CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
September
30, 2017
|
|
|
June 30, 2017
|
|
ASSETS
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,329,365
|
|
|
$
|
6,730,486
|
|
Accounts receivable, net
|
|
|
785,455
|
|
|
|
871,570
|
|
Accounts receivable, related parties
|
|
|
1,646,503
|
|
|
|
1,762,271
|
|
Inventory, net
|
|
|
782,268
|
|
|
|
444,274
|
|
Prepaid income tax and tax receivable
|
|
|
1,180,646
|
|
|
|
1,276,540
|
|
Investments
|
|
|
3,556,997
|
|
|
|
3,578,749
|
|
Other current assets
|
|
|
315,838
|
|
|
|
369,599
|
|
Total current assets
|
|
|
15,597,072
|
|
|
|
15,033,489
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
14,618
|
|
|
|
14,870
|
|
Property and equipment, net
|
|
|
1,301,343
|
|
|
|
1,159,465
|
|
Goodwill
|
|
|
498,973
|
|
|
|
498,973
|
|
Intangible assets, net
|
|
|
869,297
|
|
|
|
899,276
|
|
Deferred tax assets, net
|
|
|
1,502,116
|
|
|
|
1,480,272
|
|
Other assets, long - term
|
|
|
509,538
|
|
|
|
509,538
|
|
Total assets
|
|
$
|
20,292,957
|
|
|
$
|
19,595,883
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,435,500
|
|
|
$
|
2,842,855
|
|
Expense waivers - related parties
|
|
|
648,117
|
|
|
|
589,093
|
|
Notes payable - related parties
|
|
|
3,500
|
|
|
|
3,500
|
|
Equipment loans
|
|
|
38,140
|
|
|
|
17,388
|
|
Total current liabilities
|
|
|
3,125,257
|
|
|
|
3,452,836
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Notes payable - related parties
|
|
|
600,000
|
|
|
|
600,000
|
|
Equipment loans
|
|
|
226,946
|
|
|
|
72,605
|
|
Deferred tax liabilities
|
|
|
258,601
|
|
|
|
258,601
|
|
Total liabilities
|
|
|
4,210,804
|
|
|
|
4,384,042
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2017 and June 30, 2017
|
|
|
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 September 30, 2017 and June 30, 2017
|
|
|
886,754
|
|
|
|
886,754
|
|
Additional paid-in capital
|
|
|
6,317,440
|
|
|
|
6,317,440
|
|
Accumulated other comprehensive income (loss)
|
|
|
117,946
|
|
|
|
119,338
|
|
Retained earnings (accumulated deficit)
|
|
|
6,748,079
|
|
|
|
5,876,375
|
|
Total stockholders' equity
|
|
|
14,070,219
|
|
|
|
13,199,907
|
|
Total liabilities, convertible preferred stock, and stockholders' equity
|
|
$
|
20,292,957
|
|
|
$
|
19,595,883
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
Three Months Ended September
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(
As Adjusted
)
|
|
Net revenue
|
|
|
|
|
|
|
|
|
Fund management - related party
|
|
$
|
5,157,948
|
|
|
$
|
6,367,944
|
|
Food products
|
|
|
1,294,290
|
|
|
|
1,205,639
|
|
Security alarm monitoring
|
|
|
789,192
|
|
|
|
825,065
|
|
Other
|
|
|
22,855
|
|
|
|
64,527
|
|
Net revenue
|
|
|
7,264,285
|
|
|
|
8,463,175
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,271,524
|
|
|
|
1,271,091
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,992,761
|
|
|
|
7,192,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
|
1,239,944
|
|
|
|
1,452,048
|
|
Fund operations
|
|
|
1,276,543
|
|
|
|
1,434,202
|
|
Marketing
|
|
|
841,975
|
|
|
|
770,366
|
|
Depreciation and amortization
|
|
|
114,736
|
|
|
|
99,512
|
|
Salaries and compensation
|
|
|
1,130,133
|
|
|
|
1,055,752
|
|
Total operating expenses
|
|
|
4,603,331
|
|
|
|
4,811,880
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,389,430
|
|
|
|
2,380,204
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
(12,049
|
)
|
|
|
4,916
|
|
Interest income
|
|
|
2,188
|
|
|
|
-
|
|
Interest expense
|
|
|
(11,098
|
)
|
|
|
(13,256
|
)
|
Total other (expense), net
|
|
|
(20,959
|
)
|
|
|
(8,340
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,368,471
|
|
|
|
2,371,864
|
|
|
|
|
|
|
|
|
|
|
Provision of income taxes
|
|
|
496,767
|
|
|
|
1,070,605
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
871,704
|
|
|
$
|
1,301,259
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Diluted
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(Unaudited)
|
|
|
Three Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(
As Adjusted
)
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
871,704
|
|
|
$
|
1,301,259
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
42,705
|
|
|
|
(9,915
|
)
|
Changes in short - term investment valuation
|
|
|
(44,097
|
)
|
|
|
(694
|
)
|
Comprehensive income
|
|
$
|
870,312
|
|
|
$
|
1,290,650
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
Three Months En
ded
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(
As Adjusted
)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
871,704
|
|
|
$
|
1,301,259
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
114,736
|
|
|
|
99,512
|
|
Realized loss on sale of investments
|
|
|
35,803
|
|
|
|
-
|
|
Realized (gain) loss on disposal of equipment
|
|
|
(1,680
|
)
|
|
|
8,183
|
|
(Increase) decrease in current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
