The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1.
|
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
Concierge Technologies, Inc., (the “Company” or “Concierge”), a Nevada corporation, was originally incorporated in California on August 18, 1993 as Fanfest, Inc. On March 20, 2002, the Company changed its name to Concierge Technologies, Inc. The Company
’s principal operations include Wainwright Holdings, Inc. a Delaware corporation (“Wainwright”). Wainwright is a holding company that currently holds both United States Commodity Funds LLC (“USCF”), a registered commodity pool operator with the Commodity Futures Trading Commission (the "CFTC"), and USCF Advisers LLC (“Advisers”), an investment adviser registered under the Investment Advisers Act of 1940, as amended; Gourmet Foods, Ltd. (“Gourmet Foods”), a manufacturer and distributor of meat pies in New Zealand; Brigadier Security Systems (2000) Ltd. (“Brigadier”), a provider of security alarm installation and monitoring located in Canada; and
Kahnalytics, Inc. a California corporation (“Kahnalytics”), providing vehicle-based live streaming video and event recording to online subscribers.
Organization and Business Overview
On May 26, 2015, a new wholly-owned subsidiary of Concierge
named Kahnalytics was established in the State of California for the purpose of taking on the segment of the business retained in the spinoff of Janus Cam and to direct resources towards the further development of data processing capabilities intended for risk management used by vehicle insurance companies. As of September 30, 2016, Kahnalytics ended its sale of camera hardware to insurance companies and began providing an online platform where subscribers to the Kahnalytics Fleet Management Service ("FMS") can track their vehicles, view event video clips, see programmable alert functions and use the live-streaming function to operate in-vehicle cameras in real time.
On August 11, 2015, Concierge acquired all of the issued and outstanding stock in Gourmet Foods, a New Zealand corporation
located in Tauranga, a commercial-scale manufacturer of New Zealand meat pies under the brand names "Ponsonby Pies" and "Pat's Pantry". Gourmet Foods distributes its products through major grocery store chains, convenience stores, small restaurants and gasoline station markets. The purchase price of $1.75 million was paid in cash.
On June 2, 2016, Concierge acquired all of the issued and outstanding stock in Brigadier, a Canadian corporation
located in Saskatoon, Saskatchewan. Brigadier sells and installs alarm monitoring and security systems to commercial and residential customers under brand names "Brigadier Security Systems" and "Elite Security" throughout the province of Saskatchewan with offices in Saskatoon and Regina. The purchase price of $1.54 million was paid in cash.
On December 9, 2016, Concierge acquired all of the issued and outstanding stock in Wainwright
, a Delaware corporation, controlled as a group by our CEO and majority shareholder Nicholas Gerber together with affiliated shareholder Scott Schoenberger. Wainwright, through its subsidiaries, operates 12 investment funds in the commodities market and two exchange traded funds ("ETFs") in the equity market with a total of approximately $4.3 billion in assets under management as of March 31, 2017. Wainwright earns revenues from contractual agreements providing investment management and advisory services charged against the funds. The purchase price was paid in a stock-for-stock exchange whereby the sellers of Wainwright shares received in the aggregate a total of 818,799,976 shares of our common stock and 9,354,119 shares of our Series B Voting, Convertible, Preferred stock.
NOTE 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Presentation and Accounting Principles
The Company has prepared the accompanying financial statements on a condensed consolidated basis. In the opinion of management, the accompanying unaudited condensed consolidated balance sheets and related interim statements of income and comprehensive income (loss), and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation, prepared on an accrual basis, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company
’s 2016 Form 10-K filed on October 21, 2016 with the U.S. Securities and Exchange Commission.
Principles of Consolidation
The accompanying unaudited condensed consolidated interim financial statements, which are referred herein as the “Financial Statements” include the accounts of Concierge and its wholly owned subsidiaries, Wainwright, Gourmet Foods, Brigadier and Kahnalytics.
Wainwright was acquired in December 2016 (Refer to Note 11). Due to the commonality of ownership and control between the two companies, the transaction has been accounted for as a transaction between entities under common ownership. As a result, the assets and liabilities of Wainwright have been considered at their carrying amounts.
The accompanying Financial Statements as of
March 31, 2017 and June 30, 2016 and for the three and nine month periods ending March 31, 2017 and 2016 include the assets, liabilities and the results of operations of Wainwright at carrying amounts as though the transaction and exchange of equity interests has occurred at the beginning of the comparative period.
All significant inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of the Financial Statements are in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Other Comprehensive Income (Loss) and Foreign Currency
Comprehensive income (loss) is the total of net income (loss) and other comprehensive income (loss). We record foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830-30, Foreign Currency Translation. The accounts of Gourmet Foods use the New Zealand dollar as the functional currency. The accounts of Brigadier use the Canadian dollar as the functional currency. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange rate throughout the period. For the periods ended
March 31, 2017 and June 30, 2016, other comprehensive income (loss) consisted of unrealized losses on investments and accumulated translation losses as noted above. Accumulated translation loss, classified as an item of accumulated other comprehensive loss in the stockholders’ equity section of the consolidated balance sheet, was $42,135 as of March 31, 2017.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Concierge
’s corporate office maintains cash balances at a financial institution headquartered in San Diego, California. Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per depositor. The corporation’s uninsured cash balance in the United States was $1,602,952 at March 31, 2017. The Company’s subsidiary, Wainwright, also maintains cash balances at various high credit quality institutions and from time to time those deposits exceed the FDIC coverage amount of $250,000. As of March 31, 2017 the uninsured amount totaled $2,659,349, though no losses have been realized and none are expected. Cash balances in Canada are maintained at a financial institution in Saskatoon, Saskatchewan by the Company’s subsidiary. Each account is insured up to CD$100,000 by Canada Deposit Insurance Corporation (CDIC). The Company’s subsidiary had an uninsured cash balance in Canada of CD$587,942 (approximately US$441,974) at March 31, 2017. Balances at financial institutions within certain foreign countries, including New Zealand where the Company’s subsidiary maintains cash balances, are not covered by insurance. As of March 31, 2017, the Company’s subsidiary had uninsured deposits related to cash deposits in uninsured accounts maintained within foreign entities of approximately $407,117. The Company has not experienced any losses in such accounts.
