | |||||||||||||||
| Date of Note | ||||||||||||||||
| Maturity Date of Note | ||||||||||||||||
| Interest Rate | % | % | % | |||||||||||||
| In-Default | $ | $ | $ | $ | ||||||||||||
| Collateral | ||||||||||||||||
| * | These convertible notes are convertible at a discount, equal to 65% of the lowest market price over the preceding 20 days. |
| June 30, 2025 | $ | $ | $ | $ | ||||||||||||
| Conversion of accounts payable to convertible note payable - related party | ||||||||||||||||
| Amortization of debt discount | ||||||||||||||||
| March 31, 2026 | ||||||||||||||||
| Less: short term | ||||||||||||||||
| Long term | $ | $ | $ | $ | ||||||||||||
| June 30, 2024 | $ | $ | $ | $ | ||||||||||||
| Debt acquired in acquisition - SWC | ||||||||||||||||
| Debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ||||||||||||||||
| Repayments | ( | ) | ( | ) | ||||||||||||
| June 30, 2025 | ||||||||||||||||
| Less: short term | ||||||||||||||||
| Long term | $ | $ | $ | $ |
Loan #42
Convertible Note Payable - Related Party Settlement of Vendor Obligation
On
March 31, 2026, the Company entered into a settlement agreement with a related party to extinguish $
The
note is convertible into shares of the Company’s common stock at a conversion price equal to
| 70 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
At
the issuance date, the Company measured the bifurcated conversion feature at a fair value of $
The derivative liability is remeasured at fair value at each reporting date, with changes recognized in the consolidated statements of operations as a component of other income (expense), net.
See Notes 11 and 12.
Mortgage Notes Payable
The following represents a summary of the Company’s mortgage notes payable at March 31, 2026 and June 30, 2025:
| June 30, 2025 | $ | |||
| Debt acquired in acquisition - Victorville | ||||
| Debt acquired in acquisition - Rancho Mirage | ||||
| Repayments | ( | ) | ||
| March 31, 2026 | $ |
During the fiscal year ended June 30, 2026, the Company completed the acquisitions of two hotel properties located in Victorville, California and Rancho Mirage, California. In connection with these acquisitions, the Company assumed existing mortgage indebtedness secured by the respective properties.
The assumed mortgage notes were recorded at their estimated fair values as of the respective acquisition dates in accordance with ASC 805. The fair value measurements reflected market-based assumptions regarding interest rates and credit spreads for comparable debt instruments at the time of each acquisition.
The
Victorville acquisition resulted in the recognition of an assumed mortgage note with an acquisition-date fair value of $
The assumed mortgage notes are secured by the respective hotel properties and contain customary covenants and repayment terms.
See Note 9.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The following table presents a detail of the Company’s mortgage notes payable at March 31, 2026 and June 30, 2025:
| Loan #34 | Loan #35 | Total | ||||||||||
| Property Name | Victorville | Rancho Mirage | ||||||||||
| Date of Note | ||||||||||||
| Maturity Date of Note | ||||||||||||
| Interest Rate | %* | %* | ||||||||||
| In-Default | $ | $ | $ | |||||||||
| Collateral | ||||||||||||
| * |
| June 30, 2025 | $ | $ | ||||||||||
| Debt acquired in acquisition | ||||||||||||
| Repayments | ( | ) | ( | ) | ( | ) | ||||||
| March 31, 2026 | ||||||||||||
| Less: short term | ||||||||||||
| Long term | $ | $ | $ |
Debt Maturities
The following represents future maturities of the Company’s various debt arrangements as follows:
| For the Year Ended June 30, | Convertible Notes Payable | Convertible Notes Payable - Related Parties | Notes Payable | Mortgage Notes Payable | Total | |||||||||||||||
| 2026 (3 months) | $ | $ | $ | $ | $ | |||||||||||||||
| 2027 | ||||||||||||||||||||
| 2028 | ||||||||||||||||||||
| 2029 | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 6 – Fair Value of Financial Instruments
The Company’s fair value measurement policies, including the three-level hierarchy framework under ASC 820, are described in Note 2. The Company’s mortgage notes payable were recorded at estimated fair value upon acquisition in accordance with ASC 805 and are subsequently carried at amortized cost. The Company believes the carrying amounts approximate fair value as of March 31, 2026 based on the variable interest rate terms of the underlying instruments. See Note 12 for the Company’s recurring fair value measurements of derivative liabilities.
Note 7 – Commitments and Contingencies
Contingencies – Legal Matters
The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries.
As of March 31, 2026, the Company is not aware of any litigation, pending litigation, or other transactions that require accrual or disclosure.
Note 8 – Temporary Equity and Stockholders’ Equity (Deficit)
As of March 31, 2026, the Company had six (6) classes of stock, detailed as follows:
With respect to Series B, C and D convertible preferred stock, see policy above in Note 1 regarding classification as temporary equity.
Preferred Stock
The Company’s preferred stock is as follows.
| ● | Authorized Shares: | |
| ● | Par Value: $ per share |
The Board of Directors has the authority to issue preferred stock in one or more series and determine the rights, privileges, and restrictions of each series without further stockholder approval.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Series A, Preferred Stock – Related Party
| ● | Designated Shares: | |
| ● | Issued & Outstanding: shares as of March 31, 2026 and June 30, 2025, respectively. All shares are owned by the Company’s Chief Executive Officer. | |
| ● | Par Value: $ per share | |
| ● | Stated
Value: | |
| ● | Conversion
Terms: | |
| ● | Dividend
Provisions: | |
| ● | Voting
Rights: | |
| ● | Liquidation
Preference: | |
| ● | Redemption Rights: |
Series B, Convertible Preferred Stock
| ● | Designated Shares: | |
| ● | Issued & Outstanding: and shares as of March 31, 2026 and June 30, 2025, respectively | |
| ● | Par Value: $ per share | |
| ● | Stated
Value: | |
| ● | Conversion
Terms: convertible into shares of common stock, as amended October 28, 2025 (original terms were
shares of common stock and
warrants with an exercise price of $ | |
| ● | Dividend
Provisions: | |
| ● | Voting
Rights: | |
| ● | Liquidation
Preference: | |
| ● | Redemption Rights: | |
| ● | Derivative Liability Assessment: |
| ○ | Evaluated under ASC 815 (“Derivatives and Hedging”) | |
| ○ | The Series B Convertible Preferred Stock and the related warrants do not meet the definition of derivative liabilities because they contain fixed conversion terms and do not include any variable equity conversion features or other contingent provisions requiring derivative accounting. |
Deemed Dividends – Series B Convertible Preferred Stock
In connection with the issuance of Series B Convertible Preferred Stock, the Company recognizes deemed dividends due to periodic reductions in the conversion price, which increased the intrinsic value of the shares issuable upon conversion. These adjustments effectively conveyed additional value to the preferred stockholders and were accounted for as deemed dividends.
| 74 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
The deemed dividends were recorded as a reclassification from additional paid-in capital to accumulated deficit. This treatment did not affect total stockholders’ deficit but did reduce income available to common shareholders for purposes of earnings per share.
During
the nine months ended March 31, 2026 and the year ended June 30, 2025, the Company recorded additional deemed dividends of $
Conversion of Series B, Convertible Preferred Stock
The Company evaluated the modification under ASC 470-20-40 and ASC 260-10-S99-2 by comparing the fair value of the securities issued under the modified terms to the fair value of the securities that would have been issuable under the original terms, measured at the conversion date. The fair value of the warrants foregone was estimated using the Black-Scholes option pricing model. Based on this analysis, the fair value of the consideration under the modified terms did not exceed the fair value under the original terms, and accordingly, no deemed dividend was recognized.
As the Series B Preferred Stock was equity-classified, the conversion was accounted for as a reclassification within stockholders’ equity with no income statement impact. Following the conversion, no shares of Series B Preferred Stock remain outstanding.
Series C, Convertible Preferred Stock
| ● | Designated Shares: | |
| ● | Issued & Outstanding: and shares as of March 31, 2026 and June 30, 2025, respectively | |
| ● | Par Value: $ per share | |
| ● | Stated
Value: | |
| ● | Conversion Terms: convertible into shares of common stock | |
| ● | Dividend
Provisions: | |
| ● | Voting
Rights: |
| 75 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| ● | Liquidation
Preference: | |
| ● | Redemption Rights: | |
| ● | Derivative Liability Assessment: |
| ○ | Evaluated under ASC 815 (“Derivatives and Hedging”) | |
| ○ | The Series C Convertible Preferred Stock does not meet the definition of a derivative liability because it does not contain any variable equity conversion features or other contingent provisions that would require derivative accounting. |
Increase in Authorized Shares for Designation
The original Certificate of Designation authorized shares. On December 3, 2025, the Company filed a Certificate of Amendment to Designation with the Nevada Secretary of State increasing the number of designated shares from to to accommodate the issuance of additional shares as acquisition consideration and compensation.
Lock-Up Provisions
Certain shares of Series C Convertible Preferred Stock issued as compensation and as acquisition consideration are subject to contractual lock-up provisions that restrict conversion into common stock for a specified period following issuance.
As of March 31, 2026, of the shares of Series C Convertible Preferred Stock issued and outstanding, shares are subject to contractual lock-up provisions and are not currently eligible for conversion, representing restricted common share equivalents. Only shares, convertible into shares of common stock, are currently eligible for conversion.
Because the locked-up shares cannot currently be converted, they have been excluded from the Company’s authorized share sufficiency analysis. See Note 2 (Basic and Diluted Net Loss Per Share - Convertible Preferred Stock Classification) for the Company’s assessment of authorized share sufficiency and the reclassification from temporary equity to permanent stockholders’ equity effective November 19, 2025.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Preferred Stock Transactions for the Year Ended June 30, 2026
Shares Issued in Acquisitions
On August 27, 2025 and September 30, 2025, the Company completed the acquisitions of the Victorville (“VV”) and Rancho Mirage (“RM”) hotel properties, respectively. As part of the purchase consideration for these business combinations, the Company issued shares and shares of Series C Convertible Preferred Stock.
In
accordance with ASC 805, Business Combinations, the Series C shares issued in connection with the VV and RM acquisitions were measured
at their estimated fair values of $
See Note 9.
Stock Issued for Services
On
October 22, 2025, the Company issued shares of Series C Convertible Preferred Stock to a consultant for services rendered. The fair
value of the Series C shares was based on the quoted closing trading price of $/share. Applying the
Conversion of Series C, Convertible Preferred Stock
The
Company converted shares of Series C Preferred Stock into
As the Series C Preferred Stock was equity-classified, the conversion was accounted for as a reclassification within stockholders’ equity with no income statement impact.
Preferred Stock Transactions for the Year Ended June 30, 2025
Series C, Convertible Preferred Shares Issued for Services
On
February 17, 2025, the Company issued shares of Series C, convertible preferred stock to a consultant for services rendered. The
fair value of the Series C shares was based on the quoted closing trading price of $/share. Applying the
On
March 25, 2025, the Company granted shares of Series C, convertible preferred stock to several service providers as compensation.
The fair value of the Series C shares was based on the quoted closing trading price of $/share. Applying the
| 1. | Closing of the acquisitions of both SWC and Skytech – 1/3 vested on March 31, 2025. | |
| 2. | Achievement of total stockholders’ equity of $40 million — one-third vests upon reaching this milestone, as evidenced in the first Form 10-Q or Form 10-K in which the balance sheet reflects this level of equity. This milestone was achieved on February 23, 2026 upon the filing of the Company’s Form 10-Q reflecting greater than $40,000,000 of positive stockholders equity. | |
| 3. | Successful uplisting of the Company’s common stock to a national securities exchange (e.g., NYSE or Nasdaq) – 1/3 to vest upon such uplisting. This milestone has not yet occurred. |
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
In the event that one or more of the remaining milestones are not achieved, the unvested portion of the award will vest ratably over a 20-month period (April 2025 – November 2026).
Unvested Series C, Convertible Preferred Stock – Compensation
| Weighted Average | ||||||||
| Number of | Grant Date | |||||||
| Non-Vested Shares | Shares | Fair Value | ||||||
| June 30, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Cancelled/Forfeited | ||||||||
| June 30, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Cancelled/Forfeited | ||||||||
| March 31, 2026 | $ | |||||||
| Unrecognized compensation | $ | |||||||
| Weighted average remaining period (years) | ||||||||
During the three and nine months ended March 31, 2026 and 2025, respectively, the Company recognized $ and $ of compensation expense related to vesting.
