U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2016
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Concierge Technologies, Inc.
(Exact name of registrant as specified in its charter)
Nevada | ||
(state of incorporation) | 000-29913 (Commission File Number) | 90-1133909 (IRS Employer I.D. Number) |
1202 Puerta Del Sol
San Clemente, CA 92082
Tel: 866.800.2978
Fax: 888.312.0124
(Address and telephone number of registrant's principal
executive offices and principal place of business)
Securities registered underpursuant to Section 12(b) of the Exchange Act: None.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None. |
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | ||
Smaller reporting company | ☒ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.Act). ☐ Yes [ ]☒ No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $1,207,549$8,386,366 based upon the per share price ($0.02) at whichof $1.39, as reported by our trading exchange platform, OTC Markets, for the common stock was last sold as of December 31, 2015,2018, the last business day of the registrant’s most recently completed second fiscal quarter, multiplied by the approximate number of shares of common stock held by persons other than executive officers, directors and five percent stockholders of the registrant without conceding that any such person is an “affiliate” of the registrant for purposes of the federal securities laws.
As of September 27, 2019, there were 37,412,519 shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 67,953,870 shares ofregistrant's Common Stock, $0.001 par value, issued and 3,754,355outstanding. In addition, we have 53,032 shares of Series B Convertible, Voting, Preferred Stock issued and outstanding on October 11, 2016.September 27, 2019. Series B Preferred stock is convertible, under certain conditions, to 20 shares of common stock for each share of Series B Preferred stock. Each share of Series B Preferred stock votes as 20 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
4 | |||
ITEM 1A Risk Factors | 10 | ||
ITEM | |||
12 | |||
12 | |||
12 | |||
Market for Registrant’s Common Equity, Related Stockholder Matters, and | |||
Issuer Purchases of Equity Securities | 13 | ||
15 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 | ||
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk | 22 | ||
Financial Statements and Supplementary Data | 22 | ||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 23 | ||
Controls and Procedures | 23 | ||
ITEM 9B Other Information | 23 | ||
Directors, Executive Officers, and Corporate Governance | 24 | ||
28 | |||
Security Ownership of Certain Beneficial Owners and Management and | |||
Related Stockholder Matters | 29 | ||
Certain Relationships and Related Transactions, and Director Independence | 30 | ||
Principal Accounting Fees and Services | 31 | ||
32 | |||
33 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “would,” “shall,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:
• | our future financial performance, including our revenue, cost of revenue, gross profit, gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve and maintain profitability; | |
• | the sufficiency of our cash and cash equivalents to meet our working capital, capital expenditure, and liquidity needs; | |
• | our operating subsidiaries' ability to attract and retain customers to use our products, to optimize the pricing for our products, to expand our sales to our customers, and to convince our existing customers to renew subscriptions; | |
• | the evolution of technologies affecting our operating subsidiaries' products and markets; | |
• | our operating subsidiaries' ability to innovate and provide a superior user experience and our intentions and strategy with respect thereto; | |
• | our operating subsidiaries' ability to successfully penetrate enterprise markets; | |
• | our operating subsidiaries' ability to successfully expand in our existing markets and into new markets, including international markets; | |
• | the attraction and retention of key personnel; | |
• | our ability to effectively manage our growth and future expenses; | |
• | worldwide economic conditions and their impact on spending; and | |
• | and our operating subsidiaries' ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations. |
We caution you that the foregoing list does not contain all of the forward-looking statements made with respect to us and our operating subsidiaries in this Annual Report on Form 10-K.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors”. Moreover, we and our subsidiaries operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law. We and our subsidiaries may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
General
Concierge Technologies, Inc. (“Concierge”, (the “Company” or sometimes the “Company”“Concierge”), was incorporated in California on August 18, 1993 as "Fanfest, Inc." On August 29, 1995 its name was changed to Starfest, Inc. (“Starfest”), and on March 20, 2002 its name was changed to “Concierge Technologies, Inc.”