98,528
|
|
|
|
32,688
|
|
Accounts receivable - related party
|
|
|
115,768
|
|
|
|
72,444
|
|
Deferred taxes
|
|
|
(21,844
|
)
|
|
|
133,227
|
|
Prepaid income taxes
|
|
|
37,455
|
|
|
|
892,143
|
|
Inventory
|
|
|
(331,430
|
)
|
|
|
(8,519
|
)
|
Other assets
|
|
|
54,826
|
|
|
|
(94,949
|
)
|
Increase (decrease) in current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(377,801
|
)
|
|
|
(316,118
|
)
|
Expense waivers payable - related party
|
|
|
59,023
|
|
|
|
251,802
|
|
Net cash provided by operating activities
|
|
|
655,088
|
|
|
|
2,371,672
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(237,924
|
)
|
|
|
(40,357
|
)
|
Sale of investments
|
|
|
79,655
|
|
|
|
-
|
|
Purchase of investments
|
|
|
(102,000
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(260,269
|
)
|
|
|
(40,357
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from equipment loan
|
|
|
178,604
|
|
|
|
-
|
|
Repayment of equipment loan
|
|
|
(7,368
|
)
|
|
|
|
|
Loans from related parties
|
|
|
-
|
|
|
|
(5,000
|
)
|
Net cash provided by
(used in) financing activities
|
|
|
171,236
|
|
|
|
(5,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
32,824
|
|
|
|
(30,040
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
598,879
|
|
|
|
2,296,275
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE
|
|
|
6,730,486
|
|
|
|
5,454,107
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, ENDING BALANCE
|
|
$
|
7,329,365
|
|
|
$
|
7,750,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest paid
- U.S.
|
|
$
|
-
|
|
|
$
|
5,000
|
|
Income taxes paid
- U.S.
|
|
$
|
430,800
|
|
|
$
|
800
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
|
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
|
NOTE 1.
|
OR
GANIZATION 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 that 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 (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems.
|
|
●
|
Kahnalytics, Inc. (“Kahnalytics”), a U.S. based company, captures and presents data from vehicle-mounted camera devices equipped for live-streaming.
This business is being allowed to atrophy as customer contracts expire and management expects to be able to exit the industry within the coming fiscal year.
|
See “Note 13. Business Combinations” for a description of the terms of our acquisition of our operating businesses. On October 18, 2017, the Company, through Kahnalytics,
entered into an agreement to acquire the assets of The Original Sprout, LLC, a California limited liability company (“Original Sprout”), which engages in the manufacture and sale of organic, non-toxic, all natural hair care, bath, skin, and styling products. See “Note 18. Subsequent Events” for more information.
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”).
The information included in this Form 10-Q should be read in conjunction with information included in the Company’s 2017 Form 10-K filed on October 13, 2017 with the U.S. Securities and Exchange Commission.
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 Kahnalytics.
Wainwright
was acquired during the prior 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 13 of the Financial Statements).
The accompanying Financial Statements as of
September 30, 2017 and June 30, 2017 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, 2016.
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.
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 $2.4 million at September 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 September 30, 2017 the uninsured amount for Wainwright subsidiaries totaled approximately $3.2 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, Brigadier. Each account is insured up to CD$100,000 by Canada Deposit Insurance Corporation (CDIC). The Company’s subsidiary, Brigadier, had an uninsured cash balance in Canada of approximately CD$0.7 million (approximately US$0.6 million) at September 30, 2017. Balances at financial institutions within New Zealand, where the Company’s subsidiary, Gourmet Foods, maintains cash balances, are not covered by insurance. As of September 30, 2017, the Company’s subsidiary, Gourmet Foods, had uninsured deposits related to cash deposits in uninsured accounts maintained within foreign entities of approximately NZ$0.6 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, 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 September 30, 2017 and June 30, 2017, there is no allowance for doubtful accounts as all amounts are deemed collectible.
Accounts receivable, net, consist of receivables from the Bridagier, Gourmet Foods and Kahnalytics businesses. 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
September 30, 2017 and 2016, the Company had an insignificant amount recorded in doubtful accounts.