Shares Issued in Acquisitions
On March 31, 2025, the Company completed the acquisitions of SWC and TechForce. In connection with these transactions, the Company issued and shares of Series C Convertible Preferred Stock, respectively, as part of the purchase consideration.
See Note 9 for additional information regarding these acquisitions.
Contingent Performance-Based Equity Awards — TechForce Acquisition
In connection with the TechForce acquisition, certain additional shares of Series C Convertible Preferred Stock may be issued to the sellers contingent upon achieving specified revenue and EBITDA milestones.
These awards are structured as compensation for post-combination services and are not part of the purchase consideration under ASC 805, Business Combinations. Accordingly, related expense will be recognized in the Company’s consolidated statement of operations in accordance with ASC 718, Compensation — Stock Compensation, based on the probability of achieving the specified performance conditions.
| 78 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Each award is to be granted once upon achievement, is independent and cumulative, and is to be measured based on a 30-day volume-weighted average price of the Company’s common stock as of the applicable measurement date.
Contingent Compensation Related to the Skytech Acquisition
In connection with the Skytech acquisition, certain additional equity awards may be issued to the sellers contingent upon achieving specified revenue and/or EBITDA milestones. These awards are structured as compensation for post-combination services and are not considered part of the purchase price under ASC 805, Business Combinations. Accordingly, any related expense will be recognized in the Company’s consolidated statement of operations in accordance with ASC 718, Compensation – Stock Compensation, based on the probability of achieving the specified performance conditions.
Each award is to be granted once upon achievement, is independent and cumulative, and is to be measured based on a 30-day volume-weighted average price of the Company’s common stock as of the applicable measurement date
Revenue-Based Equity Awards
The
sellers are eligible to receive shares of Series C Convertible Preferred Stock with an aggregate maximum value of $
| Company Revenue | Restricted Stock Award (% of equity) | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
EBITDA-Based Equity Awards
The
sellers are eligible to receive additional shares of Series C Convertible Preferred Stock with an aggregate maximum value of $
| Company EBITDA | Restricted Stock Award (% of equity) | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
| $ | % | |||||
Awards are allocated pro rata among eligible recipients and are subject to continued service through each measurement date. The Series C shares issued upon achievement of milestones are subject to the same lock-up restrictions described below. As of March 31, 2026, none of the revenue or EBITDA milestones have been achieved and no awards have been issued.
Lock-Up Restrictions
Pursuant to the TechForce acquisition agreement, each seller is subject to a lock-up period restricting the sale, transfer, pledge, or other disposition of any equity securities received in connection with the transaction for a period of six months (6) following the closing date. During this period, sellers are prohibited from transferring or encumbering such securities, except in limited circumstances where transferees agree to be bound by the same restrictions. The lock-up may be terminated earlier at the sole discretion of the Company.
Seniority of Series B Convertible Preferred Stock
Under the original Certificate of Designation, the Series C Convertible Preferred Stock ranked junior to the Company’s Series B Convertible Preferred Stock with respect to liquidation preference. In October 2025, all outstanding shares of Series B Preferred Stock were converted into common stock (see Series B Convertible Preferred Stock above), and the subordination is no longer applicable.
Series D, Convertible Preferred Stock
| ● | Designated Shares: | |
| ● | Issued & Outstanding: and shares as of March 31, 2026 and June 30, 2025, respectively | |
| ● | Par Value: $ per share |
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| ● | Stated
Value: | |
| ● | Conversion Terms: convertible into shares of common stock | |
| ● | Dividend
Provisions: | |
| ● | Voting
Rights: | |
| ● | Liquidation
Preference: | |
| ● | Redemption Rights: |
Under the original Certificate of Designation, the Series D Convertible Preferred Stock ranked junior to the Company’s Series B Convertible Preferred Stock with respect to liquidation preference. In October 2025, all outstanding shares of Series B Preferred Stock were converted into common stock (see Series B Convertible Preferred Stock above), and the subordination is no longer applicable.
Series D, Convertible Preferred Stock Transactions for the Year Ended June 30, 2026
In
December 2025, the Company issued shares of common stock upon the conversion of shares of Series D Convertible Preferred
Stock at the
Series D, Convertible Preferred Stock Transactions for the Year Ended June 30, 2025
On July 22, 2024, the Company issued an additional shares of Series D, Convertible Preferred Stock in connection with the modification of an existing debt arrangement. In accordance with ASC 470-50, the transaction was evaluated to determine whether it represented a modification or an extinguishment of debt. Based on the terms and quantitative assessment, the transaction qualified as an extinguishment, and a loss was recognized accordingly.
The fair value of the equity issued was estimated to be $, based on the as-converted value of the underlying common stock, adjusted for a restricted stock discount to reflect lack of marketability and transfer restrictions. This valuation was conducted pursuant to guidance in ASC 718-10-30, and supported by an independent third-party valuation report.
See Note 5 for additional discussion regarding debt and related calculation of loss on debt extinguishment.
| 81 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Common Stock
| ● | Authorized Shares: | |
| ● | Issued & Outstanding: |
| ○ | shares as of March 31, 2026 | |
| ○ | shares as of June 30, 2025 |
| ● | Par Value: $ per share | |
| ● | Voting
Rights: |
Equity Transactions for the Year Ended June 30, 2026
Stock Issued for Cash
The
Company issued shares of common stock in several private placements for $
Common Stock Issued in connection with Conversion of Convertible Notes Payable and Related Accrued Interest Payable
The
Company issued an aggregate of shares of common stock to certain convertible debt holders upon conversion of their outstanding
notes and related accrued interest payable. The shares had a total fair value of $
Stock Issued for Services
The
Company issued shares of common stock to consultants for services rendered, having a fair value of $
Acquisition of BIM-E Intellectual Property and Technology Assets
The
Company issued shares
of common stock to an individual seller as consideration for the acquisition of the BIM-E intellectual property and technology
assets, having a fair value of $
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Equity Transactions for the Year Ended June 30, 2025
Stock Issued for Services
The
Company issued shares of common stock to consultants for services rendered, having a fair value of $
Common Stock Issued in connection with Conversion of Convertible Notes Payable and Related Accrued Interest Payable
The
Company issued an aggregate of
shares of common stock to certain convertible debt holders upon conversion of their outstanding notes and related accrued interest
payable. The shares had a total fair value of $
Warrants
Warrant activity for the nine months ended March 31, 2026 and the year ended June 30, 2025 are summarized as follows:
| Weighted | ||||||||||||||||
| Average | ||||||||||||||||
| Weighted | Remaining | Aggregate | ||||||||||||||
| Number of | Average | Contractual | Intrinsic | |||||||||||||
| Warrants | Warrants | Exercise Price | Term (Years) | Value | ||||||||||||
| Outstanding - June 30, 2024 | $ | $ | ||||||||||||||
| Exercisable - June 30, 2024 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled/Forfeited | ( | ) | $ | |||||||||||||
| Outstanding - June 30, 2025 | $ | $ | ||||||||||||||
| Exercisable - June 30, 2025 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Cancelled/Forfeited | ( | ) | $ | |||||||||||||
| Outstanding - March 31, 2026 | $ | $ | ||||||||||||||
| Exercisable - March 31, 2026 | $ | $ | ||||||||||||||
Common Stock Issued Upon Cashless Exercise of Warrants
During the nine months ended March 31, 2026, holders exercised warrants on a cashless basis, resulting in the issuance of shares of common stock. The transaction was accounted for as a reclassification within stockholders’ equity at par value, with no impact to total stockholders’ equity.
Warrants Issued as Deferred Offering Costs
On
October 8, 2025, the Company entered into an Equity Purchase Agreement with a material debt lender, allowing the Company to sell up to
$
The
fair value of the warrant was estimated at $
| Stock Price | $ | |||
| Exercise price | $ | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Expected dividends | % | |||
| Risk free interest rate | % |
The fair value was recorded as a deferred offering cost and is presented
as a separate line item within current assets in the consolidated balance sheets. The deferred offering cost will be charged against the
proceeds of future equity sales under the agreement on a pro rata basis. As of March 31, 2026, no sales had been made under the agreement and the deferred offering cost of $
Subsequent
to March 31, 2026, the Company sold shares of common stock for $
| 83 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 9 – Acquisitions and Unaudited Pro-Forma Financial Information
Fiscal Year Ended June 30, 2026
Acquisition of Victorville
Overview and Date of Acquisition
On
August 27, 2025, the Company completed the acquisition of Victorville Treasure Holdings, LLC (“Victorville”), a California
limited liability company that owns and operates a 155-room hotel located at 15494 Palmdale Road, Victorville, California (the “Property”).
Under the transaction, the Company acquired
Purchase Consideration
As
consideration, the Company issued shares of its Series C Convertible Preferred Stock, having an estimated fair value of $
Primary Reasons for the Acquisition
The Victorville acquisition represents a strategic expansion of the Company’s hospitality portfolio. The Company believes the acquisition will provide several benefits, including:
| ● | Strengthening its presence in key hospitality markets; |
| ● | Operational synergies with the Company’s existing hotel platform; |
| ● | Immediate revenue contribution from ongoing hotel operations; |
| ● | Enhanced scale to support an integrated lodging and guest-services strategy; and |
| ● | Access to franchise-branding opportunities following planned renovations. |
The acquisition was accounted for in accordance with ASC 805, Business Combinations. The Company has provisionally allocated the purchase price to the estimated fair value of assets acquired and liabilities assumed based on currently available information. The purchase price allocation (“PPA”) is subject to revision as the Company finalizes its valuation analyses and post-closing adjustments. Any such revisions could result in changes to the values assigned to the acquired tangible and intangible assets, liabilities assumed, and the resulting goodwill.
Contingent Consideration - Victorville
In connection with the acquisition, the Agreement provides for additional contingent consideration payable to the Sellers. Under the terms of the Agreement, the Sellers may earn up to additional shares of Series C Convertible Preferred Stock (the “Earnout Shares”) upon achieving specified post-closing operational and property-level milestones, including: (i) completion and build-out of a gym facility; (ii) enrollment of at least 50 active gym members; (iii) completion of all remaining renovations required to meet prospective franchise brand standards; and (iv) operation of the property under a major franchise brand for a minimum of 30 days.
Consistent
with the valuation methodology applied to the equity consideration issued at closing, the Earnout Shares and any additional shares issuable
under the purchase price adjustment provisions were measured at fair value ($
In accordance with ASC 805, the contingent consideration was classified in stockholders’ equity at its estimated fair value as part of the preliminary purchase price allocation. Contingent consideration classified in stockholders’ equity is not subsequently remeasured; adjustments are recognized only upon resolution of the contingency.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Acquisition-Related Costs
In connection with the acquisition of Victorville, the Company incurred an insignificant amount of transaction costs related to the acquisition. Such costs were expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations.
Forgiveness of Pre-Existing Relationship
In connection with the acquisition of VV, the Company and VV had a pre-existing intercompany note receivable/payable balance. As part of the closing of the transaction, the Company forgave the outstanding intercompany obligation, which resulted in the elimination of the related note payable and note receivable between the entities. In accordance with ASC 805, Business Combinations, the settlement of the pre-existing relationship was accounted for as a capital transaction rather than as an element of consideration transferred or as a gain or loss in the statement of operations.
The
forgiveness of the intercompany balance resulted in a $
Preliminary Purchase Price Allocation
The following table summarizes the preliminary estimate of the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date. Amounts have been rounded for purposes of the preliminary purchase price allocation (“PPA”). The estimated fair values were derived from an independent third-party valuation report, as follows:
| Consideration | ||||
| Series C - convertible preferred stock - shares | $ | |||
| Series C - contingent consideration - shares | ||||
| Fair value of consideration transferred | $ | |||
| Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||
| Cash | ||||
| Accounts receivable | ||||
| Prepaids and other | ||||
| Inventory | ||||
| Land | ||||
| Property and equipment - net | ||||
| Total assets acquired | ||||
| Accounts payable and accrued expenses | ||||
| Notes payable | ||||
| Mortgage note payable | ||||
| Total liabilities assumed | ||||
| Total identifiable net liabilities assumed | ( | ) | ||
| Allocation required for identifiable intangible assets and goodwill | ||||
| Intangible asset (liquor license) | ||||
| Intangible asset (franchise agreement) | ||||
| Total identifiable intangible assets | ||||
| Goodwill (including assembled workforce) | $ |
| 85 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Measurement Period
The Company expects to finalize the purchase price allocation no later than August 27, 2026, which represents the end of the one-year measurement period permitted under ASC 805. During this period, provisional amounts may be adjusted retrospectively if new information becomes available about facts and circumstances that existed at the acquisition date.