Accounts Receivable, Related Parties
Accounts receivable primarily consists of fund management fees receivable from the Wainwright business. Management fees receivable generally consist of one month of management fees which are collected in the month after they are earned.
Management closely monitors receivables and records an allowance for any balances that are determined to be uncollectible. As of
March 31, 2017 and June 30, 2016, the Company considered all remaining accounts receivable to be fully collectible.
Major Customers & Suppliers
– Concentration of Credit Risk
Concierge, through Kahnalytics as a licensed user of a proprietary software application, is dependent on the continued support of this online platform and the adherence to the license contract terms between Kahnalytics and the foreign-based licensor. Kahnalytics is also largely dependent on its sales channel to continue to expand its dealer network of resellers who, in turn, activate subscribers to the Kahnalytics service. No single customer accounts for a significant percentage of sales or accounts receivable. Hardware sold by Kahnalytics is currently supplied by one source, however in the event this source proves to be inadequate there are other alternative sources of equal or comparable devices as needed by Kahnalytics. During the
nine-month period ended March 31, 2016 Kahnalytics had just one customer accounting for 100% of its sales. Correspondingly, Kahnalytics had only one supplier of the hardware it sold and only one contractor supplying the labor component accounting for 72% and 28% respectively of the cost of goods sold for the nine-month period ended March 31, 2016. Sales of these products were discontinued during the current fiscal year.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Concierge, through Brigadier, is dependent upon its contractual relationship with the alarm monitoring company who purchases the monitoring contracts and provides monitoring services to Brigadier
’s customers. In the event this contract is terminated, Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the two largest customers, which includes contracts and recurring monthly residuals from the monitoring company, totaled 50% of the total revenues for the nine months ended March 31, 2017, and accounted for approximately 38% of accounts receivable as of the balance sheet date of March 31, 2017. There is no comparison data for the prior year as the company was not acquired until June 2016.
Concierge, through Gourmet Foods, has three major customer groups comprising the gross revenues to Gourmet Foods; 1) grocery, 2) gasoline convenience stores,
and 3) independent retailers. The grocery and food industry is dominated by several large chain operations, which are customers of Gourmet Foods, and there are no long term guarantees that these major customers will continue to purchase products from Gourmet Foods, however the relationships have been in place for sufficient time to give management reasonable confidence in their continuing business. For the nine month period ending and balance sheet date of March 31, 2017, our largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 18% of our gross sales revenues and 30% of our accounts receivable. The second largest in the grocery industry accounted for approximately 11% of our gross revenues and 10% of our accounts receivable. In the gasoline convenience store market we supply two major channels to market. The largest is a marketing consortium of gasoline dealers accounting for approximately 43% of our gross sales revenues however no single member of the consortium is responsible for a significant portion of our accounts receivable. The second largest are independent operators accounting for less than 10% of gross sales however no single independent operator is responsible for a significant portion of our accounts receivable. The third category of independent retailers and cafes accounted for the balance of our gross sales revenue however the group is fragmented and no one customer accounts for a significant portion of our revenues or account receivables.
For the
eight months ended and the balance sheet date of March 31, 2016 our largest customer in the grocery industry accounted for approximately 13% of revenues and 31% of accounts receivable. For the gasoline convenience store sector, the largest customer is a consortium of independent owners who accounted for approximately 45% of revenues and 20% of accounts receivable (though no single member of the consortium accounted for more than 3% of accounts receivable). Independent retail stores accounted for approximately 11% of revenues however no single store accounted for any significant amount of the accounts receivable. The balance of the revenues and accounts receivable were not dominated by any significant single source for the eight months ended March 31, 2016. Gourmet Foods is not dependent upon any one major supplier as many alternative sources are available in the local market place should the need arise.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For our subsidiary, Wainwright, the concentration of risk and the relative reliance on major customers are found within the various funds it manages and the associated accounts receivable as of
March 31, 2017 and June 30, 2016 as depicted below.
|
|
March
31, 201
7
|
|
Fund
|
|
Accounts Receivable
|
|
USO
|
|
$
|
1,070,065
|
|
|
|
57
|
%
|
USCI
|
|
|
371,475
|
|
|
|
20
|
%
|
UNG
|
|
|
248,103
|
|
|
|
13
|
%
|
All Others
|
|
|
176,412
|
|
|
|
10
|
%
|
Total
|
|
$
|
1,866,055
|
|
|
|
100
|
%
|
|
|
June 30, 2016
|
|
Fund
|
|
Accounts Receivable
|
|
USO
|
|
$
|
1,245,396
|
|
|
|
59
|
%
|
USCI
|
|
|
400,258
|
|
|
|
19
|
%
|
UNG
|
|
|
280,431
|
|
|
|
13
|
%
|
All Others
|
|
|
198,020
|
|
|
|
9
|
%
|
Total
|
|
$
|
2,124,105
|
|
|
|
100
|
%
|
Reclassifications
For comparative purposes, prior year
’s Financial Statements have been reclassified to conform to report classifications of the current year.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. This pronouncement is effective for annual reporting periods beginning after December 15, 2016, and is to be applied using one of two retrospective application methods, with early application not permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In January 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-01
Income Statement - Extraordinary and Unusual Items
(Subtopic 225-20)
.
ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. As a result, an entity will no longer be required to segregate extraordinary items from the results of ordinary operations, to separately present an extraordinary item on its income statement, net of tax, after income from continuing operations or to disclose income taxes and earnings-per-share data applicable to an extraordinary item. However, ASU 2015-01 will still retain the presentation and disclosure guidance for items that are unusual in nature and occur infrequently. ASU 2015-01 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-01 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.
In February, 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-02,
Consolidation (Topic 810): Amendments to the Consolidation Analysis.
ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.
In September, 2015, the FASB issued ASU No. 2015-16,
Business Combinations (Topic 805
)
:
Simplifying the Accounting for Measurement-Period Adjustments
.
Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.
In November
2015, the FASB issued ASU No. 2015-17,
Income Taxes (Topic 740):
Balance Sheet Classification of Deferred Taxes
. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not anticipate the adoption of this ASU will have a significant impact on its consolidated financial position, results of operations, or cash flows.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments—Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
, to mainly change the accounting for investments in equity securities and financial liabilities carried at fair value as well as to modify the presentation and disclosure requirements for financial instruments. The ASU is effective for annual periods beginning after December 15, 2018, with early adoption permitted. Adoption of the ASU is retrospective with a cumulative adjustment to retained earnings or accumulated deficit as of the adoption date. The Company does not anticipate that the adoption of the ASU will have a material impact on its financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in ASC Topic 840,
Leases (FAS 13)
. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09,
Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share
-
Based Payment Accounting
, to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of this newly issued guidance to its consolidated financial statements.
On November 17, 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. It is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The new standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017 including interim periods within those fiscal years. Earlier adoption is permitted. The adoption of ASU 2016-18 is not expected to have a material effect on the Company’s consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01,
Business Combinations (Topic 805):
Clarifying the Definition of a Business
, which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those periods. Early adoption is permitted for acquisition or deconsolidation transactions occurring before the issuance date or effective date and only when the transactions have not been reported in issued or made available for issuance financial statements. The Company does not expect the adoption to have any significant impact on its Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles—Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment
. Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment test performed on testing dates after January 1, 2017. The Company will apply this guidance to applicable impairment tests after the adoption date.
No other recently issued accounting pronouncements are expected to have a material impact on the Company
’s consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Inventories consisted of the following:
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Raw materials
|
|
$
|
44,418
|
|
|
$
|
50,023
|
|
Supplies and packing materials
|
|
|
99,845
|
|
|
|
77,497
|
|
Finished goods
|
|
|
320,943
|
|
|
|
357,351
|
|
|
|
|
465,206
|
|
|
|
484,871
|
|
Less impairment finished goods
|
|
|
-
|
|
|
|
(48,330
|
)
|
Total
|
|
$
|
465,206
|
|
|
$
|
436,541
|
|
NOTE 4.
|
PROPERTY AND EQUIPMENT
|
Property and equipment consisted of the following as of
March 31, 2017 and June 30, 2016:
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Plant and equipment
|
|
$
|
1,354,563
|
|
|
$
|
1,477,411
|
|
Furniture and office equipment
|
|
|
159,559
|
|
|
|
119,123
|
|
Vehicles
|
|
|
199,661
|
|
|
|
58,850
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, gross
|
|
|
1,713,783
|
|
|
|
1,655,384
|
|
Accumulated depreciation
|
|
|
(570,649
|
)
|
|
|
(488,691
|
)
|
Total property and equipment, net
|
|
$
|
1,143,134
|
|
|
$
|
1,166,693
|
|
Depreciation expense amounted to $223,188 and $152,346 for the
nine months ended March 31, 2017 and 2016, respectively.
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations. Goodwill comprised of the following amounts:
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Trained workforce
– Gourmet Foods
|
|
$
|
51,978
|
|
|
$
|
51,978
|
|
Trained workforce - Brigadier
|
|
|
75,795
|
|
|
|
75,795
|
|
Goodwill
– Gourmet Foods
|
|
|
45,669
|
|
|
|
45,669
|
|
Goodwill - Brigadier
|
|
|
45,814
|
|
|
|
45,814
|
|
|
|
$
|
219,256
|
|
|
$
|
219,256
|
|
The Company tests for goodwill impairment at each reporting unit. There was no goodwill impairment for the three months and nine months ended March 31, 2017 and 2016
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6.
|
INTANGIBLE ASSETS
|
Intangible assets consisted of the following:
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Brand name
|
|
$
|
402,123
|
|
|
$
|
402,123
|
|
Domain name
|
|
|
36,913
|
|
|
|
36,913
|
|
Customer relationships
|
|
|
500,252
|
|
|
|
500,252
|
|
Non-compete agreement
|
|
|
84,982
|
|
|
|
84,982
|
|
Recipes
|
|
|
21,601
|
|
|
|
21,601
|
|
Total
|
|
|
1,045,871
|
|
|
|
1,045,871
|
|
Less : accumulated amortization
|
|
|
(116,942
|
)
|
|
|
(27,658
|
)
|
Net Intangibles
|
|
$
|
928,929
|
|
|
$
|
1,018,213
|
|
CUSTOMER RELATIONSHIP
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the acquired customer relationships was estimated to be $66,153 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired customer relationships was estimated to be $434,098 and is amortized over the remaining useful life of 10 years.