Major Customers & 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. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s Annual Report on Form 10-K filed on October 13, 2017 with the U.S. Securities and Exchange Commission. Sales to the largest customer, which include contracts and recurring monthly residuals from the monitoring company, totaled 49% of the Brigadier revenues for the three months ended September 30, 2017, and accounted for approximately 32% of accounts receivable for the three months ended September 30, 2017 as compared to 48% of the Brigadier revenues and approximately 28% of accounts receivables for the three months ended September 30, 2016.
Concierge, through Gourmet Foods, has three major customer groups comprising the gross revenues to Gourmet Foods; 1) grocery, 2) gasoline convenience stores, and 3) independent retailers.
The grocery and food industry is dominated by several large chain operations, which are customers of Gourmet Foods, and there are no long term guarantees that these major customers will continue to purchase products from Gourmet Foods, however the relationships have been in place for sufficient time to give management reasonable confidence in their continuing business For the three months ended September 30, 2017, the largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 22% of Gourmet Foods' gross sales revenues and 25% of Gourmet Foods' accounts receivable as compared to 20% and 27% respectively for the three months ended September 30, 2016. The second largest in the grocery industry accounted for approximately 12% and 11% of Gourment Foods' gross revenues and 14% and 9% of Gourmet Foods' accounts receivable for the three months ended September 30, 2017 and 2016 respectively. In the gasoline convenience store market Gourmet Foods supplies two major channels. The largest is a marketing consortium of gasoline dealers who for the three months ended September 30, 2017 accounted for approximately 41% of Gourmet Foods' gross sales revenues as compared to 41% for the three months ended September 30, 2016. No single member of the consortium is responsible for a significant portion of Gourmet Foods' accounts receivable. The second largest are independent operators accounting for less than 10% of Gourmet Foods' gross sales, however no single independent operator is responsible for a significant portion of Gourmet Foods' accounts receivable. The third category of independent retailers and cafes accounted for the balance of Gourmet Foods' gross sales revenue, however the group is fragmented and no one customer accounts for a significant portion of Gourmet Foods' 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 man
ages and the associated three month revenues as of September 30, 2017 and 2016, and accounts receivable at September 30, 2017 and June 30, 2017 as depicted below.
|
|
Three M
onths E
nded
September
30, 2017
|
|
|
Three Months Ended
September 30, 2016
|
|
|
|
Revenue
|
|
|
Revenue
|
|
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO
|
|
$
|
2,943,844
|
|
|
|
57
|
%
|
|
$
|
3,619,261
|
|
|
|
57
|
%
|
USCI
|
|
|
978,617
|
|
|
|
19
|
%
|
|
|
1,373,276
|
|
|
|
21
|
%
|
UNG
|
|
|
697,856
|
|
|
|
14
|
%
|
|
|
823,113
|
|
|
|
13
|
%
|
All Others
|
|
|
537,631
|
|
|
|
10
|
%
|
|
|
552,294
|
|
|
|
9
|
%
|
Total
|
|
$
|
5,157,948
|
|
|
|
100
|
%
|
|
$
|
6,367,944
|
|
|
|
100
|
%
|
|
|
September 30, 2017
|
|
|
June 30, 2017
|
|
|
|
Accounts Receivable
|
|
|
Accounts Receivable
|
|
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USO
|
|
$
|
906,096
|
|
|
|
55
|
%
|
|
$
|
1,060,421
|
|
|
|
60
|
%
|
USCI
|
|
|
322,929
|
|
|
|
20
|
%
|
|
|
317,032
|
|
|
|
18
|
%
|
UNG
|
|
|
240,475
|
|
|
|
14
|
%
|
|
|
217,760
|
|
|
|
12
|
%
|
All Others
|
|
|
177,003
|
|
|
|
11
|
%
|
|
|
167,058
|
|
|
|
10
|
%
|
Total
|
|
$
|
1,646,503
|
|
|
|
100
|
%
|
|
$
|
1,762,271
|
|
|
|
100
|
%
|
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 three months ended September 30, 2017 and 2016 impairment to inventory value was recorded as $
0 and $684, respectively. An assessment is made at the end of each reporting period to determine what inventory items have remained in stock from the close of the corresponding prior year reporting period. If such items exist, either a reserve is established to reduce inventory value by the value of these items, or these items are removed from the inventory valuation and recorded as an expense. As of September 30, 2017 and September 30, 2016, the expense for slow moving or obsolete inventory was $0 and $0, respectively. As of September 30, 2017 and June 30, 2017 there was no reserve established for slow moving inventory valuation.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. 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.
There was no impairment recorded for the three months ended September 30, 2017 or the three months ended September 30, 2016.