The Company expects to recognize goodwill primarily attributable to anticipated synergies, enhanced automation capabilities, and future economic benefits that do not qualify for separate recognition. The goodwill is expected to be non-deductible for tax purposes.
Supplemental Pro-Forma Information (Unaudited)
The following unaudited pro forma information gives effect to the acquisition as though it had occurred on July 1, 2024, the beginning of the comparable prior annual reporting period. This pro forma information reflects the Victorville acquisition only and excludes pro forma effects of the Rancho Mirage acquisition (which is presented separately below). This information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that date. The unaudited pro forma financial results do not reflect potential cost savings, integration synergies, or non-recurring charges that may result from the acquisition.
| Nine Months Ended | Nine Months Ended | |||||||
| March 31, 2026 | March 31, 2025 | |||||||
| Revenues - net | $ | $ | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share - basic | $ | ( | ) | $ | ( | ) | ||
| Loss per share - diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares - basic | ||||||||
| Weighted average number of shares - diluted | ||||||||
Acquisition of Rancho Mirage
Overview and Date of Acquisition
On
September 30, 2025, the Company completed the acquisition of Treasure Mountain Holdings, LLC (“Rancho Mirage”), a
Delaware limited liability company that owns and operates the Hilton Garden Inn Palm Springs – Rancho Mirage, a 120-room hotel
located at 71700 Highway 111, Rancho Mirage, California (the “Property”). Under the transaction, the Company acquired
Purchase Consideration
As
consideration, the Company issued shares of its Series C Convertible Preferred Stock, having an estimated fair value of $
Primary Reasons for the Acquisition
The Rancho Mirage acquisition represents a strategic expansion of the Company’s hospitality portfolio. The Company believes the acquisition will provide several benefits, including:
| ● | Strengthening its presence in key hospitality markets; |
| ● | Operational synergies with the Company’s existing hotel platform; |
| ● | Immediate revenue contribution from ongoing hotel operations; |
| ● | Enhanced scale to support an integrated lodging and guest-services strategy; and |
| ● | Access to franchise-branding opportunities following planned renovations. |
The acquisition was accounted for in accordance with ASC 805, Business Combinations. The Company has provisionally allocated the purchase price to the estimated fair value of assets acquired and liabilities assumed based on currently available information. The purchase price allocation (“PPA”) is subject to revision as the Company finalizes its valuation analyses and post-closing adjustments. Any such revisions could result in changes to the values assigned to the acquired tangible and intangible assets, liabilities assumed, and the resulting goodwill.
| 86 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Contingent Consideration – Rancho Mirage
In connection with the acquisition, the Agreement provides for additional contingent consideration payable to the Sellers. Under the terms of the Agreement, the Sellers may earn up to additional shares of Series C Convertible Preferred Stock (the “Earnout Shares”) upon achievement of specified post-closing milestones, including: (i) the completion and build-out of five new guestrooms; and (ii) receipt of a certificate of occupancy and all required permits or approvals for such guestrooms, on or before December 31, 2027.
Consistent
with the valuation methodology applied to the equity consideration issued at closing, the Earnout Shares and any additional shares issuable
under the purchase price adjustment provisions were measured at fair value ($
In accordance with ASC 805, the contingent consideration was classified in stockholders’ equity at its estimated fair value as part of the preliminary purchase price allocation. Contingent consideration classified in stockholders’ equity is not subsequently remeasured; adjustments are recognized only upon resolution of the contingency.
Acquisition-Related Costs
In connection with the acquisition of Rancho Mirage, the Company incurred an insignificant amount of transaction costs related to the acquisition. Such costs were expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations.
Preliminary Purchase Price Allocation
The following table summarizes the preliminary estimate of the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date. Amounts have been rounded for purposes of the preliminary purchase price allocation (“PPA”). The estimated fair values were derived from an independent third-party valuation report, as follows:
| Consideration | ||||
| Series C - convertible preferred stock - shares | $ | |||
| Series C - contingent consideration - shares | ||||
| Fair value of consideration transferred | $ | |||
| Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||
| Cash | ||||
| Accounts receivable | ||||
| Prepaids and other | ||||
| Inventory | ||||
| Land | ||||
| Property and equipment - net | ||||
| Total assets acquired | ||||
| Accounts payable and accrued expenses | ||||
| Accounts payable and accrued expenses - related party | ||||
| Deferred revenue/customer deposits | ||||
| Notes payable | ||||
| Mortgage note payable | ||||
| Total liabilities assumed | ||||
| Total identifiable net assets assumed | ||||
| Allocation required for identifiable intangible assets and goodwill | ||||
| Intangible asset (liquor license) | ||||
| Intangible asset (franchise agreement) | ||||
| Total identifiable intangible assets | ||||
| Goodwill (including assembled workforce) | $ |
| 87 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Measurement Period
The Company expects to finalize the purchase price allocation no later than September 30, 2026, which represents the end of the one-year measurement period permitted under ASC 805. During this period, provisional amounts may be adjusted retrospectively if new information becomes available about facts and circumstances that existed at the acquisition date.
The Company expects to recognize goodwill primarily attributable to anticipated operational synergies, future economic benefits, and other advantages that do not qualify for separate recognition. The goodwill is expected to be non-deductible for tax purposes.
Supplemental Pro-Forma Information (Unaudited)
The following unaudited pro forma information gives effect to the acquisition as though it had occurred on July 1, 2024, the beginning of the comparable prior annual reporting period. This pro forma information reflects the Rancho Mirage acquisition only and excludes pro forma effects of the Victorville acquisition (which is presented separately above). This information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that date.
The unaudited pro forma financial results do not reflect potential cost savings, integration synergies, or non-recurring charges that may result from the transactions.
| Nine Months Ended | Nine Months Ended | |||||||
| March 31, 2026 | March 31, 2025 | |||||||
| Revenues - net | $ | $ | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share - basic | $ | ( | ) | $ | ( | ) | ||
| Loss per share - diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares - basic | ||||||||
| Weighted average number of shares - diluted | ||||||||
Goodwill Summary
| Balance - June 30, 2024 | $ | |||
| Acquisition of SWC | ||||
| Acquisition of Skytech | ||||
| Impairment charge - FHVH | ( | ) | ||
| Balance - June 30, 2025 | ||||
| Acquisition of Victorville | ||||
| Acquisition of Rancho Mirage | ||||
| Balance - March 31, 2026 | $ |
| 88 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 10 – Intangible Assets
Intangibles consisted of the following at March 31, 2026 and June 30, 2025, respectively:
| Weighted Average | ||||||||||||||||
| Estimated Useful | Remaining | |||||||||||||||
| Classification | March 31, 2026 | June 30, 2025 | Lives (Years) | Life (Years) | ||||||||||||
| Tradenames/trademarks | $ | $ | N/A | N/A | ||||||||||||
| Customer relationships | ||||||||||||||||
| Franchise agreements | ||||||||||||||||
| Liquor licenses | N/A | |||||||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||||||||
| Intangibles - net | $ | $ | ||||||||||||||
Amortization expense for the three and nine months ended March 31, 2026 and 2025 was as follows:
| Three Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
| Nine Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
There
were
Estimated amortization expense for each of the five (5) succeeding years and thereafter is as follows:
| For the Years Ended June 30, | ||||
| 2026 (3 Months) | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| 2029 | $ | |||
| 2030 | $ | |||
| Thereafter | $ | |||
| Total | $ | |||
Note 11- Derivative Liabilities
The convertible notes acquired in connection with the SWC acquisition on March 31, 2025, and certain notes issued during the nine months ended March 31, 2026 (see Note 5), contain embedded conversion features with variable pricing terms. Because these features allow conversion into an indeterminate number of common shares based on the trading price of the Company’s common stock, they are not considered indexed to the Company’s own stock and therefore require bifurcation from the host debt instrument in accordance with ASC 815.
The Company accounts for the bifurcated embedded derivatives as derivative liabilities, measured at fair value with subsequent remeasurement at each reporting period. The derivative liabilities are classified within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs.
| 89 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Valuation Methodology
The Company used the Black-Scholes option pricing model to estimate the fair value of the embedded conversion option liabilities at both initial recognition and subsequent remeasurement dates.
The model utilized the following key assumptions:
| March 31, 2026 | June 30, 2025 | |||||||
| Expected term (years) | ||||||||
| Expected volatility | ||||||||
| Expected dividends | ||||||||
| Risk free interest rate | ||||||||
A reconciliation of the beginning and ending balances of derivative liabilities measured at fair value on a recurring basis using Level 3 inputs is presented below as of March 31, 2026 and June 30, 2025:
| Third Party | Related Party | Total | ||||||||||
| Derivative liabilities – June 30, 2024 | $ | $ | $ | |||||||||
| Fair value at commitment date | ||||||||||||
| Gain on debt extinguishment | ( | ) | ( | ) | ||||||||
| Fair value mark to market adjustment | ( | ) | ||||||||||
| Derivative liabilities – June 30, 2025 | ||||||||||||
| Fair value at commitment date | ||||||||||||
| Fair value mark to market adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Derivative liabilities – March 31, 2026 | $ | $ | $ | |||||||||
Related Party Component
A portion of the derivative liability relates to convertible notes held by the Company’s Chief Executive Officer and Chief Revenue Officer, who is also a member of the Board of Directors.
Conversion of Accounts Payable to Convertible Note Payable
In
March 2026, the Company converted $
Derivative Liabilities - Nine Months Ended March 31, 2026
The Company issued four convertible promissory notes containing embedded conversion features that require bifurcation and accounting as derivative liabilities. The Company estimates the fair value of each bifurcated conversion feature using the Black-Scholes option pricing model.
See Note 5 for third party convertible notes (3) and related party convertible note (1) and summary above.
Derivative Liability Activity
Changes in the fair value of derivative liabilities are recognized in other income (expense) in the consolidated statements of operations.
For the three and nine months ended March 31, 2026 and 2025, the Company recorded a change in fair value gain (loss) of its derivative liabilities as follows:
| Three Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
| Nine Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
| 90 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Debt Extinguishment and Related Impacts
During
the year ended June 30, 2025, in connection with the conversion of principal on a convertible note (Loan #17), and consistent with ASC
470-50, the Company allocated a proportionate adjustment and remeasurement to the related derivative liability. This resulted in the
recognition of a $
During
initial measurement in the prior fiscal year (year ended June 30, 2025), the Company determined that the fair value of the embedded derivative
liabilities exceeded the proceeds allocated to the convertible note host instrument. Accordingly, the Company recorded a debt discount
equal to the face amount of the note, and the excess, totaling $
For the three and nine months ended March 31, 2026 and 2025, the Company recognized derivative expense as follows:
| Three Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
| Nine Months Ended March 31, | ||||||
| 2026 | 2025 | |||||
| $ | $ | |||||
The
derivative liabilities recognized during the nine months ended March 31, 2026 arose from the issuance of convertible notes with an aggregate
face value of $
See Notes 6 and 12 for additional fair value disclosures.
Note 12 – Fair Value of Financial Instruments
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.
Liabilities measured at fair value on a recurring basis consisted of the following at March 31, 2026 and June 30, 2025:
| March 31, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| June 30, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Note 13 – Segment Information
General
Operating segments are components of the Company for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to allocate resources and assess performance.
Reportable Segments
Beginning
in fiscal 2026, the Company has three (
| 1. | Foodservice Packaging Distribution - distribution of foodservice packaging products, established through the acquisition of SWC on March 31, 2025. | |
| 2. | Robotics-as-a-Service (RaaS) - development and deployment of robotics solutions, operated through TechForce | |
| 3. | Hotel Operations - ownership and operation of hotel properties, including lodging, food and beverage, and related hospitality services. This segment was established following the acquisitions of the Victorville and Rancho Mirage hotel properties during the first quarter of fiscal 2026. |
| 91 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Other Corporate Overhead represents corporate-level activities and shared services, including public company compliance, executive management, finance, legal, and other centralized functions. These costs are not included in the CODM’s evaluation of segment performance and are not considered a reportable operating segment. Corporate overhead is presented for reconciliation to the consolidated financial statements.
Basis of Measurement
The CODM evaluates segment performance primarily based on revenue and operating income (loss). The CODM also reviews total assets and total liabilities by segment to assess resource allocation. Segment information is prepared on the same basis as the consolidated financial statements. There were no material intersegment transactions during the periods presented.