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Customer relationships
|
|
$
|
500,252
|
|
|
$
|
500,252
|
|
Less: accumulated amortization
|
|
|
(47,212
|
)
|
|
|
(9,659
|
)
|
Total customer relationships, net
|
|
$
|
453,040
|
|
|
$
|
490,593
|
|
BRAND NAME
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the acquired brand name was estimated to be $61,429 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired brand name was estimated to be $340,694 and is amortized over the remaining useful life of 10 years.
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Brand name
|
|
$
|
402,123
|
|
|
$
|
402,123
|
|
Less: accumulated amortization
|
|
|
(38,634
|
)
|
|
|
(8,447
|
)
|
Total brand name, net
|
|
$
|
363,489
|
|
|
$
|
393,676
|
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DOMAIN NAME
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the acquired domain name was estimated to be $21,601 and is amortized over the remaining useful life of 5 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired domain name was estimated to be $15,312 and is amortized over the remaining useful life of 5 years.
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Domain Name
|
|
$
|
36,913
|
|
|
$
|
36,913
|
|
Less: accumulated amortization
|
|
|
(9,735
|
)
|
|
|
(4,193
|
)
|
Total brand name, net
|
|
$
|
27,178
|
|
|
$
|
32,720
|
|
RECIPES
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the recipes was estimated to be $21,601 and is amortized over the remaining useful life of 5 years.
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Recipes
|
|
$
|
21,601
|
|
|
$
|
21,601
|
|
Less: accumulated amortization
|
|
|
(7,180
|
)
|
|
|
(3,937
|
)
|
Total Recipes, net
|
|
$
|
14,421
|
|
|
$
|
17,664
|
|
NON-COMPETE AGREEMENT
On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired non-compete agreement was estimated to be $84,982 and is amortized over the remaining useful life of 5 years.
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Non-compete agreement
|
|
$
|
84,982
|
|
|
$
|
84,982
|
|
Less: accumulated amortization
|
|
|
(14,180
|
)
|
|
|
(1,421
|
)
|
Total non-compete agreement, net
|
|
$
|
70,802
|
|
|
$
|
83,561
|
|
AMORTIZATION EXPENSE
The total amortization expense for the
nine months ended March 31, 2017 was $89,284. No amortization was taken for the comparison period ending March 31, 2016.
Estimated amortization expenses of intangible assets for the next five twelve month periods ending
March 31, are as follows:
Years Ending
March
31,
|
|
Expense
|
|
201
8
|
|
$
|
118,937
|
|
201
9
|
|
|
118,937
|
|
2020
|
|
|
118,937
|
|
202
1
|
|
|
113,161
|
|
202
2
|
|
|
93,590
|
|
Thereafter
|
|
|
365,367
|
|
Total
|
|
$
|
928,929
|
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Other Current Assets
Other current assets totaling $1,389,413 as of
March 31, 2017 and $262,084 as of June 30, 2016 are comprised of various components as listed below.
|
|
As of
March
31,
|
|
|
As of June 3
0
,
|
|
|
|
201
7
|
|
|
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Deferred tax asset
|
|
$
|
-
|
|
|
$
|
19,503
|
|
Prepaid expenses
|
|
|
287,954
|
|
|
|
87,068
|
|
Tax receivable
|
|
|
941,853
|
|
|
|
-
|
|
Dividends receivable
|
|
|
9,606
|
|
|
|
5,513
|
|
Notes receivable
|
|
|
150,000
|
|
|
|
150,000
|
|
Total
|
|
$
|
1,389,413
|
|
|
$
|
262,084
|
|
Investments
Investments are comprised mainly of investments in ETF funds. Wainwright, from time to time, provides initial investments in the creation of ETF funds that Wainwright manages. Wainwright classifies these investments as current assets as these investments are generally sold within one year from the balance sheet date. Investments in which no controlling financial interest or significant influence exists are recorded at fair value with unrealized holding gains and losses included in accumulated other comprehensive income (loss) as a component of stockholders
’ equity, except for unrealized losses determined to be other-than-temporary, which are included in the condensed consolidated statements of operations and comprehensive income (loss). Investments in which no controlling financial interest exists, but significant influence exists are recorded as per the equity method of acconting. As of
March 31, 2017 and June 30, 2016, investments are approximately $3.3 million and $1 thousand, respectively.
Restricted Cash
At
March 31, 2017 Gourmet Foods had on deposit NZ$20,000 (approximately US$14,028) securing a lease bond for one of its properties. The cash securing the bond is restricted from access or withdrawal so long as the bond remains in place. There was no bond posted by Gourmet Foods at June 30, 2016, thus the restricted cash amount was zero.
