NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- ORGANIZATION AND LINE OF BUSINESS
Organization and Basis of Presentation:
The accompanying unaudited interim condensed consolidated financial statements of Advanced Oxygen Technologies, Inc. (“Group” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.
The results of operations for the nine months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending June 30, 2018. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended June 30, 2017 and 2016 included in Form 10-K filed with the SEC.
Lines of Business:
The Company, through its wholly owned subsidiary Anton Nielsen Vojens ApS owns income producing commercial real estate leased until 2026. The real estate consists solely of the land with no buildings or improvements (“Land”). All improvements on the Land are those of the tenant.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue recognition of rental income:
Revenues are
recognized during the period in which the rental payment is received. The
Company applies the provisions of FASB Accounting Standards Codification ('ASC')
605-10. Revenue Recognition in Financial Statements ASC 605-10, which provides
guidance on recognition, presentation, and disclosure of revenues in financial
statements filed with the SEC.
The Company's source of revenue is from a commercial property lease in which quarterly payments are received pursuant to the property lease which is in effect until 2026.
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Property Plant and
Equipment:
Land and
buildings are recognized at cost. Land is carried at cost less accumulated
impairment losses.
Foreign currency translation:
Foreign currency transactions are translated applying the current rate method. Assets and liabilities are translated at current rates. Stockholders' equity accounts are translated at the appropriate historical rates and revenue and expenses are translated at weighted average rates for the year. Exchange rate differences that arise between the rate at the transaction date and the one in effect at the payment date, or at the balance sheet date, are recognized in the income statement.
Income Taxes:
The Company accounts for income taxes under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is required when it is less likely than not that the Company will be able to realize all or a portion of its deferred tax assets. Because it is doubtful that the net operating losses of recent years will ever be used, a valuation allowance has been recognized equal to the tax benefit of net operating losses generated.
Net Earnings per Share:
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of March 31, 2018 and March 31, 2017 there were 10,000 and 10,000 potential dilutive shares that need to be considered as common share equivalents. Because of the net loss at March 31, 2017, the effect of these potential common shares is anti-dilutive for the nine month period ending March 31, 2017.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at March 31, 2018 did not exceed federally insured limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on such amounts.
Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.
Concentrations of Credit Risk:
Financial instruments that potentially subject the Company to major credit risk consist principally of a single subsidiary of Anton Nielsen Vojens ApS.
Reclassification:
Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.
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Recently Issued Accounting Standards:
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On July 9, 2015, the FASB agreed to delay the effective date by one year; accordingly, the new standard is effective for us beginning in the first quarter of 2018 and we expect to adopt it at that time. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We have not yet selected a transition method, nor have we determined the impact of the new standard on our consolidated financial statements.
Other recent accounting
pronouncements issued by the FASB did not or are not believed by management to
have a material impact on the Company's present or future financial statements.
N
OTE 3 - MAJOR CUSTOMER:
The Company's subsidiary, Anton Nielsen Vojens, ApS has sales to major customers who were non related parties. For the period ending March 31, 2018, and March 31, 2018 the major customer concentrations were as follows:
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Percent of Sales
for the Period ending March 31,
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Customer
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2018
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2017
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Circle K Denmark A/S, Formerly Statoil A/S
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100
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%
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100
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%
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Total Sales from Major Customers
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100
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%
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100
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%
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NOTE 4 - LAND AND BUILDINGS :
The Land owned by the Company's wholly owned subsidiary constitutes the largest asset of the Company. During the nine month period ending March 31, 2018 the Company recorded an increase in the carrying value of the Land of
$52,092
due to the currency translation difference. The carrying value of the Land of the Company was as follows:
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Carrying Value of Land at
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March 31, 2018
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June 30, 2017
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US Dollars
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$
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671,684
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$
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619,592
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NOTE 5 - RELATED PARTY TRANSACTIONS:
Advances payable to Crossfields, Inc., a company that the CEO, Robert Wolfe is an officer and director, which are not collateralized, non-interest bearing, and payable upon demand, however, the Company did not expect to make payment within one year. During the nine month period ended March 31, 2018 and March 31, 2017 the Company had a balance of
$110,343
and was advanced $16,755
and had a balance of $95,391 and was advanced $17,443 respectively, to meet expenses.