Continuing vs. Discontinued Operations
The Company’s legacy Snacks and Beverages operations are presented as discontinued operations and excluded from reportable segments. For comparability, the segment tables separately identify discontinued operations. See Note 14 – Discontinued Operations for further detail.
Reconciliations
The following tables present financial information for the Company’s reportable segments and include reconciling items, such as other corporate overhead, non-operating items, and discontinued operations, so that the totals reconcile directly to the consolidated statements of operations.
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Foodservice Packaging | $ | $ | $ | $ | ||||||||||||
| RaaS | ||||||||||||||||
| Hotel | ||||||||||||||||
| Other Corporate Overhead | ||||||||||||||||
| Revenues - continuing operations | ||||||||||||||||
| Revenues - discontinued operations | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Costs and expenses | ||||||||||||||||
| Foodservice Packaging | $ | $ | $ | $ | ||||||||||||
| RaaS | ||||||||||||||||
| Hotel | ||||||||||||||||
| Other Corporate Overhead | ||||||||||||||||
| Costs and expenses - continuing operations | ||||||||||||||||
| Costs and expenses - discontinued operations | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ||||||||||||||||
| Foodservice Packaging | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| RaaS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Hotel | ( | ) | ( | ) | ||||||||||||
| Other Corporate Overhead | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other income (expense) - net | ||||||||||||||||
| Foodservice Packaging | $ | $ | $ | ( | ) | $ | ||||||||||
| RaaS | ( | ) | ( | ) | ||||||||||||
| Hotel | ( | ) | ( | ) | ||||||||||||
| Other Corporate Overhead | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense - continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense - discontinued operations | ( | ) | ( | ) | ||||||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss | ||||||||||||||||
| Foodservice Packaging | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| RaaS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Hotel | ( | ) | ( | ) | ||||||||||||
| Other Corporate Overhead | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 92 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
| March 31, 2026 | June 30, 2025 | |||||||
| Total Assets | ||||||||
| Foodservice Packaging | $ | $ | ||||||
| RaaS | ||||||||
| Hotel | ||||||||
| Other Corporate Overhead | ||||||||
| Assets - continuing operations | ||||||||
| Assets - discontinued operations | ||||||||
| Total | $ | $ | ||||||
| Total Liabilities | ||||||||
| Foodservice Packaging | $ | $ | ||||||
| RaaS | ||||||||
| Hotel | ||||||||
| Other Corporate Overhead | ||||||||
| Liabilities - continuing operations | ||||||||
| Liabilities - discontinued operations | ||||||||
| Total | $ | $ | ||||||
Note 14 – Discontinued Operations
On June 30, 2025, management committed to a plan to discontinue the Company’s legacy Snacks and Beverages business, which historically involved the sale of packaged snack products through wholesale and distribution channels. This decision was made in connection with the Company’s strategic shift toward foodservice packaging distribution, Robotics-as-a-Service, and hotel operations. Management determined that the discontinuation represents a strategic shift that has a major effect on the Company’s operations and financial results, and accordingly, the Snacks and Beverages business has been classified as discontinued operations.
The results of the Snacks and Beverages business have been presented as discontinued operations for all periods presented. Accordingly, revenues, expenses, assets, and liabilities associated with this business have been segregated from continuing operations in the consolidated financial statements, and prior-period amounts have been reclassified to conform to the current-period presentation.
As
of March 31, 2026 and June 30, 2025, the Company had no remaining assets associated with the discontinued operations. Liabilities related
to discontinued operations totaled $
Results of Discontinued Operations
The following table presents the financial results of discontinued operations for the three and nine months ended March 31, 2026 and 2025:
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues - net | $ | $ | $ | $ | ||||||||||||
| Costs and expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total costs and expenses | ||||||||||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Liabilities of Discontinued Operations
The carrying amounts of the liabilities of discontinued operations as of March 31, 2026 and June 30, 2025 were as follows:
| March 31, 2026 | June 30, 2025 | |||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Total liabilities | $ | $ | ||||||
| 93 |
NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Note 15 – Commitments
Manufacturing and Research and Development Advisory Agreement
On February 1, 2026, the Company entered into a Manufacturing and Research and Development Advisory Agreement (the “Advisory Agreement”) with a nonemployee advisor to provide strategic and technical guidance in support of the development and commercialization of the Company’s artificial intelligence robotic technologies. The advisor has no authority to bind the Company, and the Advisory Agreement does not create an employment, partnership, joint venture, or fiduciary relationship. The Advisory Agreement has no fixed term and is terminable by either party upon 30 days’ prior written notice. All intellectual property developed through the collaboration is the sole and exclusive property of the Company.
Onboarding Equity Bonus. Upon execution of the Advisory Agreement, the Company issued shares of common stock to the advisor as a one-time onboarding equity bonus. The shares vested immediately with no service or performance conditions. In accordance with Accounting Standards Codification (ASC) 718, Compensation - Stock Compensation, the Company measured the award at the grant-date closing price of $ per share and recognized stock-based compensation expense of $ in full on February 1, 2026.
Performance-Based Warrants. The Advisory Agreement provides for the issuance of performance-based warrants, each entitling the advisor to purchase one share of common stock at an exercise price of $ per share, with a five-year term and exercisable solely on a cashless basis. The warrants contain standard anti-dilution adjustments for stock splits, reverse stock splits, stock dividends, recapitalizations, and similar transactions. The warrants are earned upon achievement of the following milestones:
| Milestone Category | Trigger | Warrants Earned | ||
| Product Commercialization | ||||
| Product Commercialization | ||||
| Revenue-Based Earn-Out |
Commercialization is defined as commencement of commercial launch with confirmed production. Warrants earned at each revenue milestone are cumulative, and the product commercialization category is not subject to a maximum cap.
Accounting Treatment. Following the Company’s adoption of Accounting Standards Update (ASU) 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, share-based payments to nonemployees are accounted for under the same framework as employee awards. The performance-based warrants are subject to performance conditions under ASC 718-10-25, and compensation expense is recognized when achievement of the performance condition becomes probable.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
As of the grant date and through the current reporting period, the Company assessed the probability of achieving any product commercialization or revenue-based earn-out milestone to be zero. Accordingly, no compensation expense has been recognized, and no warrants have been issued or are outstanding under these provisions. The Company will reassess probability at each reporting date and, upon a milestone becoming probable, will recognize a cumulative catch-up adjustment based on the grant-date fair value of the applicable warrants, with the remaining unrecognized expense recognized over the estimated remaining service period.
Warrant Classification. The Company evaluated the warrants under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity, and ASC 480, Distinguishing Liabilities from Equity. The cashless exercise feature results in a fixed-for-fixed settlement in the Company’s own shares, and the anti-dilution provisions are limited to standard adjustments that do not preclude equity classification. Accordingly, the warrants are indexed to the Company’s own stock and meet the conditions for equity classification under ASC 815-40-25. If and when issued, the warrants will be classified within stockholders’ equity.
Potential Dilution. In addition to the shares issued on February 1, 2026, the advisor is eligible to receive warrants to purchase up to shares under the revenue-based earn-out milestones, plus uncapped additional warrants for each SKU successfully commercialized. Future share issuances and warrant exercises may have a dilutive effect on earnings per share in subsequent periods.
Joint Development, Manufacturing, And Licensing Agreement
On March 31, 2026, TechForce Robotics, Inc., a wholly-owned subsidiary of the Company (“TechForce”), entered into a Joint Development, Manufacturing, and Licensing Agreement (the “Agreement”) with Oncotelic Therapeutics, Inc. (“Oncotelic”) to jointly develop, manufacture, and commercialize artificial intelligence enabled, current Good Manufacturing Practice (“cGMP”) compliant robotic systems for use in pharmaceutical and biopharmaceutical manufacturing environments (the “Product”). The Product is intended to integrate Oncotelic’s proprietary PDAOAI artificial intelligence platform with TechForce’s robotic hardware and automation systems.
Under
the Agreement, all artificial intelligence related developments are owned exclusively by Oncotelic, all solely developed robotic hardware
and mechanical engineering developments are owned exclusively by TechForce, and jointly developed intellectual property is owned jointly
by the parties. During the term of the Agreement and for twelve (12) months thereafter, TechForce is restricted from licensing the jointly
developed intellectual property to third parties for use in the pharmaceutical manufacturing industry, but is not otherwise restricted
from competing in the pharmaceutical industry using its own technology. Each party’s total cumulative liability under the Agreement
is capped at the greater of $
The Agreement has an initial term of one (1) year and automatically renews for successive five (5) year terms unless either party provides at least sixty (60) days’ prior written notice of non-renewal. Either party may also terminate the Agreement for convenience upon sixty (60) days’ prior written notice or for uncured material breach upon thirty (30) days’ written notice. The Agreement does not specify minimum monetary commitments or guaranteed funding obligations; specific milestone payments, cost-sharing percentages, royalty rates, and revenue-sharing terms applicable to the commercialization of the Product are to be established in a separate Commercialization and Licensing Agreement (the “CLA”) to be executed by the parties prior to the first commercial sale of the Product. Pending execution of the CLA, no commercial sales, subscriptions, or other revenue-generating activities related to the Product may be initiated by either party.
The Company has evaluated the Agreement under Accounting Standards Codification (“ASC”) Topic 808, Collaborative Arrangements, and concluded that it constitutes a collaborative arrangement within the scope of ASC 808 because both parties are active participants exposed to significant risks and rewards dependent on the commercial success of the activity. As of March 31, 2026, no consideration had been received or was receivable, no performance obligations were enforceable, and no assets, liabilities, revenue, or expenses had been recognized in the condensed consolidated financial statements with respect to the Agreement. A copy of the Agreement was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2026.
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Right-of-Use Operating Lease
On September 1, 2025, the Company’s subsidiary, SWC Group, Inc., executed a five-year triple-net lease for 23,437 square feet of warehouse and distribution space at 13501 S. Main Street, Los Angeles, California 90061.
The landlord, 13501 S. Main Holdings, LLC, is a material lender to the Company.
| ● | Lease
term: | |
| ● | Monthly lease payments: |
| ○ | Months
1–4: $ | |
| ○ | Month
5: $ | |
| ○ | Months
6–16: $ | |
| ○ | Months
17–28: $ | |
| ○ | Months
29–40: $ | |
| ○ | Months
41–51: $ | |
| ○ | Months
52–60: $ |
| ● | Total
lease obligation: $ | |
| ● | Renewal option: None | |
| ● | Lease
classification: Operating lease under ASC 842, recorded as a right-of-use asset and lease
liability based on the present value of lease payments ($ | |
| ● | Lease
incentives: Months | |
| ● | Guarantee: The Company | |
| ● | Security
deposit: $ |
The Company recognizes lease expense on a straight-line basis over the lease term.
At March 31, 2026 and June 30, 2025, the Company has no financing leases as defined in ASC 842, “Leases.”
The tables below present information regarding the Company’s operating lease assets and liabilities at March 31, 2026 and June 30, 2025.
| March 31, 2026 | June 30, 2025 | |||||||
| Assets | ||||||||
| Operating lease - right-of-use asset - non-current | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liability | $ | $ | ||||||
| Weighted-average remaining lease term (years) | - | |||||||
| Weighted-average discount rate | % | - | ||||||
The components of lease expense were as follows:
| March 31, 2026 | March 31, 2025 | |||||||
| Operating lease costs | ||||||||
| Amortization of right-of-use operating lease asset | $ | $ | ||||||
| Lease liability expense in connection with obligation repayment | $ | |||||||
| Total operating lease costs | $ | $ | ||||||
| Supplemental cash flow information related to operating leases was as follows: | ||||||||
| Operating cash outflows from operating lease (obligation payment) | $ | $ | ||||||
| Right-of-use asset obtained in exchange for new operating lease liability | $ | $ | ||||||
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NIGHTFOOD HOLDINGS, INC. AND SUBSIDIARIES
DBA TECHFORCE ROBOTICS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
Future minimum lease payments required under leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31,:
| 2026 (3 months) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total undiscounted cash flows | ||||
| Less: amount representing interest | ||||
| Present value of operating lease liability | ||||
| Less: current portion of operating lease liability | ||||
| Long-term operating lease liability | $ |
Note 16 – Subsequent Events
Subsequent to March 31, 2026, the Company had the following transactions:
Supply Agreement
Subsequent to March 31, 2026, on April 11, 2026, TechForce Robotics, Inc., a wholly-owned subsidiary of the Company (“TechForce”), entered into a three-party Supply Agreement (the “Agreement”) with NUWA Robotics Corp. (“NUWA”) and Hon Hai Precision Industry Co., Ltd. (“Hon Hai”), with a stated commencement date of March 6, 2026. The Agreement establishes a development, manufacturing, and supply framework for robotic systems and related electromechanical products (collectively, the “Products”), under which TechForce defines the commercial requirements and retains ownership of all product specifications, designs, and associated intellectual property; NUWA provides engineering development, system integration, and coordinates manufacturing with Hon Hai; and Hon Hai manufactures, assembles, and tests the Products in accordance with the approved specifications and quality standards.
