CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
ASSETS
|
|
|
|
|
|
|
|
As Adjusted
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,730,486
|
|
|
$
|
5,454,107
|
|
Accounts receivable, net
|
|
|
871,570
|
|
|
|
839,220
|
|
Accounts receivable, related parties
|
|
|
1,762,271
|
|
|
|
2,124,104
|
|
Inventory, net
|
|
|
444,274
|
|
|
|
436,541
|
|
Prepaid income tax and tax receivable
|
|
|
1,276,540
|
|
|
|
354,308
|
|
Investments
|
|
|
3,578,749
|
|
|
|
993
|
|
Other current assets
|
|
|
369,599
|
|
|
|
242,584
|
|
Total current assets
|
|
|
15,033,489
|
|
|
|
9,451,857
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
14,870
|
|
|
|
-
|
|
Property and equipment, net
|
|
|
1,159,465
|
|
|
|
1,166,693
|
|
Goodwill
|
|
|
498,973
|
|
|
|
498,973
|
|
Intangible assets, net
|
|
|
899,276
|
|
|
|
1,018,213
|
|
Deferred tax assets, net
|
|
|
1,480,272
|
|
|
|
1,179,472
|
|
Long - term assets
|
|
|
509,538
|
|
|
|
509,538
|
|
Total assets
|
|
$
|
19,595,883
|
|
|
$
|
13,824,746
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,842,855
|
|
|
$
|
2,396,817
|
|
Expense waivers
|
|
|
589,093
|
|
|
|
448,930
|
|
Purchase consideration payable
|
|
|
-
|
|
|
|
214,035
|
|
Notes payable - related parties
|
|
|
3,500
|
|
|
|
8,500
|
|
Equipment loans
|
|
|
17,388
|
|
|
|
8,500
|
|
Convertible promissory notes payable - related parties, net
|
|
|
-
|
|
|
|
600,000
|
|
Total current liabilities
|
|
|
3,452,836
|
|
|
|
3,676,782
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Notes payable - related parties
|
|
|
600,000
|
|
|
|
-
|
|
Equipment loans
|
|
|
72,605
|
|
|
|
-
|
|
Deferred tax liabilities
|
|
|
258,601
|
|
|
|
272,095
|
|
Total liabilities
|
|
|
4,384,042
|
|
|
|
3,948,877
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock, 50,000,000 authorized par $0.001
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock: 13,108,474 issued and outstanding at June 30, 2017 and June 30, 2016
|
|
|
2,011,934
|
|
|
|
2,011,934
|
|
|
|
|
2,011,934
|
|
|
|
2,011,934
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 900,000,000 shares authorized; 886,753,847 shares issued and outstanding at June 30, 2017 and June 30, 2016
|
|
|
886,754
|
|
|
|
886,754
|
|
Additional paid-in capital
|
|
|
6,317,440
|
|
|
|
6,317,440
|
|
Accumulated other comprehensive income (loss)
|
|
|
119,338
|
|
|
|
(30,303
|
)
|
Retained earnings (accumulated deficit)
|
|
|
5,876,375
|
|
|
|
690,044
|
|
Total stockholders' equity
|
|
|
13,199,907
|
|
|
|
7,863,935
|
|
Total liabilities and stockholders' equity
|
|
$
|
19,595,883
|
|
|
$
|
13,824,746
|
|
The accompanying notes are an integral part of these audited consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Year Ended June 30,
|
|
|
Year Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
Fund management - related party
|
|
$
|
23,926,065
|
|
|
$
|
23,551,395
|
|
Food products
|
|
|
4,791,996
|
|
|
|
3,756,402
|
|
Security alarm monitoring
|
|
|
3,136,733
|
|
|
|
348,553
|
|
Other
|
|
|
156,327
|
|
|
|
120,430
|
|
Net revenue
|
|
|
32,011,121
|
|
|
|
27,776,780
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
4,848,141
|
|
|
|
2,746,132
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
27,162,980
|
|
|
|
25,030,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
|
5,627,235
|
|
|
|
4,090,168
|
|
Fund operations
|
|
|
5,431,408
|
|
|
|
4,624,879
|
|
Marketing
|
|
|
3,434,228
|
|
|
|
2,926,950
|
|
Depreciation and amortization
|
|
|
418,840
|
|
|
|
229,469
|
|
Salaries and compensation
|
|
|
5,519,079
|
|
|
|
4,249,216
|
|
Impairment of inventory value
|
|
|
2,090
|
|
|
|
48,330
|
|
Total operating expenses
|
|
|
20,432,880
|
|
|
|
16,169,012
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
6,730,100
|
|
|
|
8,861,636
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Other income
|
|
|
64,039
|
|
|
|
1,204
|
|
Interest income
|
|
|
3,177
|
|
|
|
1,713
|
|
Interest expense
|
|
|
(21,582
|
)
|
|
|
(8,686
|
)
|
Total other income (expense)
|
|
|
45,634
|
|
|
|
(5,769
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
6,775,734
|
|
|
|
8,855,867
|
|
|
|
|
|
|
|
|
|
|
Provision of income taxes
|
|
|
1,589,403
|
|
|
|
3,580,632
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,186,331
|
|
|
$
|
5,275,235
|
|
|
|
|
|
|
|
|
|
|
Weighted - average shares of common stock
|
|
|
|
|
|
|
|
|
Basic
|
|
|
886,753,847
|
|
|
|
886,753,847
|
|
Diluted
|
|
|
1,148,923,324
|
|
|
|
1,148,923,324
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
The accompanying notes are an integral part of these audited consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
Year Ended
June 30
,
|
|
|
Year Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,186,331
|
|
|
$
|
5,275,235
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
113,444
|
|
|
|
(30,303
|
)
|
Changes in short - term investment valuation
|
|
|
36,197
|
|
|
|
-
|
|
Comprehensive income
|
|
$
|
5,335,972
|
|
|
$
|
5,244,932
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
|
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
|
|
|
|
|
Preferred Stock
(Series B)
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Total
Concierge's
|
|
|
|
|
|
Number o
f
Shares
|
|
|
Amount(1)
|
|
Number o
f
Shares