● | 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 and exchange traded products organized as limited partnerships or investment trusts that issue shares which trade on the NYSE Arca stock exchange. | |
● | Gourmet Foods, Ltd. (“Gourmet Foods”), a New Zealand based company, manufactures and distributes New Zealand meat pies on a commercial scale. | |
● | Brigadier Security Systems (2000) Ltd. (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems. | |
● | Kahnalytics, Inc. dba/Original Sprout (“Original Sprout”), a U.S. based company, is engaged in the wholesale distribution of hair and skin care products under the brand name Original Sprout on a global scale. The former business of Kahnalytics, providing live-streaming mobile video on a subscription basis, was insignificant and was terminated after transitioning to the current business of distributing hair and skin care products in December 2017. |
See “Note 12. Business Combinations” to our audited financial statements included elsewhere in this annual report for a description of the terms of our acquisitions for our operating businesses.
Concierge manages its operating businesses on a commercial scale.
Subsidiary Business Overview
Wainwright
On December 9, 2016, Concierge through a non-exclusive distribution agreement. The transaction closed on May 7, 2015.
Services and Customers
USCF is a commercial-scale manufacturercurrently the General Partner in the following Securities Act of New Zealand meat pies under1933 LP commodity based index funds and Sponsor (“Sponsor”) for the brand names “Ponsonby Pies”fund series within the United States Commodity Index Funds Trust (“USCIF Trust”) and “Pat’s Pantry”. Gourmet Foods distributes its products through major grocery store chains, convenience stores, small restaurantsthe USCF Funds Trust (“USCF Funds Trust”):
USCF as General Partner for the following funds: | |
United States Oil Fund, LP (“USO”) | Organized as a Delaware limited partnership in May 2005 |
United States Natural Gas Fund, LP (“UNG”) | Organized as a Delaware limited partnership in November 2006 |
United States Gasoline Fund, LP (“UGA”) | Organized as a Delaware limited partnership in April 2007 |
United States Diesel Heating Oil Fund, LP (“UHN”) | Organized as a Delaware limited partnership in April 2007; Liquidated September 12, 2018 |
United States 12 Month Oil Fund, LP (“USL”) | Organized as a Delaware limited partnership in June 2007 |
United States 12 Month Natural Gas Fund, LP (“UNL”) | Organized as a Delaware limited partnership in June 2007 |
United States Short Oil Fund, LP (“DNO”) | Organized as a Delaware limited partnership in June 2008; Liquidated September 12, 2018 |
United States Brent Oil Fund, LP (“BNO”) | Organized as a Delaware limited partnership in September 2009 |
USCF as fund Sponsor - each a series within the USCIF Trust | |
United States Commodity Index Funds Trust (“USCIF Trust”) | A series trust formed in Delaware December 2009 |
United States Commodity Index Fund (“USCI”) | A commodity pool formed in April 2010 and made public August 2010 |
United States Copper Index Fund (“CPER”) | A commodity pool formed in November 2010 and made public November 2011 |
United States Agriculture Index Fund (“USAG”) | A commodity pool formed in November 2010 and made public April 2012; Liquidated September 12, 2018 |
USCF as fund Sponsor - each a series within the USCF Funds Trust | |
USCF Funds Trust (“USCF Funds Trust”) | A series trust formed in Delaware March 2016 |
United States 3X Oil Fund (“USOU”) | A commodity pool formed in May 2017 and made public July 2017 |
United States 3X Short Oil Fund (“USOD”) | A commodity pool formed in May 2017 and made public July 2017 |
USCF Advisers serves as the investment adviser to the funds listed below within the Trusts and gasoline station markets. The purchase price of $1,753,428 was paid in cash.