NOTE 6 - NOTES PAYABLE:
The Company issued a promissory note ("Note") for $650,000, payable to the Borkwood Development Ltd, a previous shareholder of the Company ("Seller"), payable and amortized monthly and carrying an interest at 5% per year. The Company has the right to prepay the note at any time with a notice of 14 days. To secure the payment of principal and interest the Sellers will receive a perfect lien and security interest in the Shares in the company ANV until the note with accrued interest is paid in full., and, 2) In the case that the Note has not been repaid within 12 months from the day of closing the Sellers have the right to convert the debt to common stock of Advanced Oxygen Technologies, Inc. in an amount of non diluted shares calculated on the conversion Date, equal to the lesser of : a) Six hundred and Fifty thousand (650,000) or the Purchase Price minus the principal payments made by the buyer, whichever is greater, divided by the previous ten day closing price of AOXY as quoted on the national exchange, or b) Fifteen million shares, whichever is lesser. The Note has been extended until July 1, 2018 and interest waived through the period ending July 1, 2018. The balance on the note as of March 31, 2018 and June 30, 2017 was $127,029.
The Company has a note payable with a bank. The original amount of the note was kr 800,000 Danish Krone (kr) ("Note A"). The note is secured by the revenues of the lease with Circle K Denmark A/S, formerly Statoil, with a 7.00% interest rate and 0.25 years left on the term. The balance on the note as of March 31, 2018 was $2,338. The Company made principal payments of $9,104 and interest payments of $1,027. The value of the note reflect the currency adjustments.
The Company has a note payable with a bank ("Note B"). The original amount of Note B was kr 1,132,000 Danish Krone (kr). Note B is secured by the subsidiary's real estate, with a 2.00% interest rate and 5.75 years left on the term. The balance on the note as of March 31, 2018 was $110,644. During the period ended March 31, 2018, the Company paid $13,823 in principal payments and $4,115 in interest.
The Company's commitments and contingencies are $146,866 for 2018 and $93,240 for the years 2019 through 2025 with a total of $240,106. The amounts stated reflect the Company's commitments in the currencies that those commitments were made and the amounts are an estimate of what the US dollar amount would be if the currency rates did not change going forward.
The Company has minimum yearly bank payments of $7,642 for the next quarter year, and $17,404 thereafter for another 5 years.
The amounts stated in this note reflect the Company's commitments in the currencies that those commitments were made and the amounts are an estimate of what the US dollar amount would be if the currency rates did not change going forward.
NOTE 7 - SHAREHOLDERS' EQUITY:
Common Stock:
Pursuant to a Certificate of Amendment to our Certificate of Incorporation filed with the State of Delaware and effective as of December 8, 2014, the Company (effected a reverse stock split of all the outstanding shares of our common stock at an exchange ratio of one for twenty (1:20) and changed the number our authorized shares of common stock, par value $0.01 per share, from 90,000,000 to 60,000,000 while maintaining the number of authorized shares of preferred stock, par value $0.01 per share, at 10,000,000. As a result, the 45,853,585 shares of common stock outstanding at December 7, 2014 had been reduced to 2,292,945 shares of common stock (taking into account the rounding up of fractional share interests).
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Preferred Stock:
The Company is authorized to issue 10,000,000 shares of $0.01 par value preferred stock. The Company may issue any class of preferred shares in series. The board of directors has the authority to establish and designate series and to fix the number of shares included in each such series.
Series 2 Convertible Preferred Stock:
Each Series 2 preferred share is convertible into two shares of common stock at the option of the holder. Each Series 2 preferred share also includes one warrant to purchase two common shares for $5.00. The warrants are exercisable over a three-year period. In the event of the liquidation of the Company, holders of Series 2 preferred stock would be entitled to receive $5.00 per share, plus any unpaid dividends declared on the Series 2 preferred stock from the funds remaining after the Company's creditors, including directors, have been paid. There have been no dividends declared. During November 1997, 172,000 shares of Series 2 preferred stock were converted into 344,000 shares of the Company's common stock. As of March 31, 2018, there were 5,000 shares issued, which are convertible into 2 common shares. There are no warrants outstanding that have been issued in connection with the preferred shares.
Series 3 Convertible Preferred Stock:
Each share automatically converts on March 2, 2000 into either (a) one (1) share of the Company's common stock if the average closing price of the common stock during the ten trading days immediately prior to March 1, 2000 is equal to or greater than sixty-six cents ($0.66) per share, or (b) one and one-half (1 1/2) shares of common stock if the average closing price of the common stock during the ten trading days immediately prior March 1, 2000 is less than sixty-six cents ($0.66) per share.
Series 5 Convertible Preferred Stock:
The shares are collectively convertible to common stock of the Company on March 5, 2004, in an amount equal to the greater of a) 290,000 shares divided by the ten day closing price, prior to the date of acquisition of IPS, of the Company's common stock as quoted on the national exchange and not to exceed twenty million shares, or b) six million shares.
NOTE 8 - SUBSEQUENT EVENTS:
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report. There are no material subsequent events to report.