|
|
|
Pa
r
Value
|
|
|
Paid - i
n
Captial
|
|
|
Accumulate
d
OCI
|
|
|
(Deficit) Retained Earnings
|
|
|
Equit
y
|
|
Balance at June 30, 2015
|
|
|
|
|
3,754,355
|
|
|
$
|
3,754
|
|
|
67,953,871
|
|
|
$
|
67,954
|
|
|
$
|
8,325,620
|
|
|
$
|
-
|
|
|
$
|
(6,349,570
|
)
|
|
$
|
2,044,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in acquistion to Wainwright shareholders
|
|
|
|
|
9,354,119
|
|
|
|
2,008,180
|
|
|
818,799,976
|
|
|
|
818,800
|
|
|
|
(2,008,180
|
)
|
|
|
-
|
|
|
|
1,764,379
|
|
|
|
574,999
|
|
Loss on currency translation for the year ended June 30, 2016
|
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,303
|
)
|
|
|
-
|
|
|
|
(30,303
|
)
|
Net loss for the year ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,275,235
|
|
|
|
5,275,235
|
|
Balance at June 30, 2016
|
|
|
|
|
13,108,474
|
|
|
|
2,011,934
|
|
|
886,753,847
|
|
|
|
886,754
|
|
|
|
6,317,440
|
|
|
|
(30,303
|
)
|
|
|
690,044
|
|
|
|
7,863,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional other comprehensive income
|
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,197
|
|
|
|
-
|
|
|
|
36,197
|
|
Gain (loss) on currency translation for the year ended June 30, 2017
|
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
113,444
|
|
|
|
-
|
|
|
|
113,444
|
|
Net income for the year ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,186,331
|
|
|
|
5,186,331
|
|
Balance at June 30, 2017
|
|
|
|
|
13,108,474
|
|
|
$
|
2,011,934
|
|
|
886,753,847
|
|
|
$
|
886,754
|
|
|
$
|
6,317,440
|
|
|
$
|
119,338
|
|
|
$
|
5,876,375
|
|
|
$
|
13,199,907
|
|
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. Other equity accounts have been adjusted to reflect the historical cost basis of Wainwright.
The accompanying notes are an integral part of these audited consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For the years ended
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,186,331
|
|
|
$
|
5,275,235
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
418,840
|
|
|
|
229,469
|
|
Realized (gain) on sale of investments
|
|
|
(2,399
|
)
|
|
|
(526
|
)
|
Realized loss (gain) on disposal of equipment
|
|
|
(4,341
|
)
|
|
|
-
|
|
(Increase) decrease in current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(24,890
|
)
|
|
|
(32,863
|
)
|
Accounts receivable - related party
|
|
|
361,834
|
|
|
|
(382,959
|
)
|
Notes receivable
|
|
|
-
|
|
|
|
(150,000
|
)
|
Deferred taxes
|
|
|
(314,294
|
)
|
|
|
329,279
|
|
Prepaid income taxes
|
|
|
(918,230
|
)
|
|
|
414,212
|
|
Inventory
|
|
|
(2,109
|
)
|
|
|
154,723
|
|
Other assets
|
|
|
(101,725
|
)
|
|
|
(38,959
|
)
|
Increase (decrease) in current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
449,756
|
|
|
|
(538,344
|
)
|
Expense waivers payable - related party
|
|
|
140,163
|
|
|
|
48,930
|
|
Conversion of loan to other income
|
|
|
(8,500
|
)
|
|
|
|
|
Net cash provided by operating activities
|
|
|
5,180,436
|
|
|
|
5,308,199
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash paid for acquisition of subsidiary net of subsidiary cash acquired
|
|
|
(214,035
|
)
|
|
|
(2,766,205
|
)
|
Purchase of equipment
|
|
|
(259,017
|
)
|
|
|
(103,662
|
)
|
Sale of investments
|
|
|
227,632
|
|
|
|
-
|
|
Purchase of investments
|
|
|
(3,766,111
|
)
|
|
|
-
|
|
Net cash (used in) investing activities
|
|
|
(4,011,531
|
)
|
|
|
(2,869,867
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Equipment loan
|
|
|
88,383
|
|
|
|
-
|
|
Loans from related parties
|
|
|
(5,000
|
)
|
|
|
600,000
|
|
Wainwright Holdings, Inc. stock repurchase and dividends
|
|
|
-
|
|
|
|
(847,264
|
)
|
Net cash provided by (used in) financing activities
|
|
|
83,383
|
|
|
|
(247,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
24,090
|
|
|
|
(90,235
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
1,276,378
|
|
|
|
2,100,833
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE
|
|
|
5,454,107
|
|
|
|
3,353,274
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, ENDING BALANCE
|
|
$
|
6,730,486
|
|
|
$
|
5,454,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
5,000
|
|
|
$
|
-
|
|
Income taxes paid, U.S.
|
|
$
|
2,475,800
|
|
|
$
|
3,935,000
|
|
The accompanying notes are an integral part of these audited consolidated financial statements.
|
NOTE 1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Concierge Technologies, Inc., (the “Company” or “Concierge”), a Nevada corporation, is
the parent company to wholly-owned subsidiaries engaged in various business activities. The most significant business of Concierge is Wainwright Holdings, Inc. a Delaware corporation (“Wainwright”). Wainwright is a holding company for two subsidiaries, United States Commodity Funds LLC (“USCF”), and USCF Advisers LLC (“USCF Advisers”). USCF and USCF Advisers operate exchange traded products ("ETPs") with combined fund assets under management of approximately $4.1 billion USD as of June 30, 2017. Other Concierge subsidiaries include two foreign subsidiaries 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 service located in Canada; and Kahnalytics, Inc. a California corporation (“Kahnalytics”), providing vehicle-based live streaming video and event recording to online subscribers.