Advisers as fund manager for each series within the USCF ETF Trust and the USCF Mutual Funds Trust: | |
USCF ETF Trust (“ETF Trust”) | Organized as a Delaware statutory trust in November 2013 |
USCF SummerHaven SHPEI Index Fund ("BUY") | Fund launched November 30, 2017 |
USCF SummerHaven SHPEN Index Fund ("BUYN") | Fund launched November 30, 2017 |
Stock Split Index Fund (“TOFR”) | Fund launched September 2014; Liquidated October 20, 2017 |
Restaurant Leaders Index Fund (“MENU”) | Fund launched November 2016; Liquidated October 20, 2017 |
USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund | Fund launched May 2018 |
USCF Mutual Funds Trust ("Mutual Funds Trust") | Organized as a Delaware statutory trust in July 2016 |
USCF Commodity Strategy Fund ("USCFX" and "USCIX") | Fund launched March 2017; Liquidated March 21, 2019 |
All USCF funds and outstanding stock in Brigadier Security Systems, a Canadian corporation (“Brigadier”) located in Saskatoon, Saskatchewan. Brigadier sellsthe Trusts' funds are collectively referred to as the “Funds” hereafter.
As of and installs alarm monitoringfor the years ended June 30, 2019 and security systems2018 approximately 89% of Wainwright’s revenue and accounts receivable were attributed to commercialits three largest funds United States Oil Fund, LP, United States Natural Gas Fund, LP and residential customers under brand names “Brigadier Security Systems” and “Elite Security” throughout the province of Saskatchewan with offices in Saskatoon and Regina. The all-cash purchase price was $1,540,830.
Competition
Wainwright faces competition from other commodity fund managers, which include larger, better financed companies that offer products similar to ours. In particular, our foreign subsidiaries face stiff competition with respect to their product and service offerings.Wainwright’s. Many of ourthese competitors have substantially greater financial, technical, and human resources than we do,Wainwright does, as well as greater experience in the discovery and development of products and the commercialization of those products. Our competitors’ products may be more effective, or more effectively marketed and sold, than any products we may commercialize and may render our products obsolete or non-competitive before we can recover the expenses of their commercialization. Our larger competitors also enjoy a much wider and entrenched market share making it particularly difficult for us to penetrate certain market segments and even if penetrated, might make it difficult to maintain. We anticipate that we will face intense and increasing competition as new products and new competitors enter the market. However, with respect to the market share we currently enjoy, we believe that our core customers will remain loyal. Wecommercialize. Wainwright will continue to strive to capture additional customersdevelop and consider new fund opportunities identified through organic growthits research efforts and a focus on quality.
Regulation
Wainwright’s operating subsidiaries, USCF and USCF Advisers, are subject to federal, state and local laws and regulations generally applicable to the investment services industry. USCF is a commodity pool operator (“CPO”) subject to regulation by the Commodity Futures Trading Commission (the "CFTC") and the National Futures Association (the “NFA”) under the Commodities Exchange Act (“CEA”). USCF Advisers is an investment adviser registered under the Investment Advisers Act of these products were discontinued1940, as amended and has registered as a CPO under the CEA. ETPs issued or sponsored by USCF are required to be registered with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Act of 1933. USCF Advisers advises exchange traded funds and a mutual fund (liquidated during the current fiscal year.
Employees
Wainwright’s operating subsidiaries employ approximately 15 persons, a majority of whom are located in Walnut Creek, California. The operating subsidiaries are responsible for the retention of sub-advisers to manage the investments of each managed Funds’ assets in conformity with their respective investment policies if the operating subsidiary does not provide those services directly. Wainwright’s operating subsidiaries may also retain third-parties to provide custody, distribution, fund administration, transfer agency, and all other non-distribution related services necessary for each fund to operate. Wainwright, through its operating subsidiaries, bears all of its own costs associated with providing these advisory services and the expenses of the members of the board of directors of each fund who purchasesare affiliated with Wainwright.
Intellectual Property
Wainwright subsidiary USCF owns registered trademarks for USCF and USCF Advisers. The funds USCF is a general partner or sponsor of each have registered trademarks owned by USCF. Additionally, USCF was granted two patents Nos. 7,739,186 and 8,019,675, for systems and methods for an exchange traded fund (ETF) that tracks the monitoring contractsprice of one or more commodities.