Long Term Assets
Other long term assets totaling $509,538 and $509,538
at March 31, 2017 and June 30, 2016, respectively, were attributed to Wainwright and consisted of
(i)
|
$500,000 as of
March 31, 2017 and June 30, 2016 representing 10% equity investment in a registered investment adviser accounted for on a cost basis,
|
(ii)
|
and $9,538 as of
March 31, 2017 and June 30, 2016 in other assets.
|
NOTE 8.
|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
Accounts payable and accrued expenses consisted of the following:
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Accounts payable
|
|
$
|
1,465,592
|
|
|
$
|
1,044,026
|
|
Accrued judgment
|
|
|
135,000
|
|
|
|
135,000
|
|
Accrued interest
|
|
|
26,356
|
|
|
|
5,238
|
|
Taxes payable
|
|
|
109,188
|
|
|
|
769,224
|
|
Deferred rent
|
|
|
15,172
|
|
|
|
19,202
|
|
Accrued payroll and vacation
|
|
|
130,884
|
|
|
|
127,271
|
|
Accrued expenses
|
|
|
526,521
|
|
|
|
296,057
|
|
Total
|
|
$
|
2,408,713
|
|
|
$
|
2,396,018
|
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9.
|
RELATED PARTY TRANSACTIONS
|
Notes Payable - Related Parties
Current related party notes payable consist of the following:
|
|
March
31,
201
7
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Notes payable to shareholder, interest rate of 10%, unsecured and payable on July 31, 2004 (past due)
|
|
$
|
-
|
|
|
$
|
5,000
|
|
Notes payable to shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due)
|
|
|
3,500
|
|
|
|
3,500
|
|
Notes payable to shareholder, interest rate of 4%, unsecured and payable on May 25, 2022
|
|
|
250,000
|
|
|
|
-
|
|
Notes payable to shareholder, interest rate of 4%, unsecured and payable on April 8, 2022
|
|
|
350,000
|
|
|
|
-
|
|
|
|
$
|
603,500
|
|
|
$
|
8,500
|
|
On July 7, 2016 the Company repaid the outstanding note due to a related party totaling $5,000 in principal and $5,000 in accrued interest. A total of $2,075 in accrued interest was forgiven by the noteholder in settlement of the debt.
Interest expense for all related party notes for the three-month period ending
March 31, 2017 and 2016 were $5,987 and $3,400 (as adjusted) respectively and for the respective nine months ended March 31, 2017 and 2016 the interest expense was $18,227 and $3,800 (as adjusted).
Convertible Promissory Note Payable
– Related Parties
On April 8, 2016 the Company entered into a convertible promissory note (the “Promissory Note”) with Gerber Irrevocable Family Trust, an affiliate of our shareholder and CEO that resulted in the funding of $350,000. The Promissory Note bears interest at four percent (4%) per annum and increases to nineteen percent (19%) in the event of default by the Company. The Company and the noteholder negotiated the interest rate at arm
’s length relying upon the available market rate for long-term deposits at financial institutions as well as the current rate of return realized by the noteholder for cash deposits currently held. Larger deposits traditionally fall into a “Jumbo” rate category with marginally higher returns. Interest ranged from annual percentage rates of 0.01% at the lowest to 1.75% at the highest. Recognizing the unsecured nature of the promissory note, and the historical record of continued operating losses by the Company, a rate of 4 percent annual interest was agreed upon in light of the heightened default risk over traditional investment instruments. There was no beneficial conversion feature identified as of the date of issuance of the Promissory Note.
In connection with the acquisition of Wainwright Holdings on December 9, 2016 the convertible promissory note was subsequently amended to remove the conversion feature. The maturity date and interest rate remain the same and the liability is now reflected on the condensed consolidated balance sheet as a component of Notes Payable-Related Parties.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On May 25, 2016 the Company entered into a convertible promissory note (the “Promissory Note”) with Schoenberger Family Trust, an affiliate of our shareholder and director that resulted in the funding of $250,000. The Promissory Note bears interest at four percent (4%) per annum and increases to nineteen percent (19%) in the event of default by the Company. The Company and the noteholder negotiated the interest rate at arm
’s length relying upon the available market rate for long-term deposits at financial institutions as well as the current rate of return realized by the noteholder for cash deposits currently held. Larger deposits traditionally fall into a “Jumbo” rate category with marginally higher returns. Interest ranged from annual percentage rates of .01% at the lowest to 1.75% at the highest. Recognizing the unsecured nature of the promissory note, and the historical record of continued operating losses by the Company, a rate of 4 percent annual interest was agreed upon in light of the heightened default risk over traditional investment instruments. There was no beneficial conversion feature identified as of the date of issuance of the Promissory Note.
In connection with the acquisition of Wainwright Holdings on December 9, 2016 the convertible promissory note was subsequently amended to remove the conversion feature. The maturity date and interest rate remain the same and the liability is now reflected on the condensed consolidated balance sheet as a component of Notes Payable-Related Parties.
Interest expense for all related party convertible debentures, for the three months ended
March 31, 2017 and 2016 amounted to $0 and $0 respectively.
Wainwright - Related Party Transactions
The Funds managed by USCF and Advisers are deemed by management to be related parties. The Company
’s Wainwright revenues, totaled $18,477,486 and $17,085,983 for the nine months ended March 31, 2017 and 2016, respectively, were earned from these related parties. Accounts receivable, totaling $1,866,055 and $2,124,105 as of March 31, 2017 and June 30, 2016, respectively, were owed from these related parties. Fund expense waivers, totaling $779,688 and $583,767 for the nine months ended March 31, 2017 and 2016, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $1,228,618 and $448,930 as of March 31, 2017 and June 30, 2016, respectively, were owed to these related parties.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
An unsecured loan in the amount of $8,500 due a former director and shareholder who is now deceased has been reclassified as a note due unrelated party. The note is interest free, not deemed assignable to successors by the Company, and held as a contingent liability until resolved.
