CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,481,815
|
|
|
$
|
7,524,114
|
|
Accounts receivable, net
|
|
|
939,649
|
|
|
|
1,068,240
|
|
Accounts receivable - related parties
|
|
|
1,037,146
|
|
|
|
1,458,159
|
|
Inventories
|
|
|
1,008,662
|
|
|
|
931,065
|
|
Prepaid income tax and tax receivable
|
|
|
1,754,369
|
|
|
|
2,138,636
|
|
Investments
|
|
|
3,756,596
|
|
|
|
3,204,005
|
|
Other current assets
|
|
|
546,105
|
|
|
|
374,617
|
|
Total current assets
|
|
|
15,524,342
|
|
|
|
16,698,836
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
13,436
|
|
|
|
13,536
|
|
Property and equipment, net
|
|
|
757,014
|
|
|
|
1,080,471
|
|
Goodwill
|
|
|
915,790
|
|
|
|
915,790
|
|
Intangible assets, net
|
|
|
2,659,723
|
|
|
|
2,995,231
|
|
Deferred tax assets, net
|
|
|
859,696
|
|
|
|
865,120
|
|
Other assets, long - term
|
|
|
523,607
|
|
|
|
532,165
|
|
Total assets
|
|
$
|
21,253,608
|
|
|
$
|
23,101,149
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,867,081
|
|
|
$
|
3,249,387
|
|
Expense waivers – related parties
|
|
|
325,821
|
|
|
|
662,650
|
|
Purchase consideration payable
|
|
|
-
|
|
|
|
1,205,000
|
|
Notes payable - related parties
|
|
|
3,500
|
|
|
|
3,500
|
|
Equipment loans, current portion
|
|
|
26,241
|
|
|
|
46,705
|
|
Total current liabilities
|
|
|
3,222,643
|
|
|
|
5,167,242
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Notes payable - related parties
|
|
|
600,000
|
|
|
|
600,000
|
|
Equipment loans, net of current portion
|
|
|
61,057
|
|
|
|
149,491
|
|
Deferred tax liabilities
|
|
|
176,578
|
|
|
|
208,419
|
|
Total liabilities
|
|
|
4,060,278
|
|
|
|
6,125,152
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 50,000,000 authorized
|
|
|
|
|
|
|
|
|
Series B: 53,032 issued and outstanding at June 30, 2019 and 436,951 at June 30, 2018
|
|
|
53
|
|
|
|
437
|
|
Common stock, $0.001 par value; 900,000,000 shares authorized; 37,237,519 shares issued and outstanding at June 30, 2019 and 29,559,139 at June 30, 2018
|
|
|
37,237
|
|
|
|
29,559
|
|
Additional paid-in capital
|
|
|
9,178,838
|
|
|
|
9,186,132
|
|
Accumulated other comprehensive (loss) income
|
|
|
(175,659
|
)
|
|
|
148,808
|
|
Retained earnings
|
|
|
8,152,861
|
|
|
|
7,611,061
|
|
Total stockholders' equity
|
|
|
17,193,330
|
|
|
|
16,975,997
|
|
Total liabilities and stockholders' equity
|
|
$
|
21,253,608
|
|
|
$
|
23,101,149
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
Fund management - related party
|
|
$
|
15,021,439
|
|
|
$
|
18,744,313
|
|
Food products
|
|
|
4,747,358
|
|
|
|
4,968,158
|
|
Security systems
|
|
|
3,558,580
|
|
|
|
3,303,584
|
|
Beauty products and other
|
|
|
3,621,246
|
|
|
|
1,694,534
|
|
Net revenue
|
|
|
26,948,623
|
|
|
|
28,710,589
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
6,936,421
|
|
|
|
5,914,719
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
20,012,202
|
|
|
|
22,795,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
|
4,205,389
|
|
|
|
4,828,241
|
|
Fund operations
|
|
|
4,494,001
|
|
|
|
4,933,437
|
|
Marketing and advertising
|
|
|
2,910,447
|
|
|
|
3,554,507
|
|
Depreciation and amortization
|
|
|
702,320
|
|
|
|
576,674
|
|
Salaries and compensation
|
|
|
6,944,457
|
|
|
|
6,096,232
|
|
Total operating expenses
|
|
|
19,256,614
|
|
|
|
19,989,091
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
755,588
|
|
|
|
2,806,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
(484,028
|
)
|
|
|
(316,337
|
)
|
Interest and dividend income
|
|
|
366,796
|
|
|
|
111,929
|
|
Interest expense
|
|
|
(29,493
|
)
|
|
|
(101,089
|
)
|
Total other (expense) income, net
|
|
|
(146,725
|
)
|
|
|
(305,497
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
608,863
|
|
|
|
2,501,282
|
|
|
|
|
|
|
|
|
|
|
Provision of income taxes
|
|
|
347,014
|
|
|
|
766,596
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
261,849
|
|
|
$
|
1,734,686
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock
|
|
|
|
|
|
|
|
|
Basic
|
|
|
32,588,418
|
|
|
|
29,559,139
|
|
Diluted
|
|
|
38,298,159
|
|
|
|
38,298,159
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.06
|
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
261,849
|
|
|
$
|
1,734,686
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
|
|
(44,516
|
)
|
|
|
(214,284
|
)
|
Changes in short-term investment valuation
|
|
|
-
|
|
|
|
243,754
|
|
Comprehensive income
|
|
$
|
217,333
|
|
|
$
|
1,764,156
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
|
FOR THE YEARS ENDED JUNE 30, 2019 AND 2018
|
|
|
Preferred Stock
(Series B)
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Number of
Shares
|
|
|
Par
Value
|
|
|
Additional
Paid - in
Capital
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Retained
Earnings
|
|
|
Total
Stockholders' Equity
|
|
Balance at July 1, 2017
|
|
|
436,951
|
|
|
$
|
2,011,934
|
|
|
|
29,559,139
|
|
|
$
|
29,559
|
|
|
$
|
7,174,635
|
|
|
$
|
119,338
|
|
|
$
|
5,876,375
|
|
|
$
|
13,199,907
|
|
Reclassification of Series B Preferred stock par value (1)
|
|
|
-
|
|
|
|
437
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
437
|
|
Reclassification of Series B Preferred stock to additional paid-in capital (1)
|
|
|
-
|
|
|
|
(2,011,497
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,011,497
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,011,497
|
|
Stockholders' equity following reverse stock split (1)
|
|
|
436,951
|
|
|
|
437
|
|
|
|
29,559,139
|
|
|
|
29,559
|
|
|
|
9,186,132
|
|
|
|
119,338
|
|
|
|
5,876,375
|
|
|
|
15,211,841
|
|
Change in investment valuation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
243,754
|
|
|
|
-
|
|
|
|
243,754
|
|
(Loss) on currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(214,284
|
)
|
|
|
-
|
|
|
|
(214,284
|
)
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,734,686
|
|
|
|
1,734,686
|
|
Balance at June 30, 2018
|
|
|
436,951
|
|
|
|
437
|
|
|
|
29,559,139
|
|
|
|
29,559
|
|
|
|
9,186,132
|
|
|
|
148,808
|
|
|
|
7,611,061
|
|
|
|
16,975,997
|
|
(Loss) on currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,516
|
)
|
|
|
|
|
|
|
(44,516
|
)
|
Reclassification of investment gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(279,951
|
)
|
|
|
279,951
|
|
|
|
-
|
|
Conversion of preferred shares
|
|
|
(383,919
|
)
|
|
|
(384
|
)
|
|
|
7,678,380
|
|
|
|
7,678
|
|
|
|
(7,294
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
261,849
|
|
|
|
261,849
|
|
Balance at June 30, 2019
|
|
|
53,032
|
|
|
$
|
53
|
|
|
|
37,237,519
|
|
|
$
|
37,237
|
|
|
$
|
9,178,838
|
|
|
($
|
175,659
|
)
|
|
$
|
8,152,861
|
|
|
$
|
17,193,330
|
|
Note (1) Upon issuance of the preferred shares in the Wainwright acquisition, the Company no longer had sufficient authorized, unissued, common stock to allow for Series B conversion. Accordingly, the Series B was reclassified to the mezzanine section. On December 15, 2017 a 1:30 reverse stock split was completed and allowed for the Series B shares to be moved from the mezzanine section to stockholders' equity. All share amounts have been adjusted for the reverse stock split (Note 13).