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 three months ended September 30, 2017 or 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 three months ended September 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) on the condensed consolidated statements of comprehensive 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 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 three months ended September 30, 2017 and 2016 was $0.8 million for both periods.
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 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 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 $43 thousand and ($10) thousand for the three months ended September 30, 2017 and 2016, respectively. For the three months ended September 30, 2017 and 2016 there were no material transactional gains or losses.
Short-term Investment Valuation
Other comprehensive income (loss) attributed to changes in the valuation of short-term investments held by Wainwright was approximately ($44) thousand and ($1) thousand for the three months ended September 30, 2017 and 2016, respectively.
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 it
s subsidiaries (Refer to Note 17 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 each of the three months ended September 30, 2017 and 2016, a determination was made that no adjustments were necessary.
Reclassifications
For comparative purposes, certain 2016 Financial Statements have been reclassified to conform to report classifications of the current year after giving consideration to the acquisition of Wainwright as a pooling of interests under common control.
Recent Accounting Pronouncements
The Company has reviewed new accounting pronouncements issued between October 13, 2017, the filing date of our most recent prior Annual Report on Form 10-K, and the filing date of this Quarterly Report on Form 10-Q and has determined that no pronouncements issued are relevant to the Company, and/or have a material impact on the Company
’s consolidated financial position, results of operations or disclosure requirements.
NOTE 3.
BASIC AND DILUTED NET
INCOME
PER SHARE
Basic net income
per share is based upon the weighted average number of common shares outstanding. Diluted net income 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 reflect
s the effects of shares potentially issuable upon conversion of convertible preferred stock.
The components of basic and diluted earnings per share were as follows:
|
|
For the Three Months Ended September
30, 2017
|
|
|
|
Net Income
|
|
|
Shares
|
|
|
Per Share
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
871,704
|
|
|
|
886,753,847
|
|
|
$
|
0.00
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B
|
|
|
-
|
|
|
|
262,169,477
|
|
|
|
0.00
|
|
Diluted income per share
|
|
$
|
871,704
|
|
|
|
1,148,923,324
|
|
|
$
|
0.00
|
|
|
|
For the Three Months Ended September
30, 2016
|
|
|
|
Net Income
|
|
|
Shares
|
|
|
Per Share
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
1,301,259
|
|
|
|
886,753,847
|
|
|
$
|
0.00
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock Series B
|
|
|
-
|
|
|
|
262,169,477
|
|
|
|
0.00
|
|
Diluted income per share
|
|
$
|
1,301,259
|
|
|
|
1,148,923,324
|
|
|
$
|
0.00
|
|
NOTE
4. INVENTORIES
Inventories consisted of the following as of:
|
|
September
30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
201
7
|
|
Raw materials
|
|
$
|
45,305
|
|
|
$
|
43,088
|
|
Supplies and packing materials
|
|
|
110,693
|
|
|
|
125,241
|
|
Finished goods
|
|
|
626,270
|
|
|
|
278,035
|
|
|
|
|
782,268
|
|
|
|
446,364
|
|
Less
: Impairment of finished goods
|
|
|
-
|
|
|
|
(2,090
|
)
|
Total
|
|
$
|
782,268
|
|
|
$
|
444,274
|
|
NOTE 5.
PROPERTY AND EQUIPMENT
Property, plant and equipment consi
sted of the following as of:
|
|
September
30,
2017
|
|
|
June 30,
201
7
|
|
Plant and equipment
|
|
$
|
1,478,122
|
|
|
$
|
1,460,180
|
|
Furniture and office equipment
|
|
|
173,290
|
|
|
|
162,781
|
|
Vehicles
|
|
|
377,960
|
|
|
|
185,866
|
|
Total property and equipment, gross
|
|
|
2,029,372
|
|
|
|
1,808,827
|
|
Accumulated depreciation
|
|
|
(728,029
|
)
|
|
|
(649,362
|
)
|
Total property and equipment, net
|
|
$
|
1,301,343
|
|
|
$
|
1,159,465
|
|
For the
three month periods ended September
30, 2017 and 2016, depreciation expense for property, plant and equipment totaled $84,757 and $69,533, respectively.
NOTE 6.
INTANGIBLE ASSETS
Intangible assets consisted of the following as of:
|
|
September
30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
201
7
|
|
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
|
|
|
(176,574
|
)
|
|
|
(146,595
|
)
|
Intangibles, net
|
|
$
|
869,297
|
|
|
$
|
899,276
|
|
CUSTOMER RELATIONSHIPS
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the acquired customer relationships was estimated to be $66,154 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired customer relationships was estimated to be $434,098 and is amortized over the remaining useful life of 10 years.
|
|
September
30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
201
7
|
|
Customer relationships
|
|
$
|
500,252
|
|
|
|
500,252
|
|
Less: accumulated amortization
|
|
|
(72,293
|
)
|
|
|
(59,684
|
)
|
Total customer relationships, net
|
|
$
|
427,959
|
|
|
|
440,568
|
|
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.