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 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 Kahnalytics.
Wainwright was acquired during the current fiscal year
. 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 control (Refer to Note 12 of the Financial Statements).
The accompanying Financial Statements as of June 30, 2017 and June 30, 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
, or July 1, 2015.
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
For purposes of the consolidated statement of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
Concentrations of Risk
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 $1.6 million at June 30, 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 June 30, 2017 the uninsured amount for Wainwright subsidiaries totaled approximately $3.6 million, 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 approximately CD$0.5 million (approximately US$0.4 million) at June 30, 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 June 30, 2017, the Company’s subsidiary had uninsured deposits related to cash deposits in uninsured accounts maintained within foreign entities of approximately NZ$0.7 million (approximately US$0.5 million). The Company has not experienced any losses in such accounts.
Accounts Receivable, Related Parties and Accounts Receivable, net
Accounts receivable primarily consists 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.
The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends and changes in customer payment patterns. Reserves are recorded primarily 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, 2017 and 2016, the Company had an i
nsignificant amount recorded in doubtful accounts.
Major Customers and Suppliers
– Concentration of Credit Risk
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. Sales to the two largest customers, which includes contracts and recurring monthly residuals from the monitoring company, totaled 46% of the total revenues for the year ended June 30, 2017, and accounted for approximately 40% of accounts receivable as of the balance sheet date of June 30, 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. For the year ending and balance sheet date of June 30, 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 41% of our accounts receivable as compared to 14% and 34% respectively for the prior 11 months ended June 30, 2016. The second largest in the grocery industry accounted for approximately 11% and 10% of our gross revenues and 11% and 12% of our accounts receivable for the year ending and 11 months ended June 30, 2017 and 2016 respectively. In the gasoline convenience store market we supply two major channels. The largest is a marketing consortium of gasoline dealers who for the year ending and balance sheet date of June 30, 2017 accounted for approximately 43% of our gross sales revenues as compared to 44% for the 11
-month period ended June 30, 2016. 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 accounts receivable. 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.
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 as of June 30, 2017 and June 30, 2016 as depicted below.
|
|
12 months ended June 30, 2017
|
|
|
June 30, 2017
|
|
|
|
Revenue
|
|
|
Accounts Receivable
|
|
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO
|
|
$
|
13,761,317
|
|
|
|
58
|
%
|
|
$
|
1,060,421
|
|
|
|
60
|
%
|
USCI
|
|
|
4,865,171
|
|
|
|
20
|
%
|
|
|
317,032
|
|
|
|
18
|
%
|
UNG
|
|
|
3,118,432
|
|
|
|
13
|
%
|
|
|
217,760
|
|
|
|
12
|
%
|
All Others
|
|
|
2,181,145
|
|
|
|
9
|
%
|
|
|
167,058
|
|
|
|
10
|
%
|
Total
|
|
$
|
23,926,065
|
|
|
|
100
|
%
|
|
$
|
1,762,271
|
|
|
|
100
|
%
|
|
|
12 months ended June 30, 2016
|
|
|
June 30, 2016
|
|
|
|
Revenue
|
|
|
Accounts Receivable
|
|
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO
|
|
$
|
14,020,971
|
|
|
|
59
|
%
|
|
$
|
1,245,396
|
|
|
|
59
|
%
|
USCI
|
|
|
4,244,613
|
|
|
|
18
|
%
|
|
|
400,258
|
|
|
|
19
|
%
|
UNG
|
|
|
3,242,502
|
|
|
|
14
|
%
|
|
|
280,431
|
|
|
|
13
|
%
|
All Others
|
|
|
2,043,309
|
|
|
|
9
|
%
|
|
|
198,020
|
|
|
|
9
|
%
|
Total
|
|
$
|
23,551,395
|
|
|
|
100
|
%
|
|
$
|
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 after giving consideration to the acquisition of Wainwright Holdings, Inc. as a pooling of interests under common control.
Inventory
Inventories, consisting primarily of food products and packaging in New Zealand and security system hardware in Canada, are valued at the lower of cost (determined on a FIFO basis) or market. Inventories include product cost, inbound freight and warehousing costs. Management compares the cost of inventories with the market value and an allowance is made for writing down the inventories to their market value, if lower.
For the years ended June 30, 2017 and June 30, 2016 impairment to inventory value was recorded as $2,090 and $48,330, respectively. An assessment is made at the end of each fiscal year to determine what inventory items have remained in stock from the close of the previous fiscal year. If such items exist a reserve is established to reduce inventory value by the value of these items. At the years ended June 30, 2017 and June 30, 2016, the reserve for slow moving inventory was $18,589 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 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.
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, 2017 and 2016.
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 year
s ended June 30, 2017 or 2016.
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). 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 I 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.