NOTE 11.
|
BUSINESS COMBINATIONS
|
On May 28, 2015, the Company entered into an agreement to acquire the assets of Gourmet Foods, Ltd., a New Zealand corporation, subject to satisfactory completion of due diligence and other customary criteria for a transaction of this kind. Gourmet Foods is a baker of New Zealand meat pies and other confections distributed to major grocery stores, convenience stores, restaurants and other retailers throughout New Zealand. The Company placed a cash deposit with Gourmet Foods in accordance with the provisions of the asset purchase agreement, however the parties later elected to change the nature of the transaction to a stock purchase agreement. The Stock Purchase Agreement (the “SPA”) was entered into on July 28, 2015 and was set to close on July 31, 2015 subject to final adjustments to accounts receivable, accounts payable, inventory, employee entitlements and other current assets and liabilities. The Company paid a purchase consideration of NZ$2,597,535 (approximately US$1,753,428) in cash. An independent evaluation was conducted in order to obtain a fair market value of the fixed assets and intangible assets acquired. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
On August 11, 2015 the parties reached agreement to close the SPA based on the balance sheet information as of July 31, 2015, subject to further adjustments if necessary once certain balances became known without dispute, and the Company remitted the remainder of the purchase price in cash to an account in New Zealand established for the benefit of the shareholders of Gourmet Foods, Ltd. The operations of Gourmet Foods, Ltd. was consolidated going forward with those of the Company as of August 1, 2015.
The following table summarizes the value of the net assets acquired as of the Acquisition Date:
Cash
|
|
$
|
50,695
|
|
Accounts receivable
|
|
|
259,662
|
|
Prepaid expenses
|
|
|
11,246
|
|
Inventory
|
|
|
256,271
|
|
Property and equipment
|
|
|
1,207,762
|
|
Intangible assets
|
|
|
170,784
|
|
Goodwill
|
|
|
97,647
|
|
Total Assets
|
|
$
|
2,054,067
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
253,951
|
|
Employee entitlements
|
|
|
46,688
|
|
Total Liabilities
|
|
$
|
300,639
|
|
|
|
|
|
|
Consideration paid for net assets
|
|
$
|
1,753,428
|
|
On June 2, 2016 the Company closed a Stock Purchase Agreement transaction which resulted in the acquisition of all the outstanding and issued stock of Brigadier Security Systems, a Canadian corporation located in Saskatoon, Saskatchewan. The total purchase price was CD$2,010,266 (approximately US$1,540,830) in cash, payable in several stages. The consideration of CD$1,000,000 (US$756,859) was paid in cash and CD$733,000 (US$569,935) was deposited in an attorney client trust account in Canadian currency (to be paid to Brigadier, on the 183rd day following the Closing Date if net sales meeting the minimum threshold of $1,500,000 CDN (the "Sales Goal") is achieved. The Sales Goal was achieved and the payment was released on November 23, 2016. The audit of Brigadier resulted in an upwards adjustment of the purchase price by CD$277,266 (US$214,035) which has been recorded as of September 30, 2016 as Purchase Consideration Payable and was subsequently paid in October 2016. Under the acquisition method of accounting, the total purchase consideration is allocated to Brigadier net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The following table summarizes the value of the net assets acquired as of the Acquisition Date:
Assets
|
|
|
|
|
Cash
|
|
$
|
80,391
|
|
Accounts receivable
|
|
|
431,656
|
|
Inventory
|
|
|
238,148
|
|
Prepaid expenses and other assets
|
|
|
20,001
|
|
Property, plant and equipment
|
|
|
20,455
|
|
Intangible assets
|
|
|
875,087
|
|
Goodwill
|
|
|
121,609
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,787,348
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts payable
|
|
$
|
187,925
|
|
Income tax payable
|
|
|
55,953
|
|
Customer deposits
|
|
|
2,640
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
246,518
|
|
|
|
|
|
|
Consideration paid for net assets
|
|
$
|
1,540,830
|
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On December 9, 2016 the Company closed a Stock Purchase Agreement (the “Purchase Agreement”), by and among the Company and Wainwright and each of the shareholders of Wainwright common stock (the “Wainwright Sellers”), pursuant to which the Wainwright Sellers agreed to sell, and the Company agreed to purchase 1,741 shares of Wainwright common stock, par value $0.01 per share, (the “Wainwright Common Stock”), which represents all of the issued and outstanding Wainwright Common Stock, in exchange for: (i) 818,799,976 shares of Company Common Stock, and (ii) 9,354,119 shares of Company Preferred Stock (which preferred shares are convertible into 187,082,377 shares of Company Common Stock). Wainwright and the Company have a commonality of ownership and control as represented by the shareholdings, either directly or beneficially, of Nicholas Gerber and Scott Schoenberger as a group pursuant to the aforementioned Purchase Agreement and a voting agreement which gives them control of over 50% of Wainwright and over 50% of Concierge both before and after the business combination. Accordingly, the acquisition has been recorded as a transaction between entities under Common Control in the accompanying financial statements. Further, the accompanying financial statements have been adjusted to include the carrying value of assets, liabilities, equity and operations of Wainwright as if the transaction had concluded on July 1, 2015.