The
Agreement has an initial term of two (2) years and automatically renews for successive one (1) year terms unless terminated upon at least
three (3) months’ prior written notice, and may also be terminated by either party for uncured material breach upon thirty (30)
days’ written notice. Hon Hai warrants the Products against defects in workmanship and non-conformity with manufacturing requirements
for twelve (12) months following delivery. The Agreement does not specify minimum purchase commitments or guaranteed volumes; purchase
quantities, unit prices, payment terms, and delivery schedules are to be established in individual purchase orders. Each party’s
total cumulative liability is capped at the greater of (i) $
No amounts have been recognized in the condensed consolidated financial statements with respect to the Agreement, and management does not expect the Agreement to result in recognized amounts until purchase orders are issued and Products are received. A copy of the Agreement was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2026.
Convertible Note Payable
On
April 6, 2026, the Company issued an unsecured convertible debenture with a principal amount of $
The
debenture is convertible solely at the Company’s option (not the holder’s) into common stock at a fixed conversion price
of $
The Company evaluated the embedded conversion feature under ASC 815-15-25-1 and ASC 815-40, concluded that the fixed conversion price is indexed solely to the Company’s common stock and qualifies for the scope exception in ASC 815-10-15-74(a), and accordingly accounts for the debenture as a single liability under ASC 470-20.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENT INFORMATION
Certain statements made in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “should,” “plan,” “project,” “will” and other words of similar meaning. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, technological developments related to business support services and outsourced business processes, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control.
Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth under the headings “Business” and “Risk Factors” within our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 as filed with the Securities and Exchange Commission (the “SEC”) on October 14, 2025, as well as the other information set forth herein.
OVERVIEW
Business Overview
Nightfood Holdings, Inc., dba TechForce Robotics (“Nightfood,” “NGTF,” “TechForce Robotics,” or the “Company”), operates through five wholly owned subsidiaries (excluding Nightfood, Inc. which is a discontinued operation) that collectively position us to capitalize on the accelerating demand for automation and efficiency in the hospitality and foodservice industries: TechForce Robotics, Inc. (formerly Skytech Automated Solutions Inc.), Future Hospitality Ventures Holdings Inc. (d/b/a RoboOp365), SWC Group, Inc. (d/b/a CarryOutSupplies.com), Victorville Treasure Holdings, LLC and Treasure Mountain Holdings, LLC.
The Company’s operations span Robotics-as-a-Service (“RaaS”), autonomous service robotics, enterprise automation, hospitality technology, supply-chain support, custom engineering, and operational infrastructure designed to support scalable commercial deployments. Through its subsidiaries and strategic relationships, the Company is focused on integrating AI-Enhanced robotics and automation technologies into real-world operating environments to improve labor efficiency, workflow optimization, customer service, and operational consistency.
In addition to internal development initiatives, the Company actively collaborates with sector-leading operators, manufacturers, technology partners, and enterprise customers to co-develop practical automation solutions tailored to industry-specific use cases. These partnerships allow the Company to design, refine, validate, and deploy technologies within live commercial environments, enabling product development driven by operational requirements, customer feedback, and real-world performance data rather than purely conceptual applications.
The Company also continues to pursue strategic acquisitions, distribution relationships, manufacturing collaborations, and vertical integration initiatives intended to expand its technological capabilities, commercialization platform, operational footprint, and long-term market penetration strategy.
TechForce Robotics, Inc., or TechForce or Skytech, a Delaware corporation which we acquired on March 31, 2025, serves as the Company’s operational backbone, supported by a team with deep expertise in hospitality operations and a proven track record of building, managing, and scaling hotel and foodservice platforms. This operational strength enables TechForce to lead to the deployment of robotic and AI-enhanced automation solutions, ensuring seamless integration into daily operations. Management believes Skytech’s depth of experience is a key differentiator that positions the Company to execute where many robotics competitors may struggle.
Future Hospitality Ventures Holdings Inc., or FHVH, Ventures Holdings or Future Hospitality, a Nevada corporation which we acquired on February 2, 2024, enhances this foundation by delivering advanced AI-enabled robotic systems designed to reduce labor costs, increase efficiency, and improve consumer experience. Launched in California shortly before the state’s 2025 minimum wage increase in foodservice and hospitality, Ventures Holdings has benefited from heightened industry awareness and urgency around automation. Its plug-and-play solutions are designed to integrate easily into restaurants, hotels, healthcare facilities, school cafeterias, and other foodservice environments, with exponential benefits for operators managing multiple locations is our initial strategic focus.
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SWC Group, Inc., or SWC, a California corporation which we acquired on March 31,2025, further complements the Company’s ecosystem, having served more than 6,000 foodservice operators across the United States. As a recognized leader in custom-printed foodservice packaging, SWC generates recurring revenue while also providing a ready-made distribution and marketing channel for cross-selling our robotic solutions to an established base of industry decision-makers.
On August 27, 2025, the Company completed the acquisition of the Holiday Inn Victorville, a 155-room hotel property, through an all-equity transaction valued at approximately $39.0 million (excluding contingent consideration of $7.13 million), consisting of the issuance of 216,667 shares of the Company’s Series C Convertible Preferred Stock. This property is one of two hotel assets recently acquired by the Company and is intended to support the Company’s operational presence in the hospitality sector and facilitate evaluation of its robotic solutions within an operating hotel environment.
On September 30, 2025, the Company completed the acquisition of Treasure Mountain Holdings, LLC, the owner of the Hilton Garden Inn Palm Springs - Rancho Mirage, for total consideration of approximately $42.28 million (excluding contingent consideration of $4.8 million), which was satisfied through the issuance of 176,167 shares of Series C Convertible Preferred Stock.
Our Products and Services
The Company offers a comprehensive suite of products and services designed to meet the evolving needs of the hospitality and food service industries. Through TechForce, we deploy AI-enhanced robotic systems and automation services that handle repetitive, labor-intensive tasks such as food delivery, bussing, cleaning, and back-of-house operations. Future Hospitality provides plug-and-play robotic solutions integrated with proprietary AI software, enabling customers to improve efficiency, reduce labor costs, and enhance guest experiences across restaurants, hotels, healthcare facilities, and institutional foodservice environments. SWC complement these technological offerings with custom-printed packaging products, including cups, containers, and other foodservice supplies, giving operators both brand-enhancing packaging and a direct channel to adopt robotic solutions. Together, these subsidiaries allow the Company to provide end-to-end solutions, combining automation hardware, AI-enhanced software, service and maintenance, and consumable packaging products, creating a vertically integrated platform that drives operational efficiency and customer value.
TechForce’s Products and Services
The Company believes TechForce is uniquely positioned as the operational backbone of its robotics platform, leveraging decades of hands-on hospitality and food service expertise to ensure the successful deployment of AI-enhanced automation solutions. Unlike many robotics companies that focus solely on hardware, TechForce combines robotics with deep operational know-how, enabling seamless integration of automation into real-world environments.
TechForce offers a suite of robotics and automation solutions under the Robots-as-a-Service (RaaS) model, designed to address repetitive, labor-intensive, and injury-prone tasks that are increasingly difficult for staff to manage. These solutions support both guest-facing and back-of-house operations, helping operators achieve cost savings, efficiency improvements, and enhanced service consistency.
Products and Solutions
TechForce Robotics offers a portfolio of AI-enhanced robotic systems designed to support operational, logistics, and service functions in hospitality, foodservice, and other commercial environments.
(a) BIM-E - Beverage and Inventory Management Engine
BIM-E is an AI-enhanced robotic system designed to automate beverage preparation and dispensing in high-volume service environments, including hotels, resorts, stadiums, and event venues. The system is designed to support standardized beverage preparation, inventory monitoring, and operational data capture. BIM-E may integrate with point-of-sale and other operational systems, subject to configuration, and is intended to reduce manual labor requirements and improve operational consistency.
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(b) TIM-E - Task and Intelligent Mobility Engine
TIM-E is an AI-enhanced autonomous mobile robotics platform designed to perform configurable logistics and service tasks within hospitality and commercial facilities. The platform supports autonomous navigation and integration with elevators and access systems, subject to site configuration. TIM-E is designed to accommodate modular payloads, enabling deployment across multiple operational use cases, including internal delivery and facility support functions.
(c) Concierge - Autonomous Delivery System
Concierge is an autonomous robotic delivery system designed for use in hotel and resort environments. The system is intended to support the transport of items such as meals, beverages, and guest supplies within a facility. Concierge supports autonomous navigation and secure compartmentalization and is designed to operate in conjunction with existing building infrastructure, subject to site configuration.
(d) LIN-E - Laundry and Housekeeping Support System
LIN-E is an AI-enhanced robotic system designed to support housekeeping and back-of-house logistics operations. The system is intended to transport laundry, linens, and waste materials within large facilities, including hotels, convention centers, and stadiums. LIN-E supports autonomous navigation and building access integration, subject to site configuration, and is designed to reduce manual handling requirements.
(e) Matradee - Food Service Support System
Matradee is a robotic system designed to assist front-of-house foodservice operations by transporting prepared food items within dining environments. The system is intended to operate alongside human staff and support service flow efficiency in high-volume foodservice settings.
(f) Dustee - Autonomous Cleaning System
Dustee is an autonomous robotic system designed to perform routine sweeping and basic floor-cleaning tasks in hospitality and commercial environments. The system is intended to support daily cleaning operations and reduce reliance on manual labor for repetitive cleaning functions.
TechForce’s management has an established track record of building and managing more than 130 hotels and developing over 50 properties from the ground up. This operational background provides the Company with a unique advantage: the ability to test, refine, and implement robotic solutions in live hospitality environments with confidence and precision.
In recent months, TechForce’s team has begun positioning its solutions for deployment across hotels, convention centers, healthcare facilities, and shopping malls. The Company is also using its owned hotel assets-including the recently acquired Holiday Inn Victorville-as innovation hubs to validate and showcase real-world use cases for robotics and AI-enhanced automation.
Future Hospitality’s Products and Services
The Company believes it is revolutionizing the hospitality industry with plug-and-play robotics and automation solutions designed to enhance service efficiency and consistency.
Future Hospitality offers two key robotics solutions through the RaaS business model, which can transform both front-end and back-end operations within the hospitality industry.
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Future Hospitality offers the following products and solutions:
(a) Front-End Solutions
The serving robot, an advanced front-end solution, works alongside wait staff to ensure faster and more reliable service. These server robots help streamline service delivery, enhancing guest experiences by minimizing wait times and reducing human errors.
(b) Back-End Solutions
Smart cooking bots provide game-changing back-end solutions to support chefs in high-volume environments. The advanced kitchen assistant ensures consistent food quality and enables even inexperienced staff to prepare delicious meals quickly, addressing critical challenges in busy kitchens.
In recent months, Future Hospitality has been actively showcasing the capabilities of its service robots and automated systems to various regional restaurant franchises, assisted living facilities, hotels, and hospital operators. These demonstrations have sparked significant interest among industry leaders seeking to solve service inconsistency, labor shortages, and ongoing staffing replacement costs.
Future Hospitality is in active discussions with several organizations interested in implementing these automation solutions at scale in their day-to-day operations.
SWC’s Products and Services
The Company believes that SWC (doing business as CarryOutSupplies.com) is one of the most recognized names in the custom-printed foodservice packaging industry, serving as both a revenue-generating subsidiary and a strategic channel for introducing our robotics and automation solutions to the market. With over 6,000 customers served across the United States since inception, SWC has established a strong reputation for quality, reliability, and service.
SWC provides a wide range of foodservice packaging products, specializing in custom printing that helps operators strengthen their brand identity while meeting day-to-day operational needs.
SWC offers the following products and solutions:
(a) Custom-Printed Cups
Disposable paper and plastic cups available in multiple sizes, with high-quality custom printing to promote brand visibility and enhance customer experience
(b) Takeout Containers and Boxes
Eco-friendly and durable packaging for restaurants, caterers, and foodservice operators, designed to keep food fresh during transport while showcasing custom branding.