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
Brand name
|
|
$
|
402,123
|
|
|
$
|
402,123
|
|
Less: accumulated amortization
|
|
|
(58,795
|
)
|
|
|
(48,660
|
)
|
Total brand name, net
|
|
$
|
343,328
|
|
|
$
|
353,463
|
|
DOMAIN NAME
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the acquired domain name was estimated to be $21,601 and is amortized over the remaining useful life of 5 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired domain name was estimated to be $15,312 and is amortized over the remaining useful life of 5 years.
|
|
September
30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
201
7
|
|
Domain name
|
|
$
|
36,913
|
|
|
$
|
36,913
|
|
Less: accumulated amortization
|
|
|
(13,437
|
)
|
|
|
(11,576
|
)
|
Total brand name, net
|
|
$
|
23,476
|
|
|
$
|
25,337
|
|
RECIPES
On August 11, 2015, the Company acquired Gourmet Foods. The fair value on the recipes was estimated to be $21,601 and is amortized over the remaining useful life of 5 years.
|
|
September
30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
201
7
|
|
Recipes
|
|
$
|
21,601
|
|
|
$
|
21,601
|
|
Less: accumulated amortization
|
|
|
(9,347
|
)
|
|
|
(8,257
|
)
|
Total recipes, net
|
|
$
|
12,254
|
|
|
$
|
13,344
|
|
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.
|
|
September
30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
Non-compete agreement
|
|
$
|
84,982
|
|
|
$
|
84,982
|
|
Less: accumulated amortization
|
|
|
(22,702
|
)
|
|
|
(18,418
|
)
|
Total non-compete agreement, net
|
|
$
|
62,280
|
|
|
$
|
66,564
|
|
AMORTIZATION EXPENSES
The total amortization expense for the
three months ended September 30, 2017 and 2016 was $29,979 and $29,653, respectively. Estimated amortization expenses of intangible assets for the next five twelve month periods ending
September 30, are as follows:
Years Ending
September 30
,
|
|
Expense
|
|
2018
|
|
$
|
118,937
|
|
2019
|
|
|
118,937
|
|
2020
|
|
|
117,469
|
|
2021
|
|
|
103,592
|
|
2022
|
|
|
90,237
|
|
Thereafter
|
|
|
320,125
|
|
Total
|
|
$
|
869,297
|
|
NOTE 7
.
|
INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
|
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 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
September 30, 2017 and June 30, 2017, investments were approximately $3.6 million at each period end, 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 September 30, 2017 and June 30, 2017, there were no investments requiring the equity method investment accounting.
Investments measured at estimated fair value consist of the following as of September 30, 2
017 and June 30, 2017:
|
|
September 30, 2017
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated Fair
Value
|
|
Money market funds
|
|
$
|
6,549
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,549
|
|
USCI mutual fund investment
|
|
|
2,500,000
|
|
|
|
49,840
|
|
|
|
-
|
|
|
|
2,549,840
|
|
MENU ETF investment
|
|
|
768,427
|
|
|
|
-
|
|
|
|
(1,297
|
)
|
|
|
767,130
|
|
Hedge asset
|
|
|
289,000
|
|
|
|
-
|
|
|
|
(56,562
|
)
|
|
|
232,438
|
|
Other equities
|
|
|
1,577
|
|
|
|
-
|
|
|
|
(537
|
)
|
|
|
1,040
|
|
Total short-term investments
|
|
$
|
3,565,553
|
|
|
$
|
49,840
|
|
|
$
|
(58,396
|
)
|
|
|
3,556,997
|
|
|
|
June 30, 2017
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
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 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
|
|
The following table
s summarize the valuation of the Company’s securities at September 30, 2017 and June 30, 2017 using the fair value hierarchy:
|
|
September 30, 2017
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Money market funds
|
|
$
|
6,549
|
|
|
$
|
6,549
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Mutual fund investment
|
|
|
2,549,840
|
|
|
|
2,549,840
|
|
|
|
-
|
|
|
|
-
|
|
ETF investment
|
|
|
767,130
|
|
|
|
767,130
|
|
|
|
-
|
|
|
|
-
|
|
Hedge asset
|
|
|
232,438
|
|
|
|
-
|
|
|
|
232,438
|
|
|
|
-
|
|
Other equities
|
|
|
1,040
|
|
|
|
1,040
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
3,556,997
|
|
|
$
|
3,324,559
|
|
|
$
|
232,438
|
|
|
$
|
-
|
|
|
|
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 equities
|
|
|
979
|
|
|
|
979
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
3,578,749
|
|
|
$
|
3,348,003
|
|
|
$
|
230,746
|
|
|
$
|
-
|
|
During the three months ended September 30, 2017
and 2016, there were no transfers between Level 1 and Level 2.