The following table summarizes the valuation of the Company
’s securities at June 30, 2017 using the fair value hierarchy:
At June 30, 2017
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Money market funds
|
|
$
|
86,204
|
|
|
$
|
86,204
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mutual fund investment
|
|
|
2,450,920
|
|
|
|
2,450,920
|
|
|
|
-
|
|
|
|
-
|
|
ETF investment
|
|
|
809,900
|
|
|
|
809,900
|
|
|
|
-
|
|
|
|
-
|
|
Hedge
asset
|
|
|
230,746
|
|
|
|
-
|
|
|
|
230,746
|
|
|
|
-
|
|
Other e
quities
|
|
|
979
|
|
|
|
979
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
3,578,749
|
|
|
$
|
3,348,003
|
|
|
$
|
230,746
|
|
|
$
|
-
|
|
During the year ended June 30, 2017, there were no transfers between Level I and Level II.
The following table summarizes the valuation of the Company
’s securities at June 30, 2016 using the fair value hierarchy:
At June 30, 2016
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Money market funds
|
|
$
|
96
|
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Other e
quities
|
|
|
897
|
|
|
|
897
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
993
|
|
|
$
|
993
|
|
|
$
|
-
|
|
|
$
|
-
|
|
During the year ended June 30, 2016, there were no transfers between Level I and Level II.
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 monitoring service in Canada, and subscriptions to gathering of live-streaming video recording data displayed online to users. Revenue is accounted for net of sales taxes, sales returns, trade discounts. Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, the delivery has occurred, no other significant obligations of the Company exist, and collectability is probable. Product is considered delivered to the customer once it 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.
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. Advertising costs for the years ended June 30, 2017 and 2016 were $
3.4 million and $2.9 million, respectively.
Other Comprehensive Income (Loss) and 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, Ltd. 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 average exchange rate throughout the period. Accumulated translation gains and losses classified as an item of accumulated other comprehensive income (loss) in the stockholders’ equity section of the consolidated balance sheet was approximately $113 thousand and ($30) thousand as of June 30, 2017 and 2016, respectively. Other comprehensive income (loss) is attributed to changes in the valuation of short term investments held by Wainwright for approximately $36 thousand and $0 for the years ended June 30, 2017 and 2016, respectively. Foreign currency transaction gains and losses can occur if a transaction is settled in a currency other than the entity's functional currency. For the years ended June 30, 2017 and June 30, 2016 there were no material transactional gains or losses.
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 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, 2017 and 2016 a determination was made that no adjustments were necessary.
Reclassifications
Certain 2016 balances have been reclassified to conform to the 2017 presentation
in consideration of the pooling of interests with Wainwright during the current fiscal year.
Recent Accounting Pronouncements
In September 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-16,
"Business Combinations (Topic 805) Simplifying the Accounting for Measurement-Period Adjustments.” ASU No. 2015-06 simplifies the accounting for measurement-period adjustments attributable to an acquisition. Under prior guidance, adjustments to provisional amounts during the measurement period that arise due to new information regarding acquisition date circumstances must be made retrospectively with a corresponding adjustment to goodwill. The amended guidance requires an acquirer to record adjustments to provisional amounts made during the measurement period in the period that the adjustment is determined. The adjustments should reflect the impact on earnings of changes in depreciation, amortization, or other income effects, if any, as if the accounting had been completed as of the acquisition date. Additionally, amounts recorded in the current period that would have been reflected in prior reporting periods if the adjustments had been recognized as of the acquisition date must be disclosed either on the face of the income statement or in the notes to financial statements. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2015 and early application is permitted. The impact of the guidance on our financial condition, results of operations and financial statement disclosures will depend on the level of acquisition activity performed by the Company.
In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” (ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and is effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires all deferred tax assets and liabilities to be classified as non-current. The adoption of this guidance is not expected to have a material impact on the Company
’s results of operations, financial position or disclosures.
In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is effective beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on the Company
’s results of operations, financial position or disclosures.
In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, "Investments Equity-Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting" (“ASU 2016-07”). ASU 2016-07 eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. ASU 2016-07 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this standard would have on our financial condition, results of operations and cash flows.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance simplifies accounting for share-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. We are currently evaluating the impact the adoption of this standard would have on our financial condition, results of operations and cash flows.
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 ASU No. 2017-01, "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, "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.
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.
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, 2017
|
|
|
|
Net Income
|
|
|
Shares
|
|
|
Per Share
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
5,186,331
|
|
|
|
886,753,847
|
|
|
$
|
0.01
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B
|
|
|
-
|
|
|
|
262,169,477
|
|
|
|
0.00
|
|
Diluted income per share
|
|
$
|
5,186,331
|
|
|
|
1,148,923,324
|
|
|
$
|
0.00
|
|
|
|
For the year ended June 30, 2016
|
|
|
|
Net Income
|
|
|
Shares
|
|
|
Per Share
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
5,275,235
|
|
|
|
886,753,847
|
|
|
$
|
0.01
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B
|
|
|
|
|
|
|
262,169,477
|
|
|
|
0.00
|
|
Diluted income per share
|
|
$
|
5,275,235
|
|
|
|
1,148,923,324
|
|
|
$
|
0.00
|
|
NOTE 4.
INVENTORIES
Inventories consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Raw materials
|
|
$
|
43,088
|
|
|
$
|
50,023
|
|
Supplies and packing materials
|
|
|
125,241
|
|
|
|
77,497
|
|
Finished goods
|
|
|
278,035
|
|
|
|
357,351
|
|
|
|
|
446,364
|
|
|
|
484,871
|
|
Less : Impairment of finished goods
|
|
|
(2,090
|
)
|
|
|
(48,330
|
)
|
Total
|
|
$
|
444,274
|
|
|
$
|
436,541
|
|
NOTE 5.