The accompanying notes are an integral part of these consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For the years ended
|
|
|
|
2019
|
|
|
2018
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
261,849
|
|
|
$
|
1,734,686
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
702,320
|
|
|
|
576,674
|
|
Deferred taxes
|
|
|
(26,417
|
)
|
|
|
564,992
|
|
Bad debt expense
|
|
|
2,075
|
|
|
|
51,747
|
|
Unrealized loss on investments
|
|
|
1,995
|
|
|
|
359,666
|
|
Realized (gain) on sale of investments
|
|
|
(30,718
|
)
|
|
|
(3,592
|
)
|
(Gain) on disposal of equipment
|
|
|
(3,369
|
)
|
|
|
(8,364
|
)
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
128,105
|
|
|
|
7,137
|
|
Accounts receivable - related party
|
|
|
421,013
|
|
|
|
304,112
|
|
Prepaid income taxes and tax receivable
|
|
|
421,845
|
|
|
|
(906,085
|
)
|
Inventories
|
|
|
(79,127
|
)
|
|
|
(162,388
|
)
|
Other current assets
|
|
|
(161,254
|
)
|
|
|
4,045
|
|
Increase (decrease) in current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(425,690
|
)
|
|
|
406,126
|
|
Expense waiver - related party
|
|
|
(336,829
|
)
|
|
|
73,557
|
|
Net cash provided by operating activities
|
|
|
875,798
|
|
|
|
3,002,313
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash paid for acquisition of business assets
|
|
|
(1,205,000
|
)
|
|
|
(2,277,172
|
)
|
Purchase of equipment - net of disposals
|
|
|
(50,165
|
)
|
|
|
(318,064
|
)
|
Sale of investments
|
|
|
3,230,891
|
|
|
|
1,372,019
|
|
Purchase of investments
|
|
|
(3,754,132
|
)
|
|
|
(1,109,596
|
)
|
Net cash used in investing activities
|
|
|
(1,778,406
|
)
|
|
|
(2,332,813
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds of equipment loan
|
|
|
-
|
|
|
|
178,604
|
|
Repayment of equipment loan
|
|
|
(108,898
|
)
|
|
|
(67,660
|
)
|
Net cash (used in) provided by financing activities
|
|
|
(108,898
|
)
|
|
|
110,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash, cash equivalents and restricted cash
|
|
|
(30,893
|
)
|
|
|
13,184
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
(1,042,399
|
)
|
|
|
793,628
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING BALANCE
|
|
|
7,537,650
|
|
|
|
6,744,022
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE
|
|
$
|
6,495,251
|
|
|
$
|
7,537,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
29,493
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
202,363
|
|
|
$
|
965,272
|
|
Purchase consideration payable (see Note 12)
|
|
$
|
-
|
|
|
$
|
1,205,000
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Concierge Technologies, Inc., (the “Company” or “Concierge”), a Nevada corporation, operates through its wholly owned subsidiaries who are engaged in varied business activities. The operations of the Company’s wholly-owned subsidiaries are more particularly described herein but are summarized as follows:
|
●
|
Wainwright Holdings, Inc. (“Wainwright”), a U.S. based company, is the sole member of two investment services limited liability company subsidiaries, United States Commodity Funds LLC (“USCF”), and USCF Advisers LLC (“USCF Advisers”), each of which manages, operates or is an investment advisor to exchange traded funds organized as limited partnerships or investment trusts that issue shares which trade on the NYSE Arca stock exchange.
|
|
●
|
Gourmet Foods, Ltd. (“Gourmet Foods”), a New Zealand based company, manufactures and distributes New Zealand meat pies on a commercial scale.
|
|
●
|
Brigadier Security Systems (2000) Ltd. (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems.
|
|
●
|
Kahnalytics, Inc. dba/Original Sprout (“Original Sprout”), a U.S. based company, is engaged in the wholesale distribution of hair and skin care products under the brand name Original Sprout on a global scale. The former business of Kahnalytics, providing live-streaming mobile video on a subscription basis, was insignificant and was terminated after transitioning to the current business of distributing hair and skin care products.
|
See “Note 12. Business Combinations” for a description of the terms of our acquisitions for our operating businesses.
Concierge manages its operating businesses on a decentralized basis. There are no centralized or integrated operational functions such as marketing, sales, legal or other professional services and there is little involvement by Concierge’s management in the day-to-day business affairs of its operating subsidiary businesses. Concierge’s corporate management is responsible for capital allocation decisions, investment activities and selection and retention of the Chief Executive to head each of the operating subsidiaries. Concierge's corporate management is also responsible for corporate governance practices, monitoring regulatory affairs, including those of its operating businesses and involvement in governance-related issues of its subsidiaries as needed.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Accounting Principles
The Company has prepared the accompanying financial statements on a consolidated basis. In the opinion of management, the accompanying consolidated balance sheets and related statements of income and comprehensive income, 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”).
Principles of Consolidation
The accompanying condensed consolidated 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 Original Sprout.
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.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Company maintains its cash and cash equivalents in financial institutions in the United States, Canada, and New Zealand. Accounts in the United States are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor, and accounts in Canada are insured by the Canada Deposit Insurance Corporation up to CD$100,000 per depositor. Accounts in New Zealand are uninsured. The Company has, at times, held deposits in excess of insured amounts, but the Company does not expect any losses in such accounts.
Accounts Receivable, net and Accounts Receivable - Related Parties
Accounts receivable, net, consist of receivables from the Brigadier, Gourmet Foods and Original Sprout businesses. Management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends and changes in customer payment patterns to determine whether or not an account should be deemed uncollectible. Reserves, if any, are recorded on a specific identification basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of June 30, 2019 and June 30, 2018, the Company had $2,075 and $51,747, respectively, listed as doubtful accounts.
Accounts receivable - related parties, consist of fund asset 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. As of June 30, 2019, and June 30, 2018, there is no allowance for doubtful accounts as all amounts are deemed collectible.
Major Customers and Suppliers – Concentration of Credit Risk
Concierge, through Brigadier, is partially dependent upon its contractual relationship with the alarm monitoring company who 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 largest customer, which includes contracts and recurring monthly support fees, totaled 46% and 41% of the total Brigadier revenues for the years ended June 30, 2019 and June 30, 2018, respectively. The same customer accounted for approximately 37% of Brigadier's accounts receivable as of the balance sheet date of June 30, 2019 as compared to 35% as of June 30, 2018. Another large account, which has been a significant customer this fiscal year, contributed 12% of the total sales revenues for the year ended June 30, 2019 and nil for the year ended June 30, 2018. There were no accounts receivable from this customer as of June 30, 2019 or 2018.