NOTE 12.
|
COMMITMENTS AND CONTINGENCIES
|
Lease Commitments
Gourmet Foods has operating leases for its office, factory and warehouse facilities located in Tauranga, New Zealand, as well as for certain equipment including vehicles. These leases are generally for three-year terms, with options to renew for additional three-year periods. The leases mature between August 2018 and August 2021, and require monthly rental payments of approximately US$11,531 translated to U.S. currency as of
March 31, 2017.
Future minimum lease payments for Gourmet Foods are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2017
|
|
$
|
34,536
|
|
2018
|
|
|
136,094
|
|
2019
|
|
|
60,642
|
|
2020
|
|
|
17,901
|
|
2021
|
|
|
10,395
|
|
2022
|
|
|
1,733
|
|
Total minimum lease commitment
|
|
$
|
261,301
|
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Gourmet Foods entered into a General Security Agreement in favor of the Gerald O
’Leary Family Trust and registered on the Personal Property Securities Register for a priority sum of NZ$110,000 (approximately US$77,155) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$14,028) bond has been posted through ANZ Bank and secured with a cash deposit of equal amount to secure a separate facilities lease. The General Security Agreement and the cash deposit will remain until such time as the respective leases are satisfactorily terminated in accordance with their terms. Interest from the cash deposit securing the lease accumulates to the benefit of Gourmet Foods and is listed as a component of interest income/expense on the accompanying Consolidated Statements of Operations.
Brigadier leases office and storage facilities in Saskatoon and Regina, Saskatchewan. The minimum lease obligations through their expiry dates are indicated as below and require monthly payments of approximately US$4,243 translated to U.S. currency as of
March 31, 2017.
Future minimum lease payments for Brigadier are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2017
|
|
$
|
16,434
|
|
2018
|
|
|
32,869
|
|
2019
|
|
|
30,130
|
|
Total minimum lease commitment
|
|
$
|
79,433
|
|
Wainwright leases office space in Oakland, California under an operating lease, which expires in October 2018. Rent expense was $107,350 and $104,376 for the
nine months ended March 31, 2017 and 2016, respectively.
Future minimum rental payments required under the operating lease, which has remaining non-cancellable lease terms in excess of one year, are as follows:
Year ended June 30,
|
|
Lease Amount
|
|
2017
|
|
$
|
33,001
|
|
2018
|
|
|
134,645
|
|
2019
|
|
|
45,322
|
|
Total minimum lease commitment
|
|
$
|
212,968
|
|
Litigation
On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd. against, jointly and severally, Concierge, Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus legal fees. As of May 7, 2012, the judgment had lapsed due to the passage of time and the creditor
’s failure to renew. Although a new court action would be required by the plaintiff in order to seek legal remedies, the Company has accrued the amount of $135,000 in the accompanying financial statements as accrued expenses as of March 31, 2017.
From time to time, the Company is involved in legal proceedings arising mainly from the ordinary course of its business. In management
’s opinion, the legal proceedings are not expected to have a material effect on the Company’s financial position or results of operations.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Retirement Plan
Wainwright's wholly owned subsidiary USCF, has a 401(k) Profit Sharing Plan covering its employees who are over 21 years of age and who have completed a minimum of 1,000 hours of service and have worked for USCF for one or more years. Participants may make contributions pursuant to a salary reduction agreement. In addition, USCF makes a safe harbor matching contribution. Annual matching contributions paid totaled approximately $84,000 and $63,000 for the
nine months ended March 31, 2017 and 2016, respectively.
The Company accounts for income taxes under the asset and liability method, which recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts, and for net operating losses and tax credit carryforwards. Deferred income 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 Company records a valuation allowance against deferred tax assets when it is more likely than not that such asset will not be realized. The Company continues to monitor the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets.
The Company accounts for uncertain tax positions in accordance with the authoritative guidance on income taxes under which the Company may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
As of
March 31, 2017, the Company's total unrecognized tax benefits were approximately $0.03 million, which would affect the effective tax rate if recognized. The Company will recognize interest and penalties, when they occur, related to uncertain tax provisions as a component of tax expense. There is no interest or penalties to be recognized for the quarter ended March 31, 2017.
The Company is required to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis. The Company recorded a tax provision of $1.7 million and $2.2 million from its continuing operations for the
nine months ended March 31, 2017 and March 31, 2016, respectively. The Company recorded a tax provision of $0.05 million and $0.8 million from its continuing operations for the three months ended March 31, 2017 and March 31, 2016, respectively.
As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. As of March 31, 2017, management determined that sufficient positive evidence exists to conclude that it is more likely than not that additional deferred tax assets will be realizable, and therefore, a partial valuation allowance was released accordingly.
The effective tax rate for the nine months ended March 31, 2017 differed from the statutory rate primarily due to the mix of nondeductible meals and entertainment expenses, imputed interest income and the reversal of a valuation allowance related to the U.S. federal net loss carryforward. The effective tax rate could fluctuate in the future due to changes in the taxable income mix between various jurisdictions.
The Company is subject to income taxes in the U.S. federal, California, Canada and New Zealand tax jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company
’s tax years 2012 through 2016 will remain open for examination by the federal and state authorities for three and four years, respectively. As of March 31, 2017, there were no active taxing authority examinations.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 14.
|
SEGMENT REPORTING
|
With the acquisition of Wainwright Holdings, Gourmet Foods, Ltd. and Brigadier, the Company has identified four segments for its products and services; U.S. investment fund management, U.S. data streaming and hardware, New Zealand and Canada. Our reportable segments are business units located in different global regions.