Gourmet Foods
Gourmet Foods, Ltd. (“Gourmet Foods”), was organized in its current form in 2005 (previously known as Pats Pantry Ltd) and provides monitoring servicesacquired by Concierge in August 2015. Pats Pantry was founded in 1966 to Brigadier’s customers. Inproduce and sell wholesale bakery products, meat pies and patisserie cakes and slices, in New Zealand. Gourmet Foods, located in Tauranga, New Zealand, sells substantially all of its goods to supermarkets and service station chains with stores located throughout New Zealand. Gourmet Foods also has a large number of smaller independent lunch bars, cafes and corner dairies among the event this contract is terminated Brigadier would be compelled to find an alternate source of alarm monitoring, or establish suchcustomer list, however they comprise a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Salesrelatively insignificant dollar volume in comparison to the two largest customers totaled 55%primary accounts of the total revenues for the one-month period ended June 30, 2016,large distributors and accounted for approximately 38.6% of accounts receivable as of the balance sheet date of June 30, 2016.
Products and Customers
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 11-month period endingyear ended and balance sheet date of June 30, 2016, our2019, Gourmet Foods’ largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 14%22% of our grossGourmet Foods sales revenues and 34%28% of ourGourmet Foods accounts receivable.receivable as compared to 21% and 33% for the prior year ended June 30, 2018, respectively. The second largest in the grocery industry accounted for approximately 10% of our gross revenues and 12% of ourGourmet Foods sales revenues for the year ended June 30, 2019 as compared to 12% for the year ended June 30, 2018. This same group accounted for 19% of Gourmet Foods accounts receivable.receivable as of June 30, 2019 as compared to 16% as of June 30, 2018. In the gasoline convenience store market we supplyGourmet Foods supplies two major accounts.channels. The largest is a marketing consortium of gasoline dealers accountingoperating under the same brand who, for the year ended and balance sheet date of June 30, 2019, accounted for approximately 44%43% of ourGourmet Foods’ gross sales revenues and 24%as compared to 41% for the year ended June 30, 2018. No single member of our accounts receivable. The second largest are independent operators accountingthe consortium is responsible for approximately 13%a significant portion of gross sales and 17% ofGourmet Foods’ accounts receivable. The third category of independent retailers and cafes accounted for the remaining balance of ourGourmet Foods’ gross sales revenue, however the group is fragmentedmembers are independently owned and individually responsible for their financial obligations with no one customer accountsaccounting for a significant portion of our revenues. revenues or accounts receivable.
Sources and Availability of Materials
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.
Competition
Gourmet Foods faces competition from other commercial-scale manufacturers of meat pies located in New Zealand and Australia. Competitors’ products may be no seasonal aspectmore effective, or more effectively marketed and sold, than any products Gourmet Foods may commercialize. Larger competitors in New Zealand also enjoy a wider and more entrenched market share making it particularly difficult for us to Concierge’s business.
Seasonality
The location of a permit in order to engage in businessGourmet Foods in the US. southern hemisphere provides them with a warm Christmas holiday season and some increased business as customers tend to be traveling and purchase more ready-to-eat foods. Although this increase in sales is observable, it is not deemed significant and the opposing seasons to the northern hemisphere work to offset any corresponding down turn in revenues for Brigadier, our Canadian subsidiary, during winter months. Overall, the consolidated business does not experience any material seasonality due to Gourmet Foods.
Regulation
In New Zealand our subsidiary, Gourmet Foods, is required to have certain permits from health regulatory agencies and export permits for certain products it chooses to export. Gourmet Foods is also subject to local regulations as are usual and customary for those in the food processing, manufacturing and distribution business.
Intellectual Property
Gourmet Foods, Ponsonby Pies and Pat’s Pantry are all registered trademarks of Gourmet Foods, Ltd.
Employees
Gourmet Foods employs approximately 45 persons in New ZealandZealand.
Brigadier
On June 2, 2016, Concierge acquired all of the issued and outstanding stock in Brigadier, a Canadian corporation headquartered in Saskatoon, Saskatchewan. Brigadier sells and installs alarm monitoring and security systems to commercial and residential customers under brand names "Brigadier Security Systems" and "Elite Security" throughout the province of Saskatchewan with offices in Saskatoon and Regina.