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 year ended and balance sheet date of June 30, 2019, Gourmet Foods’ largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 22% of Gourmet Foods sales revenues and 28% of Gourmet Foods accounts receivable as compared to 21% and 33% for the prior year ended June 30, 2018, respectively. The second largest in the grocery industry accounted for approximately 12% of Gourmet Foods sales revenues for the year ended June 30, 2019 as compared to 12% for the year ended June 30, 2018. This same group accounted for 19% of Gourmet Foods accounts receivable as of June 30, 2019 as compared to 16% as of June 30, 2018. In the gasoline convenience store market Gourmet Foods supplies two major channels. The largest is a marketing consortium of gasoline dealers operating under the same brand who, for the year ended and balance sheet date of June 30, 2019, accounted for approximately 43% of Gourmet Foods’ gross sales revenues as compared to 41% for the year ended June 30, 2018. No single member of the consortium is responsible for a significant portion of Gourmet Foods’ accounts receivable. The third category of independent retailers and cafes accounted for the remaining balance of Gourmet Foods’ gross sales revenue, however the group members are independently owned and individually responsible for their financial obligations with no one customer accounting for a significant portion of revenues or accounts receivable.
Concierge, through Original Sprout, is not dependent upon any one customer or group of customers as no single customer or buying group consistently accounts for over 10% of the gross revenues, though due to timing of deliveries one customer accounted for approximately 10% of our gross revenues for the year ended June 30, 2019. There were 3 major distributor accounts, all current, representing 25%, 17%, and 12% for a total of 54% of all accounts receivable as of June 30, 2019. Original Sprout is partially dependent upon its relationship with a product packaging company who, at the direction of Original Sprout, manufactures the products, packages them in appropriate containers, and delivers the finished goods to Original Sprout for distribution to its customers. All of Original Sprout’s products are currently produced by this packaging company, although if this relationship were to fail there are other similar packaging companies available to Original Sprout at competitive pricing.
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 12 month revenues and accounts receivable – related parties as of June 30, 2019 and June 30, 2018 as depicted below.
|
|
Year ended June 30, 2019
|
|
|
Year ended June 30, 2018
|
|
|
|
Revenue
|
|
|
Revenue
|
|
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO
|
|
$
|
7,308,354
|
|
|
|
49
|
%
|
|
$
|
9,752,223
|
|
|
|
52
|
%
|
USCI
|
|
|
4,051,605
|
|
|
|
27
|
%
|
|
|
4,253,921
|
|
|
|
23
|
%
|
UNG
|
|
|
1,922,596
|
|
|
|
13
|
%
|
|
|
2,753,723
|
|
|
|
15
|
%
|
All Others
|
|
|
1,738,884
|
|
|
|
11
|
%
|
|
|
1,984,446
|
|
|
|
10
|
%
|
Total
|
|
$
|
15,021,439
|
|
|
|
100
|
%
|
|
$
|
18,744,313
|
|
|
|
100
|
%
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
Accounts Receivable
|
|
|
Accounts Receivable
|
|
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO
|
|
$
|
526,981
|
|
|
|
51
|
%
|
|
$
|
674,535
|
|
|
|
46
|
%
|
USCI
|
|
|
236,251
|
|
|
|
23
|
%
|
|
|
431,288
|
|
|
|
30
|
%
|
UNG
|
|
|
141,413
|
|
|
|
13
|
%
|
|
|
182,399
|
|
|
|
12
|
%
|
All Others
|
|
|
132,501
|
|
|
|
13
|
%
|
|
|
169,937
|
|
|
|
12
|
%
|
Total
|
|
$
|
1,037,146
|
|
|
|
100
|
%
|
|
$
|
1,458,159
|
|
|
|
100
|
%
|
Inventories
Inventories, consisting primarily of food products and packaging in New Zealand, hair and skin care finished products and components in the U.S. and security system hardware in Canada, are valued at the lower of cost (determined on a FIFO basis) or net realizable value. Inventories include product cost, inbound freight and warehousing costs where applicable. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down the inventories to their net realizable value, if lower. For the years ended June 30, 2019 and 2018 impairment to inventory value was recorded as $0 and $0, respectively. An assessment is made at the end of each fiscal year to determine what slow-moving inventory items, if any, should be deemed obsolete and written down to their estimated net realizable value. For the years ended June 30, 2019 and June 30, 2018, the expense for slow-moving or obsolete inventory was $10,317 and $0, respectively.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and leasehold improvements are capitalized. Office furniture and equipment include office fixtures, computers, printers and other office equipment plus software and applicable packaging designs. Leasehold improvements, which are included in plant and equipment, are depreciated over the shorter of the useful life of the improvement and the length of the lease. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight line method over the estimated useful life of the asset (see Note 5 to the Consolidated Financial Statements).
Category
|
|
Estimated Useful Life (in years)
|
|
Plant and equipment:
|
|
|
5
|
to
|
10
|
|
Furniture and office equipment:
|
|
|
3
|
to
|
5
|
|
Vehicles
|
|
|
3
|
to
|
5
|
|
Intangible Assets
Intangible assets consist of brand names, domain names, recipes, non-compete agreements and customer lists. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the discounted expected future cash flows. If the future discounted cash flows are less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. There was no impairment recorded for the year ended June 30, 2019 or for the year ended June 30, 2018.
Goodwill
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase businesses combination. Goodwill is tested for impairment on an annual basis during the fourth quarter of our fiscal year, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value including goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. There was no impairment recorded for the years ended June 30, 2019 and 2018
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. There was no impairment recorded for the years ended June 30, 2019 or 2018.
Investments and Fair Value of Financial Instruments
Short-term investments are classified as available-for-sale securities. The Company measures the investments at fair value at period end with any changes in fair value reflected as unrealized gains or (losses) which is included as part of other (expense) income. The Company values its investments in accordance with Accounting Standards Codification ("ASC") 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and (2) The Company’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
Level 3 – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.
In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.
Revenue Recognition
Revenue consists of fees earned through management of investment funds, sale of gourmet meat pies and related bakery confections in New Zealand, security alarm system installation and maintenance services in Canada, and wholesale distribution of hair and skin care products. Revenue is accounted for net of sales taxes, sales returns, trade discounts. The performance obligation is satisfied when the product has been shipped and title, risk of loss and rewards of ownership have been transferred. For most of the Company’s product sales or services, these criteria are met at the time the product is shipped, the subscription period commences, or the management fees are accrued. For our Brigadier subsidiary in Canada, the Company operates under contract with an alarm monitoring company that pays a percentage of their recurring monitoring fee to Brigadier in exchange for continued customer service and support functions with respect to each customer maintained under contract by the monitoring company.
Recently Adopted Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that set forth a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company adopted this new standard and its related amendments as of July 1, 2018 using the modified retrospective transition method, whereby the cumulative effect of initially applying the new standard recognized as an adjustment to the opening balance of stockholders equity. Results for reporting periods commencing on or after July 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for that prior period. The impact of adoption did not have a material effect on our financial results. The adoption of the new standard impacted the identification of separate obligations for certain sales of security systems and related monitoring sales. The Company generates revenue, in part, through contractual monthly recurring fees received for providing ongoing customer support services to monitoring company clientele. The five-step process governing contract revenue reporting includes:
1. Identifying the contract(s) with customers
2. Identifying the performance obligations in the contract
3. Determining the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when or as the performance obligation is satisfied
Transactions involve security systems that are sold outright to the customer where the Company's performance obligations include customer support services and the sale and installation of the security systems. For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on a relative stand-alone selling price. Revenue associated with the sale and installation of security systems is recognized once installation is complete, and is reflected as security system revenue in the Consolidated Statements of Operations. Revenue associated with customer support services is recognized as those services are provided, and is included as a component of security system revenue in the Consolidated Statements of Operations, which for the year ended June 30, 2019, were approximately US$352,249, or approximately 10% of the total security system revenues. These revenues for the year ended June 30, 2019 account for approximately 1% of total consolidated revenues. None of the other subsidiaries of the Company generate revenues from long term contracts.