(c) Utensils and Accessories
Branded or generic foodservice accessories, including straws, cutlery, napkins, and lids, to provide operators with a one-stop shop for all consumable needs.
(d) Eco-Friendly Packaging Solutions
Compostable and recyclable packaging options are designed to meet increasing consumer and regulatory demand for sustainable products, helping operators align with ESG and green initiatives.
In addition to providing consumables, SWC serves as a strategic sales and distribution channel for the Company’s robotics offerings. Its established relationships with thousands of foodservice operators give the Company immediate access to decision-makers who are increasingly seeking automation solutions to reduce costs and improve efficiency.
By offering consumable products alongside its robotic solutions, SWC seeks to generate recurring revenue and support adoption of the Company’s automation technologies in hospitality and foodservice environments. The integrated offering is intended to support operational efficiencies through standardized supplies and coordinated logistics.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates, including those related to allowance for doubtful accounts, allowance for inventory write-downs and write offs, deferred income taxes, provision for contractual obligations and our ability to continue as a going concern. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Note 2 to the consolidated financial statements, presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. There were no significant changes in our critical accounting estimates during the nine months ended March 31, 2026.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
| Three Months Ended March 31, | Period Change | |||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||||
| Amount | Amount | $ Amount | % Change | |||||||||||||||
| Revenues - net | $ | 2,709,023 | $ | 1,264 | $ | 2,707,759 | 214,221 | % | A | |||||||||
| Cost of sales | 724,361 | - | 724,361 | N/M | B | |||||||||||||
| Depreciation and amortization | 1,063,102 | - | 1,063,102 | N/M | C | |||||||||||||
| General and administrative expenses | 5,091,316 | 1,566,833 | 3,524,483 | 225 | % | D | ||||||||||||
| Loss from operations | (4,169,756 | ) | (1,565,569 | ) | 2,604,187 | 166 | % | |||||||||||
| Other income (expense) - net | (1,250,441 | ) | (944,204 | ) | 306,237 | 32 | % | E | ||||||||||
| Loss from continuing operations | (5,420,197 | ) | (2,509,773 | ) | 2,910,424 | 116 | % | |||||||||||
| Loss from discontinued operations | (487 | ) | (31,779 | ) | (31,292 | ) | (98 | )% | ||||||||||
| Net loss | $ | (5,420,684 | ) | $ | (2,541,552 | ) | $ | 2,879,132 | 113 | % | ||||||||
A. Revenues - net
Revenues were $2,709,023 for the three months ended March 31, 2026, compared to $1,264 in the prior-year quarter. Current-quarter continuing-operations revenues by reportable segment were:
| ● | Hotel Operations: $2,381,085, or 88% of revenues, representing the second full quarter of operations for both the Holiday Inn Victorville and the Hilton Garden Inn Rancho Mirage; | |
| ● | Foodservice Packaging: $322,069, or 12% of revenues, representing the fourth full quarter of contribution from SWC; and | |
| ● | Robotics-as-a-Service: $5,869, or less than 1% of revenues, from pilot deployments and recurring service fees across hospitality, casino, retail, stadium, and other venues. |
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The prior-year quarter included only incidental revenues; the hotels had not yet been acquired and SWC was acquired on the last day of that quarter. See “Hotel Operations Discussion” below.
B. Cost of Sales
Cost of sales was $724,361 for the current quarter, compared to none in the prior-year quarter, reflecting property-level operating costs at the two hotels (payroll, utilities, guest supplies, franchise and management fees, and food and beverage costs), product and distribution costs at the foodservice packaging operation, and direct deployment costs in the robotics business. Cost of sales attributable to the legacy snacks and beverages business is presented within the loss from discontinued operations line item for both periods and is therefore not reflected in the continuing-operations cost of sales above.
C. Depreciation and Amortization
Depreciation and amortization expense was $1,063,102 for the current quarter, compared to none in the prior-year quarter. The increase reflects a full quarter of depreciation of the hotel buildings, land improvements, and furniture, fixtures and equipment acquired during the first quarter of fiscal 2026, amortization of acquired franchise, customer relationship, and other intangible assets, and amortization of operating lease right-of-use assets recognized in connection with the hotel and corporate operations.
D. General and Administrative Expenses
General and administrative expenses were $5,091,316 for the current quarter, compared to $1,566,833 in the prior-year quarter, an increase of $3,524,483, or 225%. The principal drivers were:
| ● | Expanded payroll, benefits, and contracted services to support the hotel, foodservice packaging, and robotics operations and corporate support functions; | |
| ● | Non-cash stock-based compensation, including the vesting of Series C convertible preferred stock issued as compensation and common stock issued for services; | |
| ● | Public company professional fees, including audit, tax, legal, SEC reporting, transfer agent, director and officer insurance, and investor relations; | |
| ● | Integration and start-up costs related to combining the hotel, packaging, and robotics operations under a unified operating platform; | |
| ● | Hotel property-level and segment corporate overhead, including regional management, revenue management, information technology, and centralized purchasing; and | |
| ● | General inflationary pressures on compensation, insurance, and other overhead. |
Loss from Operations
Loss from operations widened to $(4,169,756) for the current quarter from $(1,565,569) in the prior-year quarter, an increase in the operating loss of $2,604,187, or 166%. The hotel properties continue to operate within their stabilization period (during which occupancy and rate levels are typically below long-term targets while operating costs and capital improvement requirements remain elevated), and the Company is absorbing the full cost structure of an expanded multi-segment public company. Current-quarter revenues did not yet cover current-quarter operating costs and depreciation and amortization.
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E. Other Income (Expense) - net
Other expense, net, was $(1,250,441) for the current quarter, compared to $(944,204) in the prior-year quarter, an increase in net other expense of $306,237, or 32%. The increase reflects substantially higher interest expense and debt discount amortization on the Company’s expanded debt structure (including hotel mortgage notes and convertible notes payable issued during fiscal 2026), partially offset by a $1,290,823 non-cash gain on the change in fair value of derivative liabilities. See further detail below.
Net Loss
| Three Months Ended March 31, | Period Change | |||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||
| Amount | Amount | $ Amount | % Change | |||||||||||||
| Net Loss | $ | (5,420,684 | ) | $ | (2,541,552 | ) | $ | 2,879,132 | 113 | % | ||||||
Net loss was $(5,420,684) for the current quarter, compared to $(2,541,552) in the prior-year quarter, an increase of $2,879,132, or 113%. The principal drivers of the increase were:
| (i) | A wider operating loss of $(4,169,756), as discussed in items A through D above, reflecting the cost structure of an expanding multi-segment operating company during the hotel stabilization period; | |
| (ii) | Higher non-operating expense (item E), principally driven by a $1,620,303 increase in interest expense and amortization of debt discount, partially offset by a $1,290,823 non-cash gain on the change in fair value of derivative liabilities and a modest decrease in derivative expense; partially offset by | |
| (iii) | A $31,292 reduction in the loss from discontinued operations as wind-down activities for the legacy snacks and beverages business were substantially completed effective June 30, 2025. |
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OTHER INCOME (EXPENSE) - NET
Three Months Ended March 31, 2026 and 2025
| Three Months Ended March 31, | Period Change | |||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||||
| Other income (expense) - net | Amount | Amount | $ Amount | % Change | ||||||||||||||
| Interest income | $ | - | $ | 3,811 | $ | (3,811 | ) | (100 | )% | A | ||||||||
| Other income | 6,101 | - | 6,101 | N/M | B | |||||||||||||
| Derivative expense | (590,630 | ) | (611,583 | ) | (20,953 | ) | (3 | )% | C | |||||||||
| Interest expense (including amortization of debt discount) | (1,956,735 | ) | (336,432 | ) | 1,620,303 | 482 | % | D | ||||||||||
| Change in fair value of derivative liabilities | 1,290,823 | - | 1,290,823 | N/M | E | |||||||||||||
| Total other income (expense) - net | $ | (1,250,441 | ) | $ | (944,204 | ) | $ | 306,237 | 32 | % | ||||||||
A - Interest Income
Interest income was none for the current quarter, compared to $3,811 in the prior-year quarter. The decrease reflects the absence of an interest-bearing acquisition note receivable that was outstanding during the prior-year quarter.
B - Other Income
Other income was $6,101 for the current quarter, with no comparable amount in the prior-year quarter, consisting of miscellaneous incidental items.
C - Derivative Expense
Derivative expense was $(590,630) for the current quarter, compared to $(611,583) in the prior-year quarter, a modest decrease of $20,953. The current-quarter charge reflects the bifurcation of conversion features on the three convertible notes issued during the current quarter:
| ● | January 10, 2026 senior secured convertible note: $239,342 was charged to derivative expense at issuance; | |
| ● | March 19, 2026 senior secured convertible note: $242,005 was charged to derivative expense at issuance; and | |
| ● | March 31, 2026 related-party convertible note: $109,283 was charged to derivative expense at issuance. |
Derivative expense represents the excess, at issuance, of the fair value of bifurcated conversion features and other embedded derivatives over the net proceeds received on the underlying convertible debt instruments.
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D - Interest Expense (including amortization of debt discount)
Interest expense, including amortization of debt discounts, increased $1,620,303, or 482%, to $1,956,735 for the current quarter from $336,432 in the prior-year quarter. The increase reflects substantially higher average outstanding debt during the current quarter, including the hotel mortgage notes payable and the Company’s previously-issued senior secured convertible note and other notes payable outstanding throughout the quarter, together with three additional convertible notes payable issued during the current quarter:
| ● | January 10, 2026 senior secured convertible note with a face amount of $1,175,000, original issue discount of $201,252, and net proceeds of $973,748; | |
| ● | March 19, 2026 senior secured convertible note with a face amount of $1,176,471, original issue discount of $176,471, and net proceeds of $1,000,000; and | |
| ● | March 31, 2026 related-party convertible note. |
Each of the Company’s senior secured convertible notes bears interest at 15% per annum (24% upon default). The increase in interest expense also reflects accrued default interest on instruments in default and significantly higher non-cash amortization of debt discount on the Company’s outstanding convertible notes.
E - Change in Fair Value of Derivative Liabilities
The Company recognized a non-cash gain of $1,290,823 for the current quarter from the favorable remeasurement of its bifurcated derivative liabilities to fair value at the reporting date. No comparable adjustment was recorded in the prior-year quarter as no instruments with bifurcated derivative liabilities were outstanding during that period. Because the fair value of these instruments is highly sensitive to changes in the Company’s common stock price and expected volatility, the period-over-period change can result in significant gains or losses that may not correlate with the Company’s operating performance.
Total Other Income (Expense) - net
Total net other expense increased to $(1,250,441) for the current quarter from $(944,204) in the prior-year quarter, an increase of $306,237, or 32%, principally driven by the increase in interest expense and amortization of debt discount (item D), partially offset by the non-cash gain on the change in fair value of derivative liabilities (item E).
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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2026 AND 2025
| Nine Months Ended March 31, | Period Change | |||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||||
| Amount | Amount | $ Amount | % Change | |||||||||||||||
| Revenues - net | $ | 5,681,079 | $ | 1,681 | $ | 5,679,398 | 337858 | % | A | |||||||||
| Cost of sales | 1,974,415 | - | 1,974,415 | N/M | B | |||||||||||||
| Depreciation and amortization | 2,414,226 | - | 2,414,226 | N/M | C | |||||||||||||
| General and administrative expenses | 11,143,240 | 1,977,559 | 9,165,681 | 463 | % | D | ||||||||||||
| Loss from operations | (9,850,802 | ) | (1,975,878 | ) | 7,874,924 | 399 | % | E | ||||||||||
| Other income (expense) - net | (3,550,687 | ) | (1,635,837 | ) | 1,914,850 | 117 | % | F | ||||||||||
| Loss from continuing operations | (13,401,489 | ) | (3,611,715 | ) | 9,789,774 | 271 | % | G | ||||||||||
| Loss from discontinued operations | (3,050 | ) | (174,054 | ) | (171,004 | ) | (98 | )% | H | |||||||||
| Net loss | $ | (13,404,539 | ) | $ | (3,785,769 | ) | $ | 9,618,770 | 254 | % | I | |||||||
A. Revenues - net
Revenues were $5,681,079 for the nine months ended March 31, 2026, compared to $1,681 in the prior-year period. The increase principally reflects the contribution of the two hotel properties acquired during the first quarter of fiscal 2026 (closed August 27, 2025 and September 30, 2025) and a full nine months of contribution from the foodservice packaging operation. Current-period continuing-operations revenues by reportable segment were:
| ● | Hotel Operations: $4,551,198, or 80% of revenues, reflecting partial-period and full-period contribution from the two hotels since their respective acquisition dates; | |
| ● | Foodservice Packaging: $1,091,895, or 19% of revenues, reflecting a full nine months of contribution from SWC; and | |
| ● | Robotics-as-a-Service: $37,986, or less than 1% of revenues, from pilot deployments and recurring service fees. |
The prior-year period was substantially pre-revenue with respect to continuing operations.