Services, Products and Customers
Brigadier Security Systems (2000) Ltd. (“Brigadier”) was founded in 1985 and through internal growth and acquisitions the core business of Brigadier began in 1998. Today Brigadier is one of the largest SecurTek security monitoring dealers in Saskatchewan with offices in both major urban areas of Regina (dba Elite Security Systems (2005) Ltd.) and Saskatoon. SecurTek is owned by SaskTel which is Saskatchewan's leading Information and Communications Technology (ICT) provider with over 1.4 million customer connections across Canada. Brigadier is also a Honeywell Certified Access Control Integrator, Kantech Corporate Certified Integrator and UTC Interlogix Authorized dealer and the largest independent security contractor in the province. Brigadier provides comprehensive security solutions including access control, camera systems, ULC certified fire alarm panels, and intrusion alarms to home and business owners as well as government offices, schools and public buildings. Brigadier typically sells hardware to customers and brokers a 24/7 monitoring of their premises. The contract for monitoring the premises is typically supported by SecurTek, who pays Brigadier a monthly maintenance and support fee for each contract remaining in effect.
Concierge, through Brigadier, is partially dependent upon its contractual relationship with the alarm monitoring company who provides monitoring services to Brigadier’s customers. In the event this contract is terminated, Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the largest customer, which includes contracts and recurring monthly support fees, totaled 46% and 41% of the total Brigadier revenues for the years ended June 30, 2019 and June 30, 2018, respectively. The same customer accounted for approximately 37% of Brigadier's accounts receivable as of the balance sheet date of June 30, 2019 as compared to 35% as of June 30, 2018. Another large account, which has been a significant customer this fiscal year, contributed 12% of the total sales revenues for the year ended June 30, 2019 and nil for the year ended June 30, 2018. There were no accounts receivable from this customer as of the years ended June 30, 2019 or June 30, 2018.
Sources and Availability of Materials
Brigadier purchases alarm panels, digital and analog cameras, mounting hardware and accessory items needed to complete security installations from a variety of sources. The manufacture of electronic items such as those sought by Brigadier has expanded to a global scale thus providing Brigadier with a broad choice of suppliers. Brigadier bases its vendor selection on several criteria including: price, availability, shipping costs, quality, suitability for purpose and the technical support of the manufacturer.
Competition
Although it holds a dominant market position in the province of Saskatchewan, Brigadier faces competition from larger, better financed companies that offer similar products and services. In addition, it is possible that Brigadier may face increasing competition as disruptive technologies enter the market. However, with respect to the market share it currently enjoys, Brigadier expects that their core customers will remain loyal and that an opportunity exists to capitalize on the deployment of new technologies. Brigadier's management will continue efforts to capture additional customers through organic growth and a focus on quality.
Seasonality
Brigadier, due to its location in the province of Saskatchewan, Canada, is far enough north that winter weather has a negative effect on its ability to complete some installations, particularly those involving new construction. For this reason, the period from November through March typically produces less revenue than comparison periods during other seasons of the year. Although this decrease in sales is observable, the downturn in sales revenues for the winter months at Brigadier are offset in large part by the increase in revenues for our subsidiary Gourmet Foods in the Southern Hemisphere. Overall, the consolidated business does not experience any material seasonality due to Brigadier Security Systems.
Employees
Brigadier employs approximately 1921 persons in Canada.
Original Sprout
Kahnalytics was founded in 2015 and adopted the dba/Original Sprout in December 2017 (see Note 12 to the Consolidated Financial Statements). For the year ended June 30, 2017 (prior to the acquisition of the Original Sprout assets), Kahnalytics had incurred de minimis operating losses insignificant to the overall enterprise. Prior to the acquisition of the Original Sprout assets, and as of June 30, 2017, the residual business the company was founded to oversee was being wound down and management expected to transition focus to another industry. As of June 30, 2018, this legacy business had been completely wound down. Accordingly, the results of operations for the twelve-month period ending June 30, 2018 reflects only two quarters of business operations with the newly acquired assets and should not be viewed as indicative of a full twelve-month period of operations. Similarly, there is no meaningful comparative data for the twelve-month period ending June 30, 2018 as the business included nominal subscription sales to a web hosted service and not the wholesale distribution of beauty products as it currently exists.