The Company’s operations in the U.S.A. include the gathering of live-streaming video recording data displayed online to subscribers through our wholly owned subsidiary Kahnalytics, Inc. and the income derived from management of various investment funds by our subsidiary Wainwright. In New Zealand operations include the production, packaging and distribution on a commercial scale of gourmet meat pies and related bakery confections through our wholly owned subsidiary Gourmet Foods, Ltd. and in Canada we provide security alarm system installation and monitoring to residential and commercial customers sold through our wholly owned subsidiary Brigadier. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation. Amounts are adjusted for currency translation as of the balance sheet date and presented in US dollars.
The following table presents a summary of identifiable assets as of
March 31, 2017 and June 30, 2016:
|
|
As of
March
31,
201
7
|
|
|
As of
June 30,
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
2,975,295
|
|
|
$
|
1,521,210
|
|
U.S.A. : fund management
|
|
|
11,277,729
|
|
|
|
8,775,810
|
|
U.S.A. : data streaming
|
|
|
83,455
|
|
|
|
87,790
|
|
New Zealand
|
|
|
1,975,765
|
|
|
|
2,199,128
|
|
Canada
|
|
|
1,248,512
|
|
|
|
956,855
|
|
Consolidated
|
|
$
|
17,560,756
|
|
|
$
|
13,540,793
|
|
The following table presents a summary of operating information for the three months ended
March 31, 2017 and 2016: (note: Canadian interests had not yet been acquired in 2016)
|
|
Three-Months
Ended
March
31, 201
7
|
|
|
Three-Months
Ended
March
31, 201
6
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
As Adjusted
|
|
U.S.A. : data streaming and hardware
|
|
$
|
26,999
|
|
|
$
|
-
|
|
U.S.A. : investment fund management
|
|
|
5,637,011
|
|
|
|
6,144,369
|
|
New Zealand : Food Industry
|
|
|
1,127,950
|
|
|
|
970,654
|
|
Canada : Security alarm monitoring
|
|
|
702,178
|
|
|
|
-
|
|
Consolidated
|
|
$
|
7,494,138
|
|
|
$
|
7,115,023
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) after taxes:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
(368,319
|
)
|
|
$
|
(39,480
|
)
|
U.S.A. : data streaming and hardware
|
|
|
266
|
|
|
|
(3,055
|
)
|
U.S.A. : investment fund management
|
|
|
1,346,294
|
|
|
|
1,574,133
|
|
New Zealand : Food Industry
|
|
|
8,911
|
|
|
|
42,399
|
|
Canada : Security alarm monitoring
|
|
|
57,369
|
|
|
|
-
|
|
Consolidated
|
|
$
|
1,044,521
|
|
|
$
|
1,573,997
|
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents a summary of operating information for the
nine months ended March 31, 2017 and 2016: (note: New Zealand interests were present for only 8 months in 2016 and Canadian interests had not yet been acquired in 2016)
|
|
Nine
Months
Ended
March
31, 201
7
|
|
|
Nine
Months
Ended
March
31, 201
6
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
As Adjusted
|
|
U.S.A. : data streaming and hardware
|
|
$
|
116,566
|
|
|
$
|
117,700
|
|
U.S.A. : investment fund management
|
|
|
18,477,486
|
|
|
|
17,085,983
|
|
New Zealand : Food Industry
|
|
|
3,524,527
|
|
|
|
2,588,664
|
|
Canada : Security alarm monitoring
|
|
|
2,313,713
|
|
|
|
-
|
|
Consolidated
|
|
$
|
24,432,292
|
|
|
$
|
19,792,347
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) after taxes:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
(706,224
|
)
|
|
$
|
(156,641
|
)
|
U.S.A. : data streaming and hardware
|
|
|
(32,601
|
)
|
|
|
(4,872
|
)
|
U.S.A. : investment fund management
|
|
|
3,832,526
|
|
|
|
3,950,960
|
|
New Zealand : Food Industry
|
|
|
1,263
|
|
|
|
72,071
|
|
Canada : Security alarm monitoring
|
|
|
272,469
|
|
|
|
-
|
|
Consolidated
|
|
$
|
3,367,433
|
|
|
$
|
3,861,518
|
|
The following table presents a summary of capital expenditures for the
nine months ended March 31:
Capital expenditures:
|
|
201
7
|
|
|
201
6
|
|
Corporate headquarters
|
|
$
|
-
|
|
|
$
|
863
|
|
U.S.A.: data streaming and hardware
|
|
|
2,690
|
|
|
|
-
|
|
New Zealand
|
|
|
102,110
|
|
|
|
195,734
|
|
Canada
|
|
|
117,677
|
|
|
|
-
|
|
Consolidated
|
|
$
|
222,477
|
|
|
$
|
196,597
|
|
NOTE 15.
|
REVERSE STOCK SPLIT
|
On November 11, 2015, the Board of Directors (the “Board
’) of the Company approved the implementation of a one-for-ten (1:10) reverse stock split of all of the Company’s issued and outstanding common and preferred stock (the “Reverse Stock Split”). The Reverse Stock Split became effective when trading opened on December 15, 2015. The Reverse Stock Split was previously approved by the Company’s shareholders pursuant to a majority written consent and by the Board pursuant to unanimous written consent on February 26, 2015. The approvals provided discretion to the Board to implement the Reverse Stock Split by the end of 2015. The number of the Company’s authorized shares of common stock did not change. All figures have been presented on the basis of reverse split wherever applicable for all the periods presented in these financial statements.