B. Cost of Sales
Cost of sales was $1,974,415 for the current period, compared to none in the prior-year period, reflecting the operating cost categories described in the corresponding three-month section. Prior-period cost of sales attributable to the legacy snacks and beverages business is presented within the loss from discontinued operations line item and is not reflected in the continuing-operations cost of sales above.
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C. Depreciation and Amortization
Depreciation and amortization expense was $2,414,226 for the current period, compared to none in the prior-year period, reflecting depreciation of hotel and other acquired property and equipment, amortization of acquired intangible assets, and amortization of operating lease right-of-use assets, all of which were placed in service during the first quarter of fiscal 2026 and accordingly had no prior-year comparable activity within continuing operations.
D. General and Administrative Expenses
General and administrative expenses were $11,143,240 for the current period, compared to $1,977,559 in the prior-year period, an increase of $9,165,681, or 463%. Non-cash stock-based compensation alone accounted for $2,177,560 of current-period expense (including $1,810,840 from the vesting of Series C convertible preferred stock issued as compensation and $366,720 from common stock issued for services), and the Company recognized an additional $253,400 of expense from common stock issued for intellectual property. The remaining increase reflects expanded compensation and headcount across the segments and corporate functions, public company professional fees and compliance costs, integration and start-up expenses, and $58,769 of bad debt expense on receivables from new operations.
E. Loss from Operations
Loss from operations widened to $(9,850,802) for the current period from $(1,975,878) in the prior-year period, an increase in the operating loss of $7,874,924, or 399%. The wider loss reflects partial-period and stabilization-period economics of the hotel properties, the addition of segment-level costs in foodservice packaging and robotics, and the corporate overhead and stock-based compensation of an expanded multi-segment public company. Current-period revenues of $5,681,079 did not yet cover current-period operating costs and depreciation and amortization.
Segment Operating Performance
The consolidated loss from operations of $(9,850,802) reflects performance across the Company’s three reportable segments and corporate-level activities that are not allocated to the segments:
| ● | Hotel Operations: segment operating loss of $(1,687,974), reflecting stabilization-period economics at the two recently-acquired hotel properties, during which occupancy and rate performance is below long-term targets while property-level operating costs, depreciation, and amortization remain elevated; | |
| ● | Foodservice Packaging: segment operating loss of $(855,368); | |
| ● | Robotics-as-a-Service: segment operating loss of $(2,072,292), reflecting early-stage investment in pilot deployments, robotics development, and platform commercialization activities; and | |
| ● | Corporate overhead and unallocated: operating loss of $(5,239,784), representing the largest single component of the consolidated operating loss. Corporate-level activities include public company compliance, executive management, finance, legal, and other centralized functions that are not allocated to the reportable segments, as well as non-cash stock-based compensation expense. |
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F. Other Income (Expense) - net
Other expense, net, was $(3,550,687) for the current period, compared to $(1,635,837) in the prior-year period, an increase in net other expense of $1,914,850, or 117%. The increase principally reflects significantly higher interest expense and amortization of debt discount and increased non-cash derivative expense, partially offset by a non-cash gain on the change in fair value of derivative liabilities and the absence of a prior-year loss on debt extinguishment. See further detail below.
G. Net Loss from Continuing Operations
| Nine
Months Ended March 31, | Nine
Months Ended March 31, | Period Change | Period Change | |||||||||||||
| 2026 | 2025 | $ Amount | % Change | |||||||||||||
| Net loss from continuing operations | $ | (13,401,489 | ) | $ | (3,611,715 | ) | 9,789,774 | 271 | % | |||||||
Net loss from continuing operations was $(13,401,489) for the current period, compared to $(3,611,715) in the prior-year period, an increase of $9,789,774, or 271%, reflecting the wider operating loss (items A through E) and the increase in net non-operating expense (item F).
H. Net Loss from Discontinued Operations
Net loss from discontinued operations was $(3,050) for the current period, compared to $(174,054) in the prior-year period, a decrease in the loss of $(171,004), or 98%. The improvement reflects the substantial completion of wind-down activities for the legacy snacks and beverages business effective June 30, 2025.
I. Net Loss
| Nine Months Ended March 31, | Period Change | |||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||
| Amount | Amount | $ Amount | % Change | |||||||||||||
| Net Loss | $ | (13,404,539 | ) | $ | (3,785,769 | ) | $ | 9,618,770 | 254 | % | ||||||
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Net loss was $(13,404,539) for the current period, compared to $(3,785,769) in the prior-year period, an increase of $9,618,770, or 254%. The principal drivers of the increase were:
| (i) | A wider operating loss of $(9,850,802), as discussed in items A through E above, including $1,974,415 of cost of sales, $2,414,226 of depreciation and amortization, and $11,143,240 of general and administrative expenses (which included approximately $2,431,000 of non-cash stock-based and intellectual-property compensation) against current-period revenues of $5,681,079; | |
| (ii) | An increase in net non-operating expense of $1,914,850 (item F), principally driven by interest expense of $4,131,634 in the current period compared to $981,199 in the prior-year period (reflecting hotel mortgage debt, the October 2025 senior secured convertible note with $1,929,500 of net proceeds, additional convertible note arrangements, and amortization of related debt discounts of $2,031,240 in the current period compared to $186,318 in the prior-year period), and an increase in derivative expense of $874,804; partially offset by a $2,028,810 non-cash gain on the change in fair value of derivative liabilities and the absence of a prior-year loss on debt extinguishment of $113,955; partially offset by | |
| (iii) | A $171,004 reduction in the loss from discontinued operations as wind-down activities for the legacy snacks and beverages business were substantially completed effective June 30, 2025. |
OTHER INCOME (EXPENSE) - NET
Nine Months Ended March 31, 2026 and 2025
| Nine Months Ended March 31, | Period Change | |||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||||
| Other income (expense) - net | Amount | Amount | $ Amount | % Change | ||||||||||||||
| Interest income | $ | - | $ | 70,900 | $ | (70,900 | ) | (100 | )% | A | ||||||||
| Other income | 38,524 | - | $ | 38,524 | N/M | B | ||||||||||||
| Loss on debt extinguishment | - | (113,955 | ) | (113,955 | ) | (100 | )% | C | ||||||||||
| Derivative expense | (1,486,387 | ) | (611,583 | ) | 874,804 | 143 | % | D | ||||||||||
| Interest expense (including amortization of debt discount) | (4,131,634 | ) | (981,199 | ) | 3,150,435 | 321 | % | E | ||||||||||
| Change in fair value of derivative liabilities | 2,028,810 | - | $ | 2,028,810 | N/M | F | ||||||||||||
| Total other income (expense) - net | $ | (3,550,687 | ) | $ | (1,635,837 | ) | $ | 1,914,850 | 117 | % | ||||||||
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A - Interest Income
Interest income was none for the current period, compared to $70,900 in the prior-year period. The decrease reflects the absence of an interest-bearing acquisition note receivable that was outstanding during the prior-year period.
B - Other Income
Other income was $38,524 for the current period, with no comparable amount in the prior-year period.
C - Loss on Debt Extinguishment
No loss on debt extinguishment was recognized for the current period, compared to a loss of $(113,955) in the prior-year period arising from the July 2024 modification of two convertible notes that qualified as a debt extinguishment, in connection with which the Company issued 1,667 shares of Series D convertible preferred stock.
D - Derivative Expense
Derivative expense was $(1,486,387) for the current period, compared to $(611,583) in the prior-year period, a significant increase of $874,804. The current-period charge reflects the bifurcation of conversion features on the four convertible notes issued during the current period:
| ● | October 8, 2025 senior secured convertible note: $895,757 was charged to derivative expense at issuance; | |
| ● | January 10, 2026 senior secured convertible note: $239,342 was charged to derivative expense at issuance; | |
| ● | March 19, 2026 senior secured convertible note: $242,005 was charged to derivative expense at issuance; and | |
| ● | March 31, 2026 related-party convertible note: $109,283 was charged to derivative expense at issuance. |
Derivative expense represents the excess, at issuance, of the fair value of bifurcated conversion features and other embedded derivatives over the net proceeds received on the underlying convertible debt instruments.
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E - Interest Expense (including amortization of debt discount)
Interest expense, including amortization of debt discounts, increased $3,150,435, or 321%, to $4,131,634 for the current period from $981,199 in the prior-year period. The increase reflects substantially higher average outstanding mortgage and convertible debt balances during the current period, including the hotel mortgage notes payable assumed in connection with the hotel acquisitions and four convertible notes payable issued during the current period:
| ● | October 8, 2025 senior secured convertible note with a face amount of $2,270,000, original issue discount of $340,500, and net proceeds of $1,929,500; | |
| ● | January 10, 2026 senior secured convertible note with a face amount of $1,175,000, original issue discount of $201,252, and net proceeds of $973,748; | |
| ● | March 19, 2026 senior secured convertible note with a face amount of $1,176,471, original issue discount of $176,471, and net proceeds of $1,000,000; and | |
| ● | March 31, 2026 related-party convertible note. |
The three senior secured convertible notes generated aggregate net proceeds of $3,903,248. Each senior secured convertible note bears interest at 15% per annum (24% upon default). The increase in interest expense also reflects accrued default interest on instruments in default and significantly higher non-cash amortization of debt discount of $2,031,240 in the current period compared to $186,318 in the prior-year period.
F - Change in Fair Value of Derivative Liabilities
The Company recognized a net non-cash gain of $2,028,810 for the current period from favorable remeasurement of its bifurcated derivative liabilities to fair value at the reporting date. No comparable adjustment was recorded in the prior-year period.
Total Other Income (Expense) - net
Total net other expense increased to $(3,550,687) for the current period from $(1,635,837) in the prior-year period, an increase of $1,914,850, or 117%, principally driven by the increase in interest expense (item E) and the increase in derivative expense (item D), partially offset by the net gain on the change in fair value of derivative liabilities (item F) and the absence of a prior-period loss on debt extinguishment (item C).
HOTEL OPERATIONS DISCUSSION
During the first quarter of fiscal 2026, the Company completed two hotel acquisitions that transformed it into an owner and operator of lodging properties in addition to its foodservice packaging and robotics businesses:
| ● | Holiday Inn Victorville, California: a 155-room property acquired on August 27, 2025 in a share exchange transaction valued at approximately $46.1 million. Consideration consisted of 216,667 shares of Series C convertible preferred stock valued at $39,000,060, with up to an additional 41,667 shares (valued at $7,125,000) issuable as contingent consideration. The property is being established as a Company AI hospitality innovation hub for robotics deployment, testing, and operational benchmarking. | |
| ● | Hilton Garden Inn Rancho Mirage, California: a 120-room property acquired on September 30, 2025 in a share exchange transaction valued at approximately $47.1 million. Consideration consisted of 176,167 shares of Series C convertible preferred stock valued at $42,280,080, with up to an additional 20,000 shares (valued at $4,800,000) issuable as contingent consideration. The property is strategically located adjacent to Cotino, a Storyliving by Disney community, and serves as a flagship property for the Company’s robotics platform. |
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The hotels added a substantial revenue base, property-level operating costs, depreciation and amortization, and mortgage debt to the consolidated financial statements. The March 2026 quarter represented the second full quarter of operations for both properties. Management is implementing revenue-management initiatives, updated reservation systems, and targeted marketing intended to grow occupancy, average daily rate (“ADR”), and revenue per available room (“RevPAR”) over time. The Company is also integrating the hotels with the broader robotics platform, including the planned deployment of TechForce Robotics AI-powered service robots for housekeeping, food service, and guest management functions.