Because the Company has no contract with the end user, and the monthly payments for customer support services are made to the Company by the monitoring company who has a contract with the end user, and end user customers are subject to cancellation through no control of the Company; therefore, no deferred revenues or contingent liability reserves have been established with respect to these contracts. The services are deemed delivered as the obligation is acknowledged on a monthly basis.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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 of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits or if future deductibility is uncertain.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.
Advertising Costs
The Company expenses the cost of advertising as incurred. Marketing and advertising costs for the years ended June 30, 2019 and 2018 were $2.9 million and $3.6 million, respectively.
Other Comprehensive Income (Loss)
Foreign Currency Translation
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 Security System 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 weighted average exchange rate throughout the period. Foreign currency transaction gains and (losses) can also occur if a transaction is settled in a currency other than the entity's functional currency. Accumulated currency translation gains and (losses) are classified as an item of accumulated other comprehensive income (loss) in the stockholders’ equity section of the consolidated balance sheet.
Short-Term Investment Valuation
In January 2016, the FASB issued authoritative guidance related to the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, equity investments with readily determinable fair values, except those accounted for under the equity method, will be measured at fair value with changes in fair value recognized in earnings rather than other comprehensive income (loss). In addition, this update clarifies the guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from the unrealized losses on certain debt securities. The Company adopted this guidance effective on July 1, 2018. See Recent Accounting Pronouncements below related to July 1, 2018 reclassification of accumulated other comprehensive income to retained earnings. Besides this reclassification there was no material impact to Consolidated Financial Statements as a result of the adoption.
Segment Reporting
The Company defines operating segments as components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. The Company allocates its resources and assesses the performance of its sales activities based on the geographic locations of its subsidiaries (Refer to Note 16 of the Consolidated Financial Statements).
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed. For the years ended June 30, 2019 and 2018 a determination was made that no adjustments were necessary.
Recent Accounting Pronouncements adopted during the year ended June 30, 2019
On July 1, 2018 the Company adopted ASU 2016-01 Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities and Accounting Standards Codification ("ASC") 606 - Revenue from Contracts with Customers ("ASC 606"). A summary of the effects of the initial adoption of ASU 2016-01 and ASC 606 follows:
|
|
ASU 2016-01
|
|
|
ASC 606
|
|
|
Total
|
|
Increase (decrease):
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Accumulated other comprehensive income
|
|
$
|
(279,951
|
)
|
|
$
|
-
|
|
|
$
|
(279,951
|
)
|
Retained earnings
|
|
$
|
279,951
|
|
|
$
|
-
|
|
|
$
|
279,951
|
|
The above (“ASU 2016-01”) entry reclasses accumulated gains from changes in short-term investment valuations previously recorded in comprehensive income to retained earnings. ASU 2016-01 requires that unrealized gains and losses arising from changes in market values of our investments in equity securities be recorded in the condensed consolidated statements of operations rather than in accumulated other comprehensive income (loss) on the balance sheet. Prior to July 1, 2018 investment gains and losses related to equity securities were reflected on the condensed consolidated statements of comprehensive income.
The Company has reviewed new accounting pronouncements issued between September 28, 2018, the filing date of our most recent prior Annual Report on Form 10-K, and the filing date of this Annual Report on Form 10-K, and has determined that no new pronouncements, apart from Topic 842 described below, issued are relevant to the Company, and/or have, or will have, a material impact on the Company’s consolidated financial position, results of operations or disclosure requirements.
On July 1, 2019, the Company adopted FASB ASU 2016-02, Leases (Topic 842), which supersedes the requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, based on the current level of long term leases in place, this is not material to the Company’s results of operations or financial position. See Note 15 for information on existing leases.
NOTE 3. BASIC AND DILUTED NET LOSS PER SHARE
Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The Company does not have any options or warrants.
Diluted net income per share reflects the effects of shares actually potentially issuable upon conversion of convertible preferred stock.
The components of basic and diluted earnings per share were as follows:
|
|
For the year ended June 30, 2019
|
|
|
|
Net Income
|
|
|
Shares
|
|
|
Per Share
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
261,849
|
|
|
|
32,588,418
|
|
|
$
|
0.01
|
|
Effect of dilutive securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred stock Series B
|
|
|
-
|
|
|
|
5,709,741
|
|
|
|
-
|
|
Diluted income per share
|
|
$
|
261,849
|
|
|
|
38,298,159
|
|
|
$
|
0.01
|
|
|
|
For the year ended June 30, 2018
|
|
|
|
Net Income
|
|
|
Shares
|
|
|
Per Share
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
1,734,686
|
|
|
|
29,559,139
|
|
|
$
|
0.06
|
|
Effect of dilutive securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred stock Series B
|
|
|
-
|
|
|
|
8,739,020
|
|
|
|
-
|
|
Diluted income per share
|
|
$
|
1,734,686
|
|
|
|
38,298,159
|
|
|
$
|
0.05
|
|
NOTE 4. INVENTORIES
Inventories for Gourmet Foods, Brigadier and Original Sprout consisted of the following totals:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Raw materials
|
|
$
|
208,284
|
|
|
$
|
195,674
|
|
Supplies and packing materials
|
|
|
188,035
|
|
|
|
142,257
|
|
Finished goods
|
|
|
612,343
|
|
|
|
593,134
|
|
Total inventories
|
|
$
|
1,008,662
|
|
|
$
|
931,065
|
|
NOTE 5. PROPERTY AND EQUIPMENT
Property, plant and equipment consisted of the following as of June 30, 2019 and 2018:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Plant and equipment
|
|
$
|
1,511,629
|
|
|
$
|
1,487,568
|
|
Furniture and office equipment
|
|
|
188,370
|
|
|
|
171,978
|
|
Vehicles
|
|
|
332,672
|
|
|
|
351,381
|
|
Total property and equipment, gross
|
|
|
2,032,671
|
|
|
|
2,010,927
|
|
Accumulated depreciation
|
|
|
(1,275,657
|
)
|
|
|
(930,456
|
)
|
Total property and equipment, net
|
|
$
|
757,014
|
|
|
$
|
1,080,471
|
|
For the years ended June 30, 2019 and 2018, depreciation expense for property, plant and equipment totaled $366,812 and $342,628, respectively.
NOTE 6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Customer relationships
|
|
$
|
700,252
|
|
|
$
|
700,252
|
|
Brand name
|
|
|
1,142,122
|
|
|
|
1,142,122
|
|
Domain name
|
|
|
36,913
|
|
|
|
36,913
|
|
Recipes
|
|
|
1,221,601
|
|
|
|
1,221,601
|
|
Non-compete agreement
|
|
|
274,982
|
|
|
|
274,982
|
|
Total
|
|
|
3,375,870
|
|
|
|
3,375,870
|
|
Less : accumulated amortization
|
|
|
(716,147
|
)
|
|
|
(380,639
|
)
|
Net intangibles
|
|
$
|
2,659,723
|
|
|
$
|
2,995,231
|
|
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 $434,099 and is amortized over the remaining useful life of 10 years. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired customer relationships was determined to be $200,000 and is amortized over the remaining useful life of 7 years.
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Customer relationships
|
|
$
|
700,252
|
|
|
|
700,252
|
|
Less: accumulated amortization
|
|
|
(203,492
|
)
|
|
|
(124,895
|
)
|
Total customer relationships, net
|
|
$
|
496,760
|
|
|
|
575,357
|
|
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. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired brand name was determined to be $740,000 and is considered to have an indefinite life. Unlike the brand names Gourmet Foods and Brigadier Security Systems, Original Sprout is an actual product name and recognized associated brand that is identifiable to consumers of the product and is the basis of the value proposition. That brand name will forever be associated with the product offering unless and until such time in the future as the Company may elect to discontinue the use of the brand and move towards establishment of an alternative product offering. Therefore, the Company will test for impairment of the brand name "Original Sprout" at each reporting interval with no amortization recognized.