Products and Customers
Original Sprout sells its products through 3 channels to market: 1) direct sales to end users via online shopping cart, 2) distributors who, in turn, sell to other retailers or wholesalers, and 3) to retail stores selling to end users.
For the year ended June 30, 2018, Original Sprout, which operated with its current product offering for only 194 days, is not indicative of historical or future operations. For the actual concentration of risk with respect to the current business, focus is given for the period from July 1, 2018 through June 30, 2019 and no comparison exists for the prior year period as only partial business in this sector was conducted by Original Sprout. Among thousands of customers, Original Sprout does have several major accounts with distributors however only one account represented 10% of our annual sales revenues. There were 3 major distributor accounts, all current, representing 25%, 17%, and 12% for a total of 54% of all accounts receivable as of June 30, 2019 as compared to 10%, 20% and 3%respectively as of June 30, 2018.
Sources and Availability of Materials
Concierge, through Original Sprout, is dependent upon its relationship with a product packaging company who, at the direction of Original Sprout, produces the products in accordance with proprietary formulas, packages them in appropriate containers, and delivers the finished goods to Original Sprout for distribution to its customers. All of Original Sprout’s products are currently produced by this packaging company, although if this relationship were to fail there are other similar packaging companies available to Original Sprout at competitive pricing. Because of the nature of the Original Sprout product ingredients, some of the ingredients may, at times, be difficult to source in timely fashion or at the expected price point. To safeguard against this possibility Original Sprout endeavors to maintain at least a 90-day supply of all products in stock. Estimating and maintaining a reserve stock account is not a guarantee that a shortage of ingredient supplies will not affect production such that Original Sprout will not exhaust its reserves or be unable to fulfill customer orders.
Competition
Original Sprout manufactures and distributes only 100% vegan, safe and non-toxic, hair and skin care products which we believe differentiate it significantly from other main-stream products. The use of organic and natural extracts is a growing trend in the U.S. and abroad, and other established brands are beginning to make products for this market. As more entrants to the high-end, vegan, hair care segment come into existence it is inevitable that some will be better financed and have more brand recognition and resources than those of Original Sprout. Original Sprout is focused on promoting its own brand name as a recognized pioneer in 100% vegan, safe, effective, hair care products through recruitment of addition distributors, nationwide retail stores, and increased social media presence with the expectation that establishing brand awareness will allow the continued growth of annual revenues and market share protection, though there can be no guarantees that such efforts will be sufficient to offset the effects of competition in the future.
Seasonality
There is no significant seasonality for sales of products for Original Sprout, though sales will fluctuate around traditional holidays, and certain products, such as sun screen, will be lower in winter months than in summer months. Overall, the consolidated business does not experience any material seasonality due to Original Sprout.
Regulation
In the U.S. our subsidiary, Original Sprout, is not required to have permits for distribution of its products, however it chooses to gain recognition from certain testing laboratories and other quasi-regulatory agencies for compliance with accepted standards for hair and skin care ingredients and lack of toxic chemicals in their formulas and processes. For export, Original Sprout is often compelled to submit its products to foreign government agencies or certified laboratories for ingredient testing prior to being accepted for import as a “safe” product. The Original Sprout products comply with all applicable regulations, both domestic and foreign, in areas where they are sold or distributed.
Intellectual Property
The formulations and ingredient percentages of the many products of Original Sprout are considered its intellectual property, though many cannot be patented, they are maintained as confidential. The names "Original Sprout", "D’Organiques Original Sprout" are registered trademarks of Original Sprout.
Employees
Original Sprout employees 9 persons on a full time basis at its location in San Clemente, California.
Available Information
We maintain a website at www.conciergetechnology.net. We make available free of charge on or through our website our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. The information on our website is not incorporated by reference in this annual report on Form 10-K. In addition, the U.S. Securities and Exchange Commission ("SEC") maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, from which investors can electronically access Concierge's SEC filings.