NOTE 8
.
|
OTHER ASSETS, RESTRICTED CASH, AND LONG-TERM ASSETS
|
Other Current Assets
Other current assets totaling $
315,838 as of September 30, 2017 and $369,599 as of June 30, 2017 are comprised of various components as listed below.
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
and deposits
|
|
|
151,983
|
|
|
|
212,301
|
|
Notes receivable
|
|
|
150,000
|
|
|
|
150,000
|
|
Other current assets
|
|
|
13,855
|
|
|
|
7,298
|
|
Total
|
|
$
|
315,838
|
|
|
$
|
369,599
|
|
Restricted Cash
At
September 30, 2017 Gourmet Foods had on deposit NZ$20,000 (approximately US$14,618) securing a lease bond for one of its properties. The same amount was posted at June 30, 2017 and translated to approximately US$14,870. 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 $509,538 at
September 30, 2017 and June 30, 2017 were attributed to Wainwright and consisted of
(i)
|
$500,000 as of
September 30, 2017 and June 30, 2017 representing 10% investment in a registered investment adviser accounted for on a cost basis,
|
(ii)
|
and $9,538 as of
September 30, 2017 and June 30, 2017 in other assets.
|
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations.
There was no goodwill impairment for the three months ended September 30, 2017.
NOTE 10
.
|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
Accounts payable and accrued expenses consisted of the following:
|
|
September 30,
2017
|
|
|
June 30,
2017
|
|
Accounts payable
|
|
$
|
1,421,291
|
|
|
$
|
1,781,772
|
|
Accrued interest
|
|
|
38,916
|
|
|
|
32,410
|
|
Taxes payable
|
|
|
-
|
|
|
|
123
|
|
Deferred rent
|
|
|
11,632
|
|
|
|
13,402
|
|
Accrued payroll and vacation pay
|
|
|
436,094
|
|
|
|
349,507
|
|
Accrued expenses
|
|
|
527,567
|
|
|
|
665,641
|
|
Total
|
|
$
|
2,435,500
|
|
|
$
|
2,842,855
|
|
N
OTE 11
.
|
RELATED PARTY TRANSACTIONS
|
Notes Payable - Related Parties
Current related party notes payable consist of the following:
|
|
September 30
,
2017
|
|
|
June 30,
201
7
|
|
|
|
|
|
|
|
|
|
|
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 re
lated party notes for the three months ended September 30, 2017 and 2016 were $6,120 and $6,120 (as adjusted), 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 $5.2 million and $6.4 million for the three months ended September 30, 2017 and 2016, respectively, were earned from these related parties. Accounts receivable, totaling $1.6 million and $1.8 million as of September 30, 2017 and June 30, 2017, respectively, were owed from these related parties. Fund expense waivers, totaling $0.2 million and $0.3 million, and fund expense limitation amounts, totaling $0.1 million, for the three months ended September 30, 2017 and 2016, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $0.6 million as of September 30, 2017 and June 30, 2017, 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 12
. EQUIPMENT LOANS
As of
September 30, 2017, Brigadier had, in the aggregate, an outstanding principal balance of CD$330,490 (approx. US$265,086) related to new vehicle purchases. For each vehicle purchased, the loan principal together with interest is amortized over 60 equal monthly installments. The condensed consolidated balance sheets as of September 30, 2017 and June 30, 2017 reflect the amount of the principal balance which is due within twelve months as a current liability of US$38,140 and US$17,388, respectively. Principal amounts under the loans which is due after twelve months are recorded in long term liabilities as US$226,946 and US$72,605 at September 30, 2017 and June 30, 2017, respectively. Interest on the loans is expensed or accrued as it becomes due. Total interest on all vehicle loans for the three months ended September 30, 2017 and 2016 was US$2,154 and $0, respectively.
NOTE 13
.
|
BUSINESS COMBINATION
S
|
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 14
. 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.
Our Board and the majority of stockholders have approved the adoption of a one-for-thirty (1:30) reverse stock split whereby each thirty shares of our common stock and Series B preferred stock, issued and outstanding as of the record date established by Board, shall be combined into one share of common stock or preferred stock, as applicable. The reverse stock split will become effective as determined by the Board in its discretion at any time prior to December 31, 2017.
Convertible Preferred Stock
Series B Voting, Convertible, Preferred Stock ("Series B 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. Series B Stock is eligible for conversion only after the elapse of 270 days from the date of
issuance has transpired, and provided there are sufficient authorized, unissued, shares of common stock available to convert all shares of Series B Stock.
Mezzanine Presentation
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 Stock conversion. Accordingly, the Series B Stock was reclassified to the mezzanine section of the condensed consolidated balance sheets. Other equity accounts have been adjusted to reflect the historical cost basis of Wainwright.