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Brand name
|
|
$
|
1,142,122
|
|
|
$
|
1,142,122
|
|
Less: accumulated amortization
|
|
|
(129,084
|
)
|
|
|
(88,872
|
)
|
Total brand name, net
|
|
$
|
1,013,038
|
|
|
$
|
1,053,250
|
|
DOMAIN NAME
On August 11, 2015, the Company acquired Gourmet Foods, Ltd. 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.
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Domain name
|
|
$
|
36,913
|
|
|
$
|
36,913
|
|
Less: accumulated amortization
|
|
|
(26,341
|
)
|
|
|
(18,958
|
)
|
Total brand name, net
|
|
$
|
10,572
|
|
|
$
|
17,955
|
|
RECIPES AND FORMULAS
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. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired recipes and formulas was determined to be $1,200,000 and is amortized over the remaining useful life of 8 years.
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Recipes and formulas
|
|
$
|
1,221,601
|
|
|
$
|
1,221,601
|
|
Less: accumulated amortization
|
|
|
(246,622
|
)
|
|
|
(92,303
|
)
|
Total recipes and formulas, net
|
|
$
|
974,979
|
|
|
$
|
1,129,298
|
|
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. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired non-compete agreement was determined to be $190,000 and is amortized over the remaining useful life of 5 years.
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Non-compete agreement
|
|
$
|
274,982
|
|
|
$
|
274,982
|
|
Less: accumulated amortization
|
|
|
(110,608
|
)
|
|
|
(55,612
|
)
|
Total non-compete agreement, net
|
|
$
|
164,374
|
|
|
$
|
219,370
|
|
AMORTIZATION EXPENSE
The total amortization expense for intangible assets for the years ended June 30, 2019 and June 30, 2018 was $335,508 and $234,046, respectively.
Estimated amortization expenses of intangible assets for the next five twelve-month periods ending June 30, are as follows:
Years Ending June 30,
|
|
Expense
|
|
2020
|
|
$
|
335,508
|
|
2021
|
|
|
326,034
|
|
2022
|
|
|
306,809
|
|
2023
|
|
|
286,507
|
|
2024
|
|
|
268,809
|
|
Thereafter
|
|
|
1,136,056
|
|
Total
|
|
$
|
2,659,723
|
|
NOTE 7. OTHER ASSETS
Other Current Assets
Other current assets totaling $546,105 as of June 30, 2019 and $374,617 as of June 30, 2018 are comprised of various components as listed below.
|
|
As of June 30, 2019
|
|
|
As of June 30, 2018
|
|
Prepaid expenses
|
|
$
|
462,215
|
|
|
$
|
358,869
|
|
Other current assets
|
|
|
83,890
|
|
|
|
15,748
|
|
Total
|
|
$
|
546,105
|
|
|
$
|
374,617
|
|
Investments
Wainwright, from time to time, provides initial investments in the creation of ETP 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 included in comprehensive income (loss) through June 30, 2018 and subsequently through earnings in accordance with ASU 2016-01. As of June 30, 2019 and June 30, 2018, investments were approximately $3.8 million and $3.2 million, respectively. Investments in which no controlling financial interest exists, but significant influence exists are recorded as per the equity method of investment accounting. As of June 30, 2019 and June 30, 2018, there were no investments requiring the equity method investment accounting.
Investments measured at estimated fair value consist of the following as of June 30, 2019 and June 30, 2018:
|
|
As of June 30, 2019
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
Money market funds
|
|
$
|
3,005,182
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,005,182
|
|
Other short term investments
|
|
|
749,988
|
|
|
|
-
|
|
|
|
(739
|
)
|
|
|
749,249
|
|
Other equities
|
|
|
3,421
|
|
|
|
-
|
|
|
|
(1,256
|
)
|
|
|
2,165
|
|
Total short-term investments
|
|
$
|
3,758,591
|
|
|
$
|
-
|
|
|
$
|
(1,995
|
)
|
|
$
|
3,756,596
|
|
|
|
As of June 30, 2018
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
Money market funds
|
|
$
|
180,138
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
180,138
|
|
USCI mutual fund investment
|
|
|
2,500,000
|
|
|
|
280,480
|
|
|
|
-
|
|
|
|
2,780,480
|
|
Hedged asset
|
|
|
523,100
|
|
|
|
-
|
|
|
|
(280,761
|
)
|
|
|
242,339
|
|
Other equities
|
|
|
1,577
|
|
|
|
-
|
|
|
|
(529
|
)
|
|
|
1,048
|
|
Total short-term investments
|
|
$
|
3,204,815
|
|
|
$
|
280,480
|
|
|
$
|
(281,290
|
)
|
|
$
|
3,204,005
|
|
The following tables summarize the valuation of the Company’s securities at June 30, 2019 and June 30, 2018 using the fair value hierarchy:
|
|
As of June 30, 2019
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Money market funds
|
|
$
|
3,005,182
|
|
|
$
|
3,005,182
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Other short term investments
|
|
|
749,249
|
|
|
|
749,249
|
|
|
|
-
|
|
|
|
-
|
|
Other equities
|
|
|
2,165
|
|
|
|
2,165
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
3,756,596
|
|
|
$
|
3,756,596
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
As of June 30, 2018
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Money market funds
|
|
$
|
180,138
|
|
|
$
|
180,138
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mutual fund investment
|
|
|
2,780,480
|
|
|
|
2,780,480
|
|
|
|
-
|
|
|
|
-
|
|
Hedge asset
|
|
|
242,339
|
|
|
|
-
|
|
|
|
242,339
|
|
|
|
-
|
|
Other equities
|
|
|
1,048
|
|
|
|
1,048
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
3,204,005
|
|
|
$
|
2,961,666
|
|
|
$
|
242,339
|
|
|
$
|
-
|
|
During the years ended June 30, 2019 and 2018, there were no transfers between Level 1 and Level 2.
Restricted Cash
At June 30, 2019 and 2018, Gourmet Foods had on deposit approximately NZ$20,000 (approximately US$13,437 and US$13,536, respectively after currency translation) 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.
Long - Term Assets
Other long term assets totaling $523,607 and $532,165 at June 30, 2019 and June 30, 2018, respectively, were attributed to Wainwright and Original Sprout and consisted of
|
(i)
|
$500,000 as of June 30, 2019 and June 30, 2018 representing 10% equity investment in a registered investment adviser accounted for on a cost basis,
|
|
(ii)
|
and $23,607 as of June 30, 2019 and $32,165 at June 30, 2018 representing deposits and prepayments of rent.
|
NOTE 8. GOODWILL
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations. The amounts recorded in goodwill for June 30, 2019 and 2018 were $915,790 and $915,790, respectively.
Goodwill is comprised of the following amounts:
|
|
As of June 30, 2019
|
|
|
As of June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Goodwill – Original Sprout
|
|
$
|
416,817
|
|
|
$
|
416,817
|
|
Goodwill – Gourmet Foods
|
|
|
147,628
|
|
|
|
147,628
|
|
Goodwill - Brigadier
|
|
|
351,345
|
|
|
|
351,345
|
|
Total
|
|
$
|
915,790
|
|
|
$
|
915,790
|
|
The Company tests for goodwill impairment at each reporting unit. There was no goodwill impairment for the year ended June 30, 2019 or June 30, 2018.