Hotel properties typically experience a stabilization period of 12 to 24 months following acquisition, during which occupancy and rate performance is below long-term targets while operating costs and capital improvement requirements remain elevated. Management expects hotel-level performance and cash flows to improve as integration progresses, although there can be no assurance that targeted operating performance or return on invested capital will be achieved. Hotel operations are inherently sensitive to general economic conditions, business and leisure travel trends, competitive supply additions, weather, and other factors outside the Company’s control.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Going Concern
For the nine months ended March 31, 2026, the Company had a net loss of $(13,404,539) and net cash used in operating activities of $(5,215,977). At March 31, 2026, the Company had:
| ● | An accumulated deficit of $(60,158,383); | |
| ● | A working capital deficit of $(23,498,273), reflecting current liabilities of $25,381,978 in excess of current assets of $1,883,705; | |
| ● | Positive total stockholders’ equity of $82,614,372, a substantial improvement from the stockholders’ deficit of $(17,332,174) at June 30, 2025, attributable principally to the reclassification of approximately $106,298,927 of convertible preferred stock from temporary equity to permanent stockholders’ equity effective November 19, 2025 following the increase in authorized common shares from 200,000,000 to 900,000,000; and | |
| ● | Cash on hand of $732,691 (the Company holds no cash equivalents). |
These factors, including recurring losses from continuing operations, limited operating cash flows, and dependence on debt and equity financing, continue to raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the accompanying condensed consolidated financial statements. The accompanying financial statements have been prepared on a going-concern basis and do not include any adjustments to the carrying amounts or classifications of assets or liabilities that might result from this uncertainty.
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Management’s plans to address these conditions include:
| ● | Increasing revenue and operating profitability at the hotel properties, including through revenue-management initiatives, cost controls, and selective capital investments, and the potential pursuit of additional hotel acquisitions; | |
| ● | Scaling foodservice packaging and robotics revenues, including through cross-selling into the hotel customer base and expanding robotic deployments into casinos, stadiums, convention centers, public schools, assisted living facilities, and other verticals; | |
| ● | Pursuing additional debt and equity financing, including potential drawdowns under the Equity Purchase Agreement entered into on October 8, 2025, mortgage refinancings, and additional equity issuances; | |
| ● | Advancing the planned uplisting to a national securities exchange; | |
| ● | Commercializing the Beverage Bot platform unveiled in December 2025 and pursuing strategic collaborations, including the Joint Development, Manufacturing and Licensing Agreement entered into on March 31, 2026 and the Supply Agreement executed on April 11, 2026; and | |
| ● | Maintaining disciplined capital allocation, including reviewing underperforming assets and considering asset sales, restructurings, or partnership arrangements where appropriate. |
There can be no assurance that these plans will be successful or that additional financing will be available on acceptable terms or in sufficient amounts. If the Company is unable to obtain necessary financing or improve operating cash flows, it may be required to delay or curtail expansion plans, sell or restructure assets, restructure or refinance obligations, or pursue other strategic alternatives.
Cash
| Period Change | ||||||||||||||||
| Increase (Decrease) | ||||||||||||||||
| March 31, 2026 | June 30, 2025 | $ Amount | % Change | |||||||||||||
| Cash and cash equivalents | $ | 732,691 | $ | 350,231 | $ | 382,460 | 109 | % | ||||||||
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Cash increased $382,460, or approximately 109%, to $732,691 at March 31, 2026 from $350,231 at June 30, 2025. The increase reflects approximately $4.8 million of net financing proceeds and $1,269,000 of cash acquired in the hotel acquisitions, partially offset by approximately $5.2 million of cash used in operating activities, $215,771 of contractual debt principal repayments, and $252,179 of capital expenditures. The Company does not hold any cash equivalents.
Summary of Cash Flow Activities
| Nine Months Ended March 31, | Period Change | |||||||||||||||
| 2026 | 2025 | Increase (Decrease) | ||||||||||||||
| Net Cash Provided by (Used in) | Amount | Amount | $ Amount | % Change | ||||||||||||
| Operating activities | $ | (5,215,977 | ) | $ | (665,254 | ) | $ | 4,550,723 | 684 | % | ||||||
| Investing activities | 1,016,821 | (294,790 | ) | $ | 1,311,611 | 445 | % | |||||||||
| Financing activities | 4,581,616 | 959,650 | $ | 3,621,966 | 377 | % | ||||||||||
| Net change in cash | $ | 382,460 | $ | (394 | ) | $ | 382,854 | 97171 | % | |||||||
Operating Activities
Cash used in operating activities increased $4,551,007, to $(5,215,977), reflecting the wider net loss, unfavorable working capital changes (most notably a $(221,571) decrease in accounts payable and accrued expenses and a $(188,366) increase in accounts receivable), partially offset by a $2,271,092 increase in related-party accounts payable and accrued expenses and significantly higher non-cash charges. Material non-cash charges that partially offset the net loss included $2,174,582 of depreciation and amortization, $1,486,387 of derivative expense, $2,031,240 of amortization of debt discount, $2,177,560 of stock-based compensation, and $253,400 of stock issued for intellectual property, partially reduced by a $(2,028,810) non-cash gain on the change in fair value of derivative liabilities.
Investing Activities
Investing activities provided $1,016,821 of cash, compared to a use of $(294,790) in the prior-year period. The change reflects $1,269,000 of cash acquired in connection with the hotel acquisitions and $(252,179) of capital expenditures for robotics units, hotel furniture, fixtures and equipment, and other property and equipment. The prior-year period reflected $28,253 of cash acquired in connection with the Skytech acquisition, $(39,700) of capital expenditures, and $(283,343) of acquisition-related costs financed directly with debt.
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Financing Activities
Financing activities provided $4,581,616 of cash, compared to $959,650 in the prior-year period. Current-period sources of cash consisted of $894,423 in proceeds from the issuance of common stock to third-party investors in private placement transactions and $3,903,248 in aggregate net proceeds from the issuance during the period of three senior secured convertible notes:
| ● | October 8, 2025 senior secured convertible note: net proceeds of $1,929,500; | |
| ● | January 10, 2026 senior secured convertible note: net proceeds of $973,748; and | |
| ● | March 19, 2026 senior secured convertible note: net proceeds of $1,000,000. |
These sources were partially offset by $(18,272) of contractual principal repayments on notes payable and $(197,783) of contractual principal repayments on hotel mortgage notes payable.
On March 31, 2026, the Company also issued a related-party convertible note in exchange for the non-cash conversion of $73,927 of related-party accounts payable; that issuance is reflected in the supplemental disclosure of non-cash investing and financing activities and is therefore excluded from current-period financing activities cash flow.
The prior-year financing activity consisted entirely of $959,650 of proceeds from a single convertible note. The shift reflects the Company’s transition to a more diversified capital structure to fund hotel operations, integration, capital investments, and working capital.
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Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations is based upon our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosures of contingent assets and liabilities.
These estimates are based on historical experience and on various other factors believed to be reasonable under the circumstances, including current economic conditions and information available at the time the financial statements are prepared. Actual results may differ materially from those estimates, and such differences could have a material impact on our financial position or results of operations.
We define our critical accounting policies as those that require significant judgment or complexity in their application and that are most important to the portrayal of our financial condition and results of operations. These policies typically require assumptions about matters that are uncertain at the time the estimate is made and could change materially in subsequent periods.
Significant estimates for the nine months ended March 31, 2026 and 2025, respectively, include the following:
| ● | Allowance for Doubtful Accounts and Other Receivables - Management evaluates the collectability of accounts and other receivables based on historical trends, customer-specific credit risk, aging, and current economic conditions. Adjustments to the allowance are recorded as necessary to reflect expected losses. | |
| ● | Inventory Reserves and Classifications - We assess our inventory for obsolescence, impairment, and classification between raw materials, work-in-process, and finished goods. Changes in demand forecasts, damage, or excess supply may lead to write-downs to net realizable value. | |
| ● | Valuation of Goodwill and Intangible Assets (Acquired in an Acquisition) - Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment, or more frequently if events or circumstances indicate possible impairment. Valuation involves estimating future discounted cash flows or applying a market-based approach. | |
| ● | Impairment Losses Related to Goodwill and Intangible Assets - We periodically assess long-lived assets and intangible assets with finite lives for impairment when indicators of impairment are present. The process includes evaluating future cash flows and other market-based factors. | |
| ● | Valuation of Loss Contingencies - We assess potential liabilities from legal proceedings, regulatory matters, and other contingencies and recognize a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. | |
| ● | Valuation of Stock-Based Compensation - We estimate the fair value of stock-based compensation awards using appropriate valuation models (e.g., Black-Scholes), which include assumptions such as volatility, risk-free interest rate, and expected term. The resulting expense is recognized over the requisite service period. | |
| ● | Estimated Useful Lives of Property and Equipment - Depreciation is calculated using estimated useful lives of our tangible assets. These estimates reflect management’s judgment on the period the assets are expected to be used and are adjusted if conditions warrant a revision. |
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| ● | Uncertain Tax Positions - We evaluate our tax positions in accordance with ASC 740 and recognize a liability when it is more likely than not that a tax position will not be sustained upon examination by tax authorities. Estimates are updated as new information becomes available. | |
| ● | Valuation Allowance on Deferred Tax Assets - Deferred tax assets are recognized only to the extent it is more likely than not they will be realized. This assessment includes consideration of future taxable income, tax planning strategies, and historical results. A full valuation allowance remains in place as of March 31, 2026. |
Please refer to Note 2 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, for a comprehensive description of these policies. There were no material changes in our critical accounting policies or estimates during the nine months ended March 31, 2026, though the Company continues to monitor the impact of business combinations, evolving market conditions, and financing transactions (including convertible debt and stock-based compensation) on the valuation of assets, liabilities, and equity-based instruments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2026. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on that evaluation, our chief executive officer concluded that our disclosure controls and procedures were not effective at March 31, 2026 due to the lack of full-time accounting and management personnel. We will consider hiring additional employees when we obtain sufficient capital.
As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.
Changes in internal controls over financial reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not engaged in any litigation at the present time, and management is unaware of any claims or complaints that could result in future litigation. Management will seek to minimize disputes with its customers but recognizes the inevitability of legal action in today’s business environment as an unfortunate price of conducting business.
ITEM 1A. RISK FACTORS.
Not required for smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three months ended March 31, 2026, the Company issued the unregistered equity securities described below. Except as otherwise noted, the issuances were made in private transactions in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D promulgated thereunder. Each recipient represented that it was an accredited investor or otherwise qualified to participate in the transaction and that the securities were acquired for investment and not with a view to distribution. The certificates bear restrictive legends. No underwriters were engaged and no underwriting discounts or commissions were paid.
Common Stock Issued for Advisory Services. On February 1, 2026, the Company issued 2,000,000 shares of common stock to a nonemployee advisor as a one-time onboarding equity bonus under an advisory agreement, having an aggregate fair value of approximately $84,000.
Common Stock Issued for Acquisition of Intellectual Property. On February 17, 2026, the Company issued 7,000,000 shares of common stock to an individual seller as consideration for the acquisition of the BIM-E intellectual property and related technology assets, having an aggregate fair value of approximately $253,400. The issuance was exempt under Section 4(a)(2) of the Securities Act.
Common Stock Issued on Conversion of Convertible Notes Payable. The Company issued an aggregate of 10,100,000 shares of common stock upon conversion of outstanding principal and accrued interest under convertible promissory notes at the contractual conversion price of $0.033 per share. The conversions were exempt under Section 3(a)(9) of the Securities Act, as the shares were exchanged exclusively with existing security holders and no commission or other remuneration was paid for soliciting the exchange.
Common Stock Issued on Conversion of Series C Convertible Preferred Stock. The Company issued 273,804,000 shares of common stock upon conversion of 45,634 shares of Series C Convertible Preferred Stock at the contractual ratio of 6,000 shares of common stock for each share of Series C Convertible Preferred Stock, on the same Section 3(a)(9) basis described above.
Series C Convertible Preferred Stock Vested as Compensation. 24,283 shares of Series C Convertible Preferred Stock vested under previously granted compensation awards.
Convertible Promissory Note Issued to Related Party. On March 31, 2026, the Company issued a convertible promissory note with a face value of $73,927 to a related party in settlement of outstanding accounts payable. The note is convertible into common stock at a conversion price equal to 65% of the lowest trading price during the 20 trading days preceding the conversion date.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
See footnote 5 to the unaudited condensed consolidated financial statements with respect to various debt arrangements in default, including loans #1-#14, #18 and #29 at March 31, 2026.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Rule 10b5-1 Trading Arrangements. During the three months ended March 31, 2026, no director or Section 16 officer of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408(a) of Regulation S-K).
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ITEM 6. EXHIBITS.
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| * | Filed herewith |
| ++ | Indicates a management contract or compensatory plan. |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Nightfood Holdings, Inc. | ||
| Dated: May 20, 2026 | By: | /s/ Jimmy Chan |
| Jimmy Chan | ||
| Chief Executive Officer | ||
| (Principal Executive, Financial and Accounting Officer) | ||
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