The Company accounts for income taxes under the asset and liability method, which recognizes deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts, and for net operating losses and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance against deferred tax assets when it is more likely than not that such asset will not be realized. The Company continues to monitor the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets.
The Company accounts for uncertain tax positions in accordance with the authoritative guidance on income taxes under which the Company may only recognize or continue to recognize tax positions that meet a
"more likely than not" threshold. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
As of September 30, 2017, the Company's total unrecognized tax benefits were ap
proximately $
0.2 million, which would affect the effective tax rate if recognized. The Company will recognize interest and penalties, when they occur, related to uncertain tax provisions as a component of tax expense. There is no interest or penalties to be recognized for the quarter ended
September
30, 2017 or 2016.
The Company is required to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis. The Company
recorded a tax provision of $
0.5 million and $1.1 million for the three months ended September 30, 2017 and 2016, respectively. The effective tax rate for the three months ended September 30, 2017 and 2016 differed from the statutory rate primarily due to the mix of non-deductible
items. The effective tax rate could fluctuate in the future due to changes in the taxable income mix between various jurisdictions.
The Company is subject to income taxes in the U.S. federal, various states, Canada and New Zealand tax jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company
’s tax years 2013 through 2017 will remain open for examination by the federal and state authorities which is three and four years, respectively. The Company’s tax years from acquisition through 2017 remain open for examination by Canada and New Zealand authorities which is four years. As of September 30, 2017, there were no active taxing authority examinations.
N
OTE 16
.
|
COMMITMENTS AND CONTINGENCIES
|
Lease Commitments
Gourmet Foods has operating leases for its office, factory and warehouse facilities located in Tauranga, New Zealand, as well as for certain equipment including vehicles. These leases are generally for three-year terms, with options to renew for additional three-year periods. The leases mature between August 2018 and August 2021, and require monthly rental payments of approximately US$
11,651 translated to U.S. currency as of September 30, 2017.
Future minimum lease payments for Gourmet Foods are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2018
|
|
$
|
104,860
|
|
2019
|
|
|
62,299
|
|
2020
|
|
|
18,390
|
|
2021
|
|
|
10,680
|
|
2022
|
|
|
1,780
|
|
Total minimum lease commitment
|
|
$
|
198,009
|
|
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$79,264) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$14,615) bond has been posted through ANZ Bank and secured with a cash deposit of equal amount to secure a separate facilities lease. The General Security Agreement and the cash deposit will remain until such time as the respective leases are satisfactorily terminated in accordance with their terms. Interest from the cash deposit securing the lease accumulates to the benefit of Gourmet Foods and is listed as a component of interest income/expense on the accompanying Consolidated Statements of Operations.
Brigadier leases office and storage facilities in Saskatoon
and Regina, Saskatchewan. Only the Saskatoon facility has an extended lease where the minimum lease obligations through their expiry dates are indicated as below and require monthly payments of approximately US$4,527 translated to U.S. currency as of September 30, 2017.
Future minimum lease payments for Brigadier are as follows:
Year Ended June 30,
|
|
Lease Amount
|
|
2018
|
|
$
|
26,303
|
|
2019
|
|
|
32,148
|
|
Total minimum lease commitment
|
|
$
|
58,451
|
|
The total amount of rent paid by our foreign subsidiaries, including the minimum lease payments as noted above, for the three months ended September 30, 2017 translated to U.S. currency as of the balance sheet date was $
41,201 as compared to the three month period ended September 30, 2016 of $36,257.
Wainwright leases office space in Oakland, California under an operating lease, which expires in October 2018. Rent expense was approximately $
36,000 and $35,000 for the three months ended September 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
|
|
$
|
102,000
|
|
2019
|
|
|
45,000
|
|
Total minimum lease commitment
|
|
$
|
147,000
|
|
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, 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. Please refer to Note 18 regarding liquidation of TOFR and MENU subsequent to quarter end.
USCF manages seven funds which have expense waiver provisions, whereby USCF will reimburse funds when fund expenditure levels exceed certain thresholds
amounts. As of September 30, 2017 and June 30, 2017 the expense waiver payable was $648,117 and $589,093, respectively. Expense waiver expense for the three months ended September 30, 2017 and 2016 was approximately $190,000 and $252,000, respectively. 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. In addition, USCF makes a safe harbor matching contribution. There were no matching contributions paid
the three months ended September 30, 2017 and 2016, respectively.