NOTE 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
Accounts payable
|
|
$
|
1,720,902
|
|
|
$
|
1,935,645
|
|
Accrued interest
|
|
|
117,555
|
|
|
|
56,689
|
|
Taxes payable
|
|
|
181,563
|
|
|
|
3,938
|
|
Deferred rent
|
|
|
37,076
|
|
|
|
3,681
|
|
Accrued payroll, vacation and bonus payable
|
|
|
345,520
|
|
|
|
299,630
|
|
Accrued expenses
|
|
|
464,465
|
|
|
|
949,804
|
|
Total
|
|
$
|
2,867,081
|
|
|
$
|
3,249,387
|
|
NOTE 10. RELATED PARTY TRANSACTIONS
Notes Payable - Related Parties
Current related party notes payable consist of the following:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
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
|
|
|
|
250,000
|
|
Notes payable to shareholder, interest rate of 4%, unsecured and payable on April 8, 2022
|
|
|
350,000
|
|
|
|
350,000
|
|
|
|
$
|
603,500
|
|
|
$
|
603,500
|
|
Interest expense for all related party notes for the years ended June 30, 2019 and 2018 was $24,280 and $24,280, respectively.
Wainwright - Related Party Transactions
The Funds managed by USCF and USCF Advisers are deemed by management to be related parties. The Company’s Wainwright revenues, totaling $15.0 million and $18.7 million for the years ended June 30, 2019 and 2018, respectively, were earned from these related parties. Accounts receivable, totaling $1.0 million and $1.5 million as of June 30, 2019 and June 30, 2018, respectively, were owed from these related parties. Fund expense waivers, totaling $0.3 million and $0.7 million and fund expense limitation amounts, totaling $0.2 million and $0.5 million, for the years ended June 30, 2019 and 2018, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $0.3 million and $0.7 million as of June 30, 2019 and June 30, 2018, respectively, were owed to these related parties. Fund expense waivers and fund expense limitation obligations are defined under Note 15 to the Consolidated Financial Statements.
NOTE 11. EQUIPMENT LOANS
As of June 30, 2019, Brigadier had, in the aggregate, an outstanding principal balance of CD$114,292 (approx. US$87,297) related to new vehicle purchases. For each vehicle purchased, the loan principal together with interest is amortized over 60 equal monthly installments. The Consolidated Balance Sheets as of June 30, 2019 and June 30, 2018 reflect the amount of the principal balance which is due within twelve months as a current liability of US$26,241 and $46,705, respectively. Principal amounts under the loans which is due after twelve months are recorded in long term liabilities as US$61,057 and $149,491 for the years ended June 30, 2019 and 2018 respectively. Interest on the loans is expensed or accrued as it becomes due. Total interest on all vehicle loans for the year ended June 30, 2019 was US$5,197 and $12,662 for the year ended June 30, 2018.
NOTE 12. BUSINESS COMBINATION
Acquisition of the assets of The Original Sprout, LLC
Kahnalytics, Inc., a wholly owned subsidiary of Concierge Technologies domiciled in California, was founded during May 2015 for the purpose of carrying on the residual business from the disposal of Concierge Technologies' former subsidiary, Wireless Village dba/Janus Cam. As that business segment slowly wound down over the ensuing two years, management began a search for another business opportunity for Kahnalytics. Accordingly, on December 18, 2017, Kahnalytics acquired all of the assets of The Original Sprout, LLC, a California limited liability company. Simultaneous with the acquisition, Kahnalytics registered a "doing business as" (or "dba") name of “Original Sprout” and transitioned its business to the manufacture, warehousing and wholesale distribution of non-toxic, all-natural, hair and skin care products under the brand name Original Sprout. The acquisition by Kahnalytics was financed through a non-interest bearing note from Concierge Technologies. The purchase price was approximately $3.5 million with payments to be made over the course of a twelve-month period and per the estimated allocation as depicted in the following table.
Item
|
|
Amount
|
|
Inventory
|
|
$
|
371,866
|
|
Accounts receivable
|
|
|
288,804
|
|
Furniture, fixtures and equipment
|
|
|
1,734
|
|
Pre-payments of inventory
|
|
|
8,775
|
|
Discount on installment payments**
|
|
|
64,176
|
|
Intangible assets*
|
|
|
2,330,000
|
|
Goodwill
|
|
|
416,817
|
|
Total Purchase Price
|
|
$
|
3,482,172
|
|
*See Note 6 for further detail of intangible assets acquired.
**This amount represents a discount on installment payments and was charged to interest expense.
On the closing date of the transaction, December 18, 2017, Kahnalytics paid $982,172 in cash towards the purchase price and deposited an additional $1,250,000 in an attorney-held client trust account which was released to the sellers, after downward adjustments due to changes in acquired accounts receivable, on May 18, 2018. The balance of the purchase price, after consideration for monthly installment payments, was paid in full on January 5, 2019.
Supplemental Pro Forma Information (Unaudited)
The following unaudited supplemental pro forma information for the year ended June 30, 2018 assumes the acquisition of the Original Sprout LLC assets had occurred as of July 1, 2017, giving effect on a pro forma basis to purchase accounting adjustments such as depreciation of property and equipment, amortization of intangible assets, and acquisition related costs. The pro forma data is for information purposes only and may not necessarily reflect the actual results of operations had the assets of Original Sprout LLC been operated as part of the Company since July 1, 2017. Furthermore, the pro forma results do not intend to predict the future results of operations of the Company.
|
|
Year Ended
|
|
|
|
June 30, 2018
|
|
|
|
Pro Forma(1)
|
|
Net Revenues
|
|
$
|
30,782,940
|
|
Net Income
|
|
$
|
2,044,203
|
|
Basic Earnings per Share
|
|
$
|
0.07
|
|
Diluted Earnings per Share
|
|
$
|
0.05
|
|
|
(1)
|
Includes the operation of the assets acquired from Original Sprout LLC on a consolidated basis and the estimated transaction costs, amortization of intangible assets, and estimated income tax.
|
NOTE 13. STOCKHOLDERS' EQUITY
Reverse Stock Split
On November 17, 2017, the Board of Directors (the “Board’) of the Company approved the implementation of a one-for-thirty (1:30) 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, 2017. 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 13, 2017. The approvals provided discretion to the Board to implement the Reverse Stock Split by the end of 2017. 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 where ever applicable for all the periods presented in these financial statements.
Convertible Preferred Stock
Each issued Series B Voting, Convertible Preferred Stock is convertible into 20 shares of common stock and carries a vote of 20 shares of common stock in all matters brought before the shareholders for a vote. On February 7, 2019, the Company converted 383,919 shares of Series B Voting, Convertible Preferred Stock to 7,678,380 shares of common stock per the request of the shareholder and pursuant to the stock designation. After the conversion, there remain 53,032 shares of Series B Voting, Convertible Preferred Stock outstanding as of June 30, 2019.
Accumulated Other Comprehensive Income
The following table presents activity for the years ending June 30, 2019 and June 30, 2018:
Balance as of June 30, 2017
|
|
$
|
119,338
|
|
Change in short-term investment valuation before reclassification to earnings
|
|
|
329,629
|
|
Foreign currency translation (loss)
|
|
|
(214,284
|
)
|
Change in short-term investment valuation due to reclassification to earnings
|
|
|
(85,875
|
)
|
Balance as of June 30, 2018
|
|
|
148,808
|
|
Foreign currency translation (loss)
|
|
|
(44,516
|
)
|
Change in short-term investment valuation due to reclassification to earnings
|
|
|
(279,951
|
)
|
Balance as of June 30, 2019
|
|
$
|
(175,659
|
)
|
NOTE 14. INCOME TAXES
The following table summarizes income before income taxes:
|
|
Years Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
U.S.
|
|
$
|
414,961
|
|
|
$
|
2,276,390
|
|
Foreign
|
|
|
193,902
|
|
|
|
224,892
|
|
Income before income taxes
|
|
$
|
608,863
|
|
|
$
|
2,501,282
|
|
Income Tax Provision
Provision for income tax as listed on the Consolidated Statements of Operations for the years ended June 30, 2019 and 2018 are $347,014 and $766,596, respectively.