PROPERTY AND EQUIPMENT
Property, plant and equipment consisted of the following as of June 30, 2017 and 2016:
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
Plant and equipment
|
|
$
|
1,460,180
|
|
|
$
|
1,477,411
|
|
Furniture and office equipment
|
|
|
162,781
|
|
|
|
119,123
|
|
Vehicles
|
|
|
185,866
|
|
|
|
58,850
|
|
Total property and equipment, gross
|
|
|
1,808,827
|
|
|
|
1,655,384
|
|
Accumulated depreciation
|
|
|
(649,362
|
)
|
|
|
(488,691
|
)
|
Total property and equipment, net
|
|
$
|
1,159,465
|
|
|
$
|
1,166,693
|
|
For the years ended June 30, 2017 and 2016, depreciation expense
for property, plant and equipment totaled $299,903 and $229,469, respectively.
NOTE 6.
INTANGIBLE
ASSETS
Intangible assets consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
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
|
|
|
(146,595
|
)
|
|
|
(27,658
|
)
|
Net intangibles
|
|
$
|
899,276
|
|
|
$
|
1,018,213
|
|
CUSTOMER RELATIONSHIP
On August 11, 20
15, the Company acquired Gourmet Foods, Ltd. 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.
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Customer relationships
|
|
$
|
500,252
|
|
|
|
500,252
|
|
Less: accumulated amortization
|
|
|
(59,684
|
)
|
|
|
(9,659
|
)
|
Total customer relationships, net
|
|
$
|
440,568
|
|
|
|
490,593
|
|
BRAND NAME
On August 11, 20
15, the Company acquired Gourmet Foods, Ltd. 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.
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Brand name
|
|
$
|
402,123
|
|
|
$
|
402,123
|
|
Less: accumulated amortization
|
|
|
(48,660
|
)
|
|
|
(8,448
|
)
|
Total brand name, net
|
|
$
|
353,463
|
|
|
$
|
393,675
|
|
DOMAIN NAME
On August 11, 20
15, 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,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Domain name
|
|
$
|
36,913
|
|
|
$
|
36,913
|
|
Less: accumulated amortization
|
|
|
(11,576
|
)
|
|
|
(4,193
|
)
|
Total brand name, net
|
|
$
|
25,337
|
|
|
$
|
32,720
|
|
RECIPES
On August 11, 20
15, the Company acquired Gourmet Foods, Ltd. The fair value on the recipes was estimated to be $21,601 and is amortized over the remaining useful life of 5 years.
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Recipes
|
|
$
|
21,601
|
|
|
$
|
21,601
|
|
Less: accumulated amortization
|
|
|
(8,257
|
)
|
|
|
(3,937
|
)
|
Total recipes, net
|
|
$
|
13,344
|
|
|
$
|
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.
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Non-compete agreement
|
|
$
|
84,982
|
|
|
$
|
84,982
|
|
Less: accumulated amortization
|
|
|
(18,418
|
)
|
|
|
(1,421
|
)
|
Total non-compete agreement, net
|
|
$
|
66,564
|
|
|
$
|
83,561
|
|
AMORTIZATION EXPENSE
The total amortization expense for intangible assets for the years ended June 30, 2017 and June 30, 2016 was $118,937 and $27,658, respectively.
Estimated amortization expenses of intangible assets for the next five twelve-month periods ended June 30, are as follows:
Years Ending June 30,
|
|
Expense
|
|
2018
|
|
$
|
118,937
|
|
2019
|
|
|
118,937
|
|
2020
|
|
|
118,937
|
|
2021
|
|
|
109,385
|
|
2022
|
|
|
90,237
|
|
Thereafter
|
|
|
342,843
|
|
Total
|
|
$
|
899,276
|
|
NOTE 7.
OTHER ASSETS
Other current assets totaling $
369,599 as of June 30, 2017 and $242,584 as of June 30, 2016 are comprised of various components as listed below.
|
|
As of June 30,
|
|
|
As of June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Deposits
|
|
$
|
183,634
|
|
|
$
|
-
|
|
Pre
paid expenses
|
|
|
28,667
|
|
|
|
87,071
|
|
Dividends receivable
|
|
|
7,298
|
|
|
|
5,513
|
|
Notes receivable
|
|
|
150,000
|
|
|
|
150,000
|
|
Total
|
|
$
|
369,599
|
|
|
$
|
242,584
|
|
Investments
Wainwright, from time to time, provides initial investments in the creation of ET
P 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 consolidated statements of operations and comprehensive income (loss). As of
June 30, 2017 and June 30, 2016, investments were approximately $3.6 million and $1 thousand, 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, 2017 and June 30, 2016, there were no investments requiring the equity method investment accounting.
Investments measured at estimated fair value consist of the following as of June 30, 2017 and June 30, 2016:
|
|
June 30, 2017
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Loses
|
|
|
Estimated Fair
Value
|
|
Money
market funds
|
|
$
|
86,204
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
86,204
|
|
USCI
mutual fund investment
|
|
|
2,500,000
|
|
|
|
-
|
|
|
|
(49,080
|
)
|
|
|
2,450,920
|
|
MENU ETF
investment
|
|
|
768,427
|
|
|
|
41,473
|
|
|
|
-
|
|
|
|
809,900
|
|
Hedge
d asset
|
|
|
187,000
|
|
|
|
43,746
|
|
|
|
-
|
|
|
|
230,746
|
|
Other
equities
|
|
|
1,577
|
|
|
|
-
|
|
|
|
(598
|
)
|
|
|
979
|
|
Total
short-term investments
|
|
$
|
3,543,208
|
|
|
$
|
85,219
|
|
|
$
|
(49,678
|
)
|
|
|
3,578,749
|
|
|
|
June 30, 2016
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Loses
|
|
|
Estimated Fair
Value
|
|
Money
market funds
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
96
|
|
Other
equities
|
|
|
1,577
|
|
|
|
-
|
|
|
|
(680
|
)
|
|
|
897
|
|
Total
short - term investments
|
|
$
|
1,673
|
|
|
$
|
-
|
|
|
$
|
(680
|
)
|
|
$
|
993
|
|
Restricted Cash
At June 30, 2017, Gourmet Foods had on deposit
approximately NZ$20,000 (approximately US$15,000) 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
Long - term assets totaling $
500,000 at June 30, 2017 and at June 30, 2016 were attributed to Wainwright and consisted of $509,980 representing a 10% equity investment in a registered investment adviser accounted for on a cost basis, plus $980 in an investment fund and $8,558 in security deposits.