N
OTE 17
.
|
SEGMENT REPORTING
|
With the acquisition of Wainwright Holdings, Gourmet Foods, Ltd. and Brigadier, the Company has identified four segments for its products and services; U.S. investment fund management, U.S. data streaming and hardware, New Zealand and Canada. Our reportable segments are business units located in different global regions. The Company
’s operations in the U.S.A. include the gathering of live-streaming video recording data displayed online to subscribers through our wholly owned subsidiary Kahnalytics, Inc. and the income derived from management of various investment funds by our subsidiary Wainwright. In New Zealand operations include the production, packaging and distribution on a commercial scale of gourmet meat pies and related bakery confections through our wholly owned subsidiary Gourmet Foods, Ltd. and in Canada we provide security alarm system installation and monitoring to residential and commercial customers sold through our wholly owned subsidiary Brigadier. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation. Amounts are adjusted for currency translation as of the balance sheet date and presented in US dollars.
The following table presents a summa
ry of identifiable assets as of September 30, 2017 and June 30, 2017:
|
|
September 30,
2017
|
|
|
June 30,
201
7
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
4,012,745
|
|
|
$
|
3,302,979
|
|
U.S.A. : investment fund management
|
|
|
12,233,436
|
|
|
|
12,721,559
|
|
U.S.A. : data streaming and hardware
|
|
|
93,367
|
|
|
|
89,459
|
|
New Zealand: food industry
|
|
|
1,989,295
|
|
|
|
2,203,725
|
|
Canada: security alarm monitoring
|
|
|
1,964,114
|
|
|
|
1,278,161
|
|
Consolidated total
|
|
$
|
20,292,957
|
|
|
$
|
19,595,883
|
|
The following table presents a summary of ope
rating information for the three months ended September 30, 2017 and 2016:
|
|
Three-Months
Ended
September 30, 2017
|
|
|
Three-Months
Ended
September
30
, 2016
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
|
|
|
U.S.A. : data streaming and hardware
|
|
$
|
22,855
|
|
|
$
|
64,528
|
|
U.S.A. : investment fund management
|
|
|
5,157,948
|
|
|
|
6,367,944
|
|
New Zealand : food industry
|
|
|
1,294,290
|
|
|
|
1,205,638
|
|
Canada : security alarm monitoring
|
|
|
789,192
|
|
|
|
825,065
|
|
Consolidated total
|
|
$
|
7,264,285
|
|
|
$
|
8,463,175
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) after taxes:
|
|
|
|
|
|
|
|
|
Corporate headquarters
|
|
$
|
(160,339
|
)
|
|
$
|
(189,442
|
)
|
U.S.A. : data streaming and hardware
|
|
|
2,539
|
|
|
|
(16,832
|
)
|
U.S.A. : investment fund management
|
|
|
930,726
|
|
|
|
1,417,515
|
|
New Zealand : food industry
|
|
|
4,789
|
|
|
|
(25,107
|
)
|
Canada : security alarm monitoring
|
|
|
93,989
|
|
|
|
115,125
|
|
Consolidated total
|
|
$
|
871,704
|
|
|
$
|
1,301,259
|
|
The following table presents a summary of capital expenditures for the
three months ended September 30, 2017 and 2016:
Capital expenditures:
|
|
Three Months Ended September 30,
2017
|
|
|
Three Months Ended
September
30,
201
6
|
|
New Zealand : food industry
|
|
$
|
50,031
|
|
|
$
|
40,357
|
|
Canada : security alarm monitoring
|
|
|
187,893
|
|
|
|
-
|
|
Consolidated total
|
|
$
|
237,924
|
|
|
$
|
40,357
|
|
NOTE 18
. 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 October 18, 2017,
through its wholly owned subsidiary Kahnalytics, the Company entered into an Asset Purchase Agreement which, if effectuated, will result in the purchase of all of the assets of The Original Sprout LLC, a California limited liability company, which engages in the manufacture and sale of organic, non-toxic, all natural hair care, bath, skin, and styling products, by Kahnalytics. The purchase price of approximately $3.6 million will be paid in cash by Kahnalytics through funds advanced by Concierge Technologies in the form of an intercompany loan. Closing of the proposed transaction, which is structured as an asset purchase falling under California Bulk Sales guidelines, is subject to satisfaction of certain closing conditions and disclosures which are usual and customary for transactions of this nature. For details, refer to the Company’s Form 8-K filed with the SEC on October 20, 2017 and incorporated by reference herein.
As it relates to Wainwright, o
n September 22, 2017 the board of trustees of the USCF ETF Trust approved a plan for the liquidation of the Stock Split Index Fund (“TOFR”) and the USCF Restaurant Leaders Index Fund (“MENU”), each a series (or the “Funds”) of the USCF ETF Trust, as a result of the low asset levels and lack of growth for each fund. On October 20, 2017 the Funds concluded their liquidation plan with each Fund distributing its remaining net asset value to shareholders. Also, as of October 31, 2017 the expense limitation agreements associated with these funds expired with no significant additional financial reimbursement obligations.