Provision for taxes consisted of the following:
|
|
Years Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
U.S. operations
|
|
$
|
183,025
|
|
|
$
|
658,293
|
|
Foreign operations
|
|
|
163,989
|
|
|
|
108,303
|
|
Total
|
|
$
|
347,014
|
|
|
$
|
766,596
|
|
Provisions for income tax consisted of the following as of the years ended:
For the year ended:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
149,239
|
|
|
$
|
572,227
|
|
States
|
|
|
36,183
|
|
|
|
(510,765
|
)
|
Foreign
|
|
|
188,009
|
|
|
|
140,142
|
|
Total current
|
|
|
373,431
|
|
|
|
201,604
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(10,572
|
)
|
|
|
502,364
|
|
States
|
|
|
8,175
|
|
|
|
94,467
|
|
Foreign
|
|
|
(24,020
|
)
|
|
|
(31,839
|
)
|
Total deferred
|
|
|
(26,417
|
)
|
|
|
564,992
|
|
Total
|
|
$
|
347,014
|
|
|
$
|
766,596
|
|
Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets for the years ended June 30, 2019 and 2018 are presented below:
For the year ended:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Property and equipment and intangible assets - U.S.
|
|
$
|
619,483
|
|
|
$
|
745,420
|
|
Net operating loss
|
|
|
3,299
|
|
|
|
3,646
|
|
Capital loss carryover
|
|
|
167
|
|
|
|
10,337
|
|
Accruals, reserves and other - foreign
|
|
|
5,674
|
|
|
|
13,494
|
|
Accruals, reserves and other - U.S.
|
|
|
233,646
|
|
|
|
104,607
|
|
Gross deferred tax assets
|
|
|
862,269
|
|
|
|
877,504
|
|
Less valuation allowance
|
|
|
(2,573
|
)
|
|
|
(12,384
|
)
|
Total deferred tax assets
|
|
$
|
859,696
|
|
|
$
|
865,120
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets - foreign
|
|
$
|
(176,578
|
)
|
|
$
|
(208,419
|
)
|
Total deferred tax liabilities
|
|
$
|
(176,578
|
)
|
|
$
|
(208,419
|
)
|
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses; the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does believe that it is more likely than not that the deferred tax assets will be realized, however, a partial valuation allowance was established for capital loss carryforwards. The valuation allowance decreased by $9,811 during the year ended June 30, 2019 and decreased by $16,693 during the year ended June 30, 2018.
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect our business, such as imposing a one-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial tax system. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of June 30, 2018. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, we previously provided a provisional estimate of the effect of the Tax Act in our financial statements. In the fourth quarter of fiscal year 2019, we completed our analysis to determine the effect of the Tax Act and recorded immaterial adjustments as of June 30, 2019.
The TCJA reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. As a result, net deferred tax assets were re-measured, which resulted in a reduction of our deferred tax assets by approximately $504,905 for the tax year ended June 30, 2018.
Furthermore, the TCJA includes a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries. The GILTI is broadly the excess income of foreign subsidiaries over a 10% rate of routine return on tangible business assets. The US taxable GILTI amount is subject to a 50% GILTI deduction allowance, with the new US federal corporate tax of 21%, the effective US tax rate on GILTI is 10.5%. The GILTI is effective for taxable years of foreign corporation beginning after December 31, 2017. Due to the aggregated positive E&P of the foreign subsidiaries there is GILTI inclusion for 2018.
Income tax expense (benefit) for the years ended June 30, 2019 and June 30, 2018 differed from the amounts computed by applying the statutory federal income tax rate of 21.00% and 27.50%, respectively, to pretax income (loss) as a result of the following:
For the year ended:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Federal tax expense (benefit) at statutory rate
|
|
$
|
127,861
|
|
|
$
|
687,853
|
|
State income taxes
|
|
|
36,760
|
|
|
|
(437,242
|
)
|
Permanent differences
|
|
|
112,814
|
|
|
|
(46,251
|
)
|
Deferred tax impact of the Tax Act
|
|
|
-
|
|
|
|
504,905
|
|
U.S. toll charge (net of FTC)
|
|
|
-
|
|
|
|
1,112
|
|
Foreign tax credit
|
|
|
(43,930
|
)
|
|
|
|
|
Change in valuation allowance
|
|
|
(9,761
|
)
|
|
|
9,761
|
|
Foreign rate differential
|
|
|
123,270
|
|
|
|
46,458
|
|
Total tax expense
|
|
$
|
347,014
|
|
|
$
|
766,596
|
|
For the year ended:
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
%
|
|
|
%
|
|
Federal tax expense (benefit) at statutory rate
|
|
|
21.00
|
%
|
|
|
27.50
|
%
|
State income taxes
|
|
|
6.04
|
%
|
|
|
(17.48
|
%)
|
Permanent differences
|
|
|
18.52
|
%
|
|
|
(1.85
|
%)
|
Deferred tax impact of the Tax Act
|
|
|
-
|
|
|
|
20.19
|
%
|
Foreign rate differential
|
|
|
20.25
|
%
|
|
|
1.86
|
%
|
U.S. toll charge (net of FTC)
|
|
|
-
|
|
|
|
0.04
|
%
|
Foreign tax credit
|
|
|
(7.22
|
%)
|
|
|
-
|
|
Change in valuation allowance
|
|
|
(1.60
|
%)
|
|
|
0.39
|
%
|
Total tax expense
|
|
|
56.99
|
%
|
|
|
30.65
|
%
|
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which includes interest and penalties, for the years ended June 30, 2019 and 2018 are as follows:
Balance at June 30, 2018
|
|
$
|
264,543
|
|
Additions based on tax positions taken during a prior period
|
|
|
12,597
|
|
Reductions based on tax positions taken during a prior period
|
|
|
-
|
|
Additions based on tax positions taken during the current period
|
|
|
-
|
|
Reductions based on tax positions taken during the current period
|
|
|
-
|
|
Reductions related to settlement of tax matters
|
|
|
-
|
|
Reductions related to a lapse of applicable statute of limitations
|
|
|
-
|
|
Balance at June 30, 2019
|
|
$
|
277,140
|
|
The Company files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and foreign income tax returns are subject to tax examinations for the tax years 2015 through 2018 as of year ended June 30, 2019. To the extent the Company has tax attribute carry forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the U.S. Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. There were no ongoing examinations by taxing authorities as of June 30, 2019.
The Company had $251,946 of unrecognized tax benefits as of June 30, 2019 and $251,946 as of June 30, 2018 that if recognized would affect the effective tax rate. The Company does not anticipate a significant change to its unrecognized tax benefits in the year ending June 30, 2019.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2019, and June 30, 2018, the Company accrued and recognized as a liability $25,194 and $12,597, respectively, of interest and penalties related to uncertain tax positions.
NOTE 15. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases various facilities and offices throughout the world including the following subsidiary locations:
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 September 2019 and September 2022, and require monthly rental payments of approximately US$11,561 translated to U.S. currency as of June 30, 2019.
Brigadier leases office and storage facilities as well as certain office equipment in Saskatoon and Regina, Saskatchewan. As of June 30, 2019, the Company had entered into an agreement to purchase its leased facility in Saskatoon effective July 1, 2019 (see Note 17-Subsequent Events). The minimum lease obligations for the Regina facility and office equipment require monthly payments of approximately US$2,725 translated to U.S. currency as of June 30, 2019.