NOTE 8.
GOODWILL
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations.
For the fiscal year ended June 30, 2016, we made an upwards adjustment to goodwill to include the amount of deferred tax liability applied to intangible assets acquired with Gourmet and Brigadier totaling, in the aggregate, $279,717. Goodwill is comprised of the following amounts:
|
|
As of June 30,
2017
|
|
|
As of June 30,
2016
|
|
|
|
|
|
|
|
|
|
|
Goodwill
– Gourmet Foods
|
|
|
147,628
|
|
|
|
147,628
|
|
Goodwill - Brigadier
|
|
|
351,345
|
|
|
|
351,345
|
|
Total
|
|
$
|
498,973
|
|
|
$
|
498,973
|
|
The Company tests for goodwill impairment at each reporting unit. There was no goodwill impairment for the year ended June 30, 2017.
NOTE 9.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
|
|
June 30, 2017
|
|
|
June 30, 2016
As Adjusted
|
|
Accounts payable
|
|
$
|
1,781,772
|
|
|
$
|
1,044,826
|
|
Accrued interest
|
|
|
32,410
|
|
|
|
5,337
|
|
Taxes payable
|
|
|
123
|
|
|
|
769,224
|
|
Deferred rent
|
|
|
13,402
|
|
|
|
19,203
|
|
Accrued payroll and vacation pay
|
|
|
349,507
|
|
|
|
127,271
|
|
Accrued expenses
|
|
|
665,641
|
|
|
|
430,956
|
|
Total
|
|
$
|
2,842,855
|
|
|
$
|
2,396,817
|
|
NOTE 10. RELATED PARTY TRANSACTIONS
Notes Payable - Related Parties
Current related party notes payable consist of the following:
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
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 years ended June 30, 2017 and 2016 was $18,999 and $3,151, respectively.
Promissory Note Payable
– Related Parties
On April 8, 2016
and May 25, 2016, the Company entered into convertible promissory note agreements (the “Promissory Notes”) with the Gerber Irrevocable Family Trust, an affiliate of our shareholder and CEO, that resulted in the funding of $350,000 and with the Schoenberger Family Trust, an affiliate of our shareholder and director, that resulted in the funding of $250,000, respectively. The Promissory Notes bear 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% 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 Notes.
In connection with the acquisition of Wainwright 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
years ended June 30, 2017 and 2016 was accrued in interest expense for Notes payable-related parties.
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 $23.9 million and $23.6 million for the years ended June 30, 2017 and 2016, respectively, were earned from these related parties. Accounts receivable, totaling $1.8 million and $2.1 million as of June 30, 2017 and June 30, 2016, respectively, were owed from these related parties. Fund expense waivers, totaling $0.8 million and $0.8 million and fund expense limitation amounts, totaling $0.4 million and $0.3 million, for the years ended June 30, 2017 and 2016, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $0.6 million and $0.5 million as of June 30, 2017 and June 30, 2016, respectively, were owed to these related parties. Fund expense waivers and fund expense limitation obligations are defined under Note 16 to the Financial Statements.
NOTE 11.
EQUIPMENT LOANS
As of June 30, 2017, Brigadier had, in the aggregate, an outstanding principal balance of CD$116,658 (approx. US$89,993) 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, 2017 and June 30, 2016 reflect the amount of the principal balance which is due within twelve months as a current liability of US$17,388 and $0, respectively. Principal amounts under the loans which is due after twelve months are recorded in long term liabilities as US$72,605 and $0 for the years ended June 30, 2017 and 2016 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, 2017 was US$1,656 and $0 for the year ended June 30, 2016.
NOTE 12.
BUSINESS COMBINATION
Gourmet Foods, Ltd.
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
|
|
|
145,467
|
|
Total assets
|
|
$
|
2,101,887
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
253,951
|
|
Deferred tax liability
|
|
|
47,820
|
|
Employee entitlements
|
|
|
46,688
|
|
Total liabilities
|
|
$
|
348,459
|
|
|
|
|
|
|
Consideration Paid for Net Assets
|
|
$
|
1,753,428
|
|
Brigadier Security Systems (2000) Ltd.
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 CD$1,500,000 (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) 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
|
|
|
353,507
|
|
Total Assets
|
|
$
|
2,019,246
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts
payable
|
|
$
|
187,925
|
|
Income
tax payable
|
|
|
55,953
|
|
Deferred tax liability
|
|
|
231,898
|
|
Customer
deposits
|
|
|
2,640
|
|
Total Liabilities
|
|
$
|
478,416
|
|
|
|
|
|
|
Consideration paid for net assets
|
|
$
|
1,540,830
|
|
Wainwright Holdings, Inc.
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. The Wainwright assets, liabilities and shareholders' equity were recorded at their historical values with no step-up or adjustment to fair market value.
NOTE 13. STOCKHOLDERS' EQUITY
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 where ever applicable for all the periods presented in these financial statements.
Convertible Preferred Stock
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. The Series B stock is eligible for conversion only after the elapse of 270 days from the date of issueance has transpired, and provided there are sufficient authorized, unissued, shares of common stock available to convert all shares of Series B Voting, Convertible Preferred Stock.
NOTE 14.