Concierge and its subsidiaries (referred to herein as “we,” “us,” “our” or similar expressions) are subject to certain risks and uncertainties in its business operations which are described below. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are presently unknown or are currently deemed immaterial may also impair our business operations.The following risk factors should be read in connection with the other information included in this annual report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes.
Risks Related to our Business and Structure
Concierge is a holding company and its only material assets are its cash in hand, equity interests in its operating subsidiaries and its other investments. As a result, Concierge’s principal source of cash flow is distributions from its subsidiaries and its subsidiaries may be limited by law and by contract in making distributions to Concierge.
As a holding company, Concierge's assets are its cash and cash equivalents, the equity interests in its subsidiaries and other investments.
The principal source of cash flow is distributions from our subsidiaries. Thus, our ability to finance future acquisitions or develop new projects is dependent on the ability of our subsidiaries to generate sufficient net income and cash flows to make upstream cash distributions to us. Our subsidiaries are separate legal entities, and although they may be wholly-owned or controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends, distributions or otherwise. The ability of our subsidiaries to distribute cash to us are and will remain subject to, among other things, restrictions that are contained in each subsidiaries’ financing agreements, availability of sufficient funds and applicable state laws and regulatory restrictions.
Claims of creditors of our subsidiaries generally will have priority as to the assets of such subsidiaries over our claims and claims of our creditors and stockholders. To the extent our cash flow is dependent on our subsidiaries ability to make distributions to us could materially limit our ability to grow, pursue business opportunities or make acquisitions that could be beneficial to our businesses.
We are dependent on certain key personnel, the loss of which may adversely affect our financial condition or results of operations.
Major capital allocation decisions and investment decisions are made by Chief Executive Officer and Chairman of the Board of Directors, Nicholas Gerber, with consultation from key personnel, from our management team and the executive management team from our subsidiaries. The executive management teams that lead the Company and our subsidiaries are also highly experienced and possess extensive skills in their industry. If Mr. Gerber were to become unavailable, there could be a material adverse impact on our operations. However, the Company’s Board of Directors have the power and authority to fill a vacancy left by Mr. Gerber. The ability to retain key personnel is important to our success and future growth. Competition for these professionals can be intense, and we may not be able to retain and motivate our existing officers and senior employees, and continue to compensate such individuals competitively. The unexpected loss of the services of one or more of these individuals could have a detrimental effect on our operations and negatively impact our financial condition or results of operations of our businesses, and could hinder the ability of our business and our subsidiaries to effectively compete in the various industries in which we operate.
We need qualified personnel to manage and operate our subsidiaries.
Our decentralized business model requires that we retain qualified and competent managers to continue day-to-day operations of our subsidiaries and continue business operations in a changing political, business or regulatory environment. Our subsidiaries require qualified and competent personnel to execute their business plans and continue servicing their clients, suppliers and other stakeholders. Our inability to attract and retain qualified personnel to operate our business subsidiaries could negatively impact our operating results and our overall financial condition that is important to our success and future growth.
Cyber Security Risks
The efficient operation of our businesses is dependent on computer hardware and software systems. Unauthorized computer infiltration, denial-of-service attacks, phishing efforts, unauthorized access, malicious software codes, computer viruses or other such harmful computer campaigns may negatively impact our business causing significant disruptions to our business operations. We expect that we may be subject to a cyber-attack in some form or fashion in the future as such attacks become more sophisticated and frequent to all industries and all businesses of every size. There can be no assurance that our cyber-security measures and technology will adequately protect us from these and other risks, including external risks such as natural disasters and power outages and internal risks such as insecure coding and human error.
Although we have undertaken steps to prevent and mitigate cyber risks, there is no guarantee that our efforts will prevent cyber-attacks perpetrated against our information systems which could result in loss of assets and critical information, theft of intellectual property or inappropriate disclosure of confidential information and could expose us to remediation costs and reputational damage which could adversely affect our business in ways that cannot be predicted at this time. Any of these risks could materially affect our results of operations and consolidated financial results.
Future acquisitions or