Original Sprout currently leases office and warehouse space in San Clemente, CA under a three-year lease agreement expiring or renewing at March 1, 2021. Minimum monthly lease payments are approximately $7,837 with increases annually.
Wainwright leases office space in Walnut Creek, California under an operating lease which expires in December 2024. Minimum monthly lease payments are approximately $12,000 with increases annually.
For the years ended June 30, 2019 and 2018, the combined lease payments of the Company and its subsidiaries totaled $413,429 and $254,150, respectively.
Future minimum consolidated lease payments for Concierge and its subsidiaries are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2020
|
|
$
|
412,025
|
|
2021
|
|
|
384,248
|
|
2022
|
|
|
243,412
|
|
2023
|
|
|
206,502
|
|
2024
|
|
|
109,958
|
|
2025
|
|
|
584
|
|
Total minimum lease commitment
|
|
$
|
1,356,729
|
|
Additionally, 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$73,901) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$13,436) 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.
Other Agreements and Commitments
USCF manages four funds (BNO, CPER, UGA, UNL) which have expense waivers provisions, whereby USCF will reimburse funds when fund expenditure levels exceed certain threshold amounts.As of June 30, 2019 and June 30, 2018 the expense waiver payable was $0.3 million and $0.7 million, respectively. USCF has no obligation to continue such payments for these four funds into subsequent periods.
USCF Advisers previously managed one mutual fund, the USCF Commodity Strategy Fund ("USCFX" and USCIX") until it was liquidated on March 21, 2019. Prior to liquidation, USCF Advisers had an expense waiver provision for the USCF Commodity Strategy Fund, whereby, USCF Advisers reimbursed the USCF Commodity Strategy Fund when fund expenditure levels exceeded a certain threshold amount. The expense fee waiver terminated upon the liquidation of the fund on March 21, 2019.
Litigation
From time to time, the Company is involved in legal proceedings arising mainly from the ordinary course of its business. Currently, there are no legal proceedings pending.
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 an safe harbor matching contribution. Quarterly profit sharing contributions paid totaled approximately $158 thousand and $95 thousand for each of the years ended June 30, 2019 and 2018, respectively.
NOTE 16. SEGMENT REPORTING
With the acquisition of Wainwright Holdings, Gourmet Foods, Ltd., Brigadier, and the launch of the Original Sprout business unit of Kahnalytics, the Company has identified four segments for its products and services; U.S.A. investment fund management, U.S.A. beauty products, New Zealand food industry and Canada security alarm systems. Our reportable segments are business units located in different global regions. The Company’s operations in the U.S.A. include the manufacture and wholesale distribution of hair and skin care products by Original Sprout 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 maintenance services 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 June 30, 2019 and June 30, 2018:
|
|
As of June 30, 2019
|
|
|
As of June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
2,730,805
|
|
|
$
|
2,123,048
|
|
U.S.A. : fund management
|
|
|
10,878,549
|
|
|
|
13,563,773
|
|
U.S.A. : beauty products
|
|
|
3,780,278
|
|
|
|
3,739,979
|
|
New Zealand: food industry
|
|
|
1,838,800
|
|
|
|
1,959,486
|
|
Canada: security systems
|
|
|
2,025,176
|
|
|
|
1,714,863
|
|
Consolidated
|
|
$
|
21,253,608
|
|
|
$
|
23,101,149
|
|
The following table presents a summary of operating information for the years ended June 30, 2019 and June 30, 2018:
|
|
Year Ended
June 30, 2019
|
|
|
Year Ended
June 30, 2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
U.S.A. : beauty products
|
|
$
|
3,621,246
|
|
|
$
|
1,694,534
|
|
U.S.A. : investment fund management
|
|
|
15,021,439
|
|
|
|
18,744,313
|
|
New Zealand : food industry
|
|
|
4,747,358
|
|
|
|
4,968,158
|
|
Canada : security systems
|
|
|
3,558,580
|
|
|
|
3,303,584
|
|
Consolidated
|
|
$
|
26,948,623
|
|
|
$
|
28,710,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) after taxes:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
(1,223,930
|
)
|
|
$
|
(744,992
|
)
|
U.S.A. : beauty products
|
|
|
406,963
|
|
|
|
42,702
|
|
U.S.A. : investment fund management
|
|
|
687,755
|
|
|
|
1,950,711
|
|
New Zealand : food industry
|
|
|
(13,326
|
)
|
|
|
99,398
|
|
Canada : security systems
|
|
|
404,387
|
|
|
|
386,867
|
|
Consolidated
|
|
$
|
261,849
|
|
|
$
|
1,734,686
|
|
The following table presents a summary of net capital expenditures for the year ended June 30:
|
|
2019
|
|
|
2018
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
U.S.A. : corporate headquarters
|
|
$
|
-
|
|
|
$
|
495
|
|
U.S.A. : beauty products
|
|
|
5,501
|
|
|
|
2,707
|
|
U.S.A.: investment fund management
|
|
|
-
|
|
|
|
-
|
|
New Zealand: food industry
|
|
|
48,856
|
|
|
|
165,414
|
|
Canada: security systems
|
|
|
(4,192
|
)
|
|
|
149,449
|
|
Consolidated
|
|
$
|
50,165
|
|
|
$
|
318,065
|
|
The following table represents property, plant and equipment in use at each of the Company's locations as of June 30:
|
|
2019
|
|
|
2018
|
|
Asset Location:
|
|
|
|
|
|
|
|
|
U.S.A. : corporate headquarters
|
|
$
|
14,305
|
|
|
$
|
14,305
|
|
U.S.A. : beauty products
|
|
|
10,745
|
|
|
|
5,244
|
|
U.S.A.: investment fund management
|
|
|
-
|
|
|
|
-
|
|
New Zealand: food industry
|
|
|
1,659,186
|
|
|
|
1,627,545
|
|
Canada: security systems
|
|
|
348,435
|
|
|
|
363,833
|
|
Total All Locations
|
|
|
2,032,671
|
|
|
|
2,010,927
|
|
Less accumulated depreciation
|
|
|
(1,275,657
|
)
|
|
|
(930,456
|
)
|
Net property, plant and equipment
|
|
$
|
757,014
|
|
|
$
|
1,080,471
|
|
NOTE 17. SUBSEQUENT EVENTS
The Company evaluated subsequent events for recognition and disclosure through the date the financial statements were issued or filed. Nothing has occurred outside normal operations since that required recognition or disclosure in these financial statements other than the items noted below.
On July 2, 2019, Brigadier finalized the purchase of its office facility and land located in Saskatoon for CAN$750,000 (approximately US$572,858), funded by a bank loan of CAN$525,000 (approximately US$401,000) and CAN$225,000 (approximately US$171,858) in cash. The bank loan matures in 5 years and bears interest at the annual rate of 4.14%.
On June 24, 2019, Gourmet Foods, entered into an agreement to purchase the assets of Maketu Pies subject to, among other things, completion of due diligence. However, after completion of due diligence, the agreement was terminated by Gourmet Foods pursuant to its terms on July 31, 2019. (reference Form 8-K filed on June 27, 2019 and August 2, 2019)
USCF Advisers implemented fee waivers for all three of its exchange-traded funds ("ETFs") effective August 15, 2019: the USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund ("SDCI"), the USCF SummerHaven SHPEI Index Fund ("BUY") and the he USCF SummerHaven SHPEN Index Fund ("BUYN"). The fee waivers for the three ETFs will remain in effect through October 31, 2020 and may be renewed in the future with approval from the Funds Board of Trustees of USCF ETF Trust.
On August 15, 2019, the Company entered into a letter of engagement with Maxim Group LLC ("Maxim") who is to provide investment banking services. In connection with the fee arrangement for services to be provided, the Company issued to Maxim 175,000 shares of its unregistered common stock.