INCOME TAXES
The following table summarizes income before income taxes:
|
|
Years Ended June 30,
|
|
|
|
2017
|
|
|
2016
As Adjusted
|
|
U.S.
|
|
$
|
6,227,200
|
|
|
$
|
8,505,004
|
|
Foreign
|
|
|
548,534
|
|
|
|
339,005
|
|
Income before income taxes
|
|
$
|
6,775,734
|
|
|
$
|
8,855,867
|
|
Income Tax Provision
Provision for income tax as listed on the Consolidated Statements of Operations for the years ended June 30, 2017 and 2016 are $
1,589,403 and $3,580,632, respectively.
Provision for taxes consisted of the following:
|
|
Years Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
US operations
|
|
$
|
1,419,051
|
|
|
$
|
3,485,411
|
|
Foreign operations
|
|
|
170,352
|
|
|
|
95,221
|
|
Total
|
|
$
|
1,589,403
|
|
|
$
|
3,580,632
|
|
Deferred Income Tax Assets and Liabilities
Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates which are expected to be in effect when these differences reverse. The Company has adopted ASU 2017-17 and classifies all deferred tax assets and liabilities as long-term.
The gross deferred tax asset balance as of June 30, 2017 is approximately $
1,250,748. A $29,077, or approximately 2.3%, valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot be reasonably assured.
Provisions for income tax consisted of the following as of the years ended:
For the year ended:
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,573,044
|
|
|
$
|
2,929,891
|
|
States
|
|
|
138,728
|
|
|
|
324,111
|
|
Foreign
|
|
|
191,948
|
|
|
|
71,407
|
|
Total current
|
|
|
1,903,720
|
|
|
|
3,325,409
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(173,657
|
)
|
|
|
70,143
|
|
States
|
|
|
(119,064
|
)
|
|
|
162,220
|
|
Foreign
|
|
|
(21,596
|
)
|
|
|
22,860
|
|
Total deferred
|
|
|
(314,317
|
)
|
|
|
255,223
|
|
Total
|
|
$
|
1,589,403
|
|
|
$
|
3,580,632
|
|
The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. T
he effects of temporary differences and related deferred tax assets and liabilities are as:
For the year ended:
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Property and equipment and intangible assets - U.S.
|
|
$
|
1,291,927
|
|
|
$
|
1,132,920
|
|
Net operating loss
|
|
|
111,698
|
|
|
|
1,204,967
|
|
Capital loss carryover
|
|
|
-
|
|
|
|
6,970
|
|
Accruals, reserves and other - foreign
|
|
|
31,840
|
|
|
|
23,724
|
|
Accruals, reserves and other - U.S.
|
|
|
73,884
|
|
|
|
43,403
|
|
Gross deferred tax assets
|
|
|
1,509,349
|
|
|
|
2,411,984
|
|
Less valuation allowance
|
|
|
(29,077
|
)
|
|
|
(1,232,512
|
)
|
Total deferred tax assets
|
|
$
|
1,480,272
|
|
|
$
|
1,179,472
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets - foreign
|
|
$
|
(258,601
|
)
|
|
$
|
(272,095
|
)
|
Total deferred tax liabilities
|
|
$
|
(258,601
|
)
|
|
$
|
(272,095
|
)
|
Change in Valuation Allowance:
Income tax expense (benefit) for the years ended June 30, 2017 and December 31, 2016 differed from the amounts computed by applying the statutory federal income tax rate of 34% to pretax income (loss) as a result of the following:
For the year ended:
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
Federal tax expense (benefit) at statutory rate
|
|
$
|
2,321,442
|
|
|
$
|
3,006,961
|
|
State income taxes
|
|
|
(27,503
|
)
|
|
|
440,396
|
|
Permanent differences
|
|
|
399,639
|
|
|
|
98,271
|
|
Change in valuation allowance
|
|
|
(1,128,464
|
)
|
|
|
55,999
|
|
Foreign rate differential
|
|
|
24,289
|
|
|
|
(20,995
|
)
|
Total tax expense/(benefit)
|
|
$
|
1,589,403
|
|
|
$
|
3,580,632
|
|
For the year ended:
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
%
|
|
|
%
|
|
Federal tax expense (benefit) at statutory rate
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
State income taxes
|
|
|
(0.40
|
%
|
)
|
|
4.98
|
%
|
Permanent differences
|
|
|
5.85
|
%
|
|
|
1.11
|
%
|
Foreign rate differential
|
|
|
(0.36
|
%
|
)
|
|
(0.24
|
%)
|
Change in valuation allowance
|
|
|
(16.53
|
%
|
)
|
|
0.63
|
%
|
Total tax expense/(benefit)
|
|
|
23.28
|
%
|
|
|
40.48
|
%
|
Reconciliation of unrecognized tax benefits per ASC 740-10-50-15.a
Balance at June 30, 2016
|
|
$
|
-
|
|
Additions based on tax positions taken during a prior period
|
|
|
-
|
|
Reductions based on tax positions taken during a prior period
|
|
|
-
|
|
Additions based on tax positions taken during the current period
|
|
|
206,046
|
|
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, 2017
|
|
$
|
206,046
|
|
NOTE 15.
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$
11,853 translated to U.S. currency as of June 30, 2017.
Future minimum lease payments for Gourmet Foods are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2018
|
|
$
|
142,231
|
|
2019
|
|
|
63,377
|
|
2020
|
|
|
18,708
|
|
2021
|
|
|
10,864
|
|
2022
|
|
|
1,811
|
|
Total minimum lease commitment
|
|
$
|
236,991
|
|
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$80,634) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$15,000) bond has been posted through ANZ Bank and secured with a cash deposit of equal amount to secure a separate facilities lease. The General Security Agreement and the cash deposit will remain until such time as the respective leases are satisfactorily terminated in accordance with their terms. Interest from the cash deposit securing the lease accumulates to the benefit of Gourmet Foods and is listed as a component of interest income/expense on the accompanying Consolidated Statements of Operations.
Brigadier leases office and storage facilities in Saskatoon, Saskatchewan as well as vehicles used for installations and service and various office equipment. The minimum lease obligations through their expiry dates are indicated as below and require monthly payments of approximately US$
4,354 translated to U.S. currency as of June 30, 2017.
Future minimum lease payments for Brigadier are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2018
|
|
$
|
33,729
|
|
2019
|
|
|
30,919
|
|
Total minimum lease commitment
|
|
$
|
64,648
|
|
Wainwright leases office space in Oakland, California under an operating lease, which expires in October 2018. Rent expense was $146,000 and $139,000 for the years ended June 30, 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
|
|
2018
|
|
$
|
135,000
|
|
2019
|
|
|
45,000
|
|
Total minimum lease commitment
|
|
$
|
180,000
|
|
Other Agreements and Commitments
USCF Advisers has entered into
expense limitation agreements with three of the funds it manages under which USCF Advisers has agreed to waive or reimburse fees or pay fund expenses in order to limit the fund’s total annual operating expenses to certain threshold amounts. Two of the funds, TOFR and MENU, are covered by an agreement which remain in effect until October 31, 2017 and limit the funds expenses to 0.55% and 0.65%, respectively, for each of their average daily net asset values. The third fund, USCF Commodity Strategy Fund, expense limitation agreement remains in effect until July 31, 2018 and limits fund expenses to 1.30% and 0.95% of the funds average daily net assets for the Class A and Class I shares classes, respectively. After such dates, USCF Advisers may terminate the expense limitation agreements at any time upon not less than 90 days’ notice to the respective fund trust boards.
USCF manages seven funds which have expense waiver provision
s, whereby USCF will reimburse funds when fund expenditure levels exceed certain thresholds amounts. However, USCF has no obligation to continue such payments into subsequent periods.
Litigation
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.
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. Annual
profit sharing contributions paid totaled approximately $84,000 and $63,000 for each of the years ended June 30, 2017 and 2016, respectively.
NOTE 16.
SEGMENT REPORTING
With the acquisition
s 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 serivce 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, 2017 and June 30, 2016:
|
|
As of June 30,
|
|
|
As of
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
As Adjusted
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
3,302,979
|
|
|
$
|
1,805,163
|
|
U.S.A. : fund management
|
|
|
12,721,559
|
|
|
|
8,775,810
|
|
U.S.A. : data streaming
|
|
|
89,459
|
|
|
|
87,790
|
|
New Zealand: food industry
|
|
|
2,203,725
|
|
|
|
2,199,128
|
|
Canada: security alarm
|
|
|
1,278,161
|
|
|
|
956,855
|
|
Consolidated
|
|
$
|
19,595,883
|
|
|
$
|
13,824,746
|
|
The following table presents a summary of operating information for the years ended June 30, 2017 and June 30, 2016: (note: New Zealand is for a period of 11 months and Canada is for a period of 1 month for the year ended June 30, 2016)
|
|
Year Ended June 30, 2017
|
|
|
Year Ended June 30, 2016
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
As Adjusted
|
|
U.S.A. : data streaming and hardware
|
|
$
|
156,327
|
|
|
$
|
120,430
|
|
U.S.A. : investment fund management
|
|
|
23,926,065
|
|
|
|
23,551,395
|
|
New Zealand : food industry
|
|
|
4,791,996
|
|
|
|
3,756,402
|
|
Canada : security alarm
|
|
|
3,136,733
|
|
|
|
348,553
|
|
Consolidated
|
|
$
|
32,011,121
|
|
|
$
|
27,776,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) after taxes:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
(669,040
|
)
|
|
$
|
(253,265
|
)
|
U.S.A. : data streaming and hardware
|
|
|
(25,500
|
)
|
|
|
(60,612
|
)
|
U.S.A. : investment fund management
|
|
|
5,524,285
|
|
|
|
5,345,329
|
|
New Zealand : food industry
|
|
|
13,983
|
|
|
|
214,467
|
|
Canada : security alarm
|
|
|
342,603
|
|
|
|
29,316
|
|
Consolidated
|
|
$
|
5,186,331
|
|
|
$
|
5,275,235
|
|
The following table presents a summary of
net capital expenditures for the year ended June 30:
|
|
2017
|
|
|
2016
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
U.S.A. : corporate headquarters
|
|
$
|
-
|
|
|
$
|
902
|
|
U.S.A. : data streaming and hardware
|
|
|
2,690
|
|
|
|
-
|
|
U.S.A
.: investment fund management
|
|
|
-
|
|
|
|
-
|
|
New Zealand: food industry
|
|
|
155,620
|
|
|
|
102,760
|
|
Canada: security alarm
|
|
|
100,707
|
|
|
|
-
|
|
Consolidated
|
|
$
|
259,017
|
|
|
$
|
103,662
|
|
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 20, 2017, Wainwright
’s USCF business launched two new funds, United States 3X Oil Fund (“USOU”) and United States 3X Short Oil Fund (“USOD”), under the USCF Funds Trust with initial external seed capital of $2.5 million for each fund. On September 22, 2017, the board of trustees of the USCF ETF Trust (a trust managed by Wainwright’s USCF Advisers business) approved a plan for the liquidation of the Stock Split Index Fund (“TOFR”) and the USCF Restaurant Leaders Index Fund (“MENU”), each a series of the USCF ETF Trust, as a result of the low asset levels and lack of growth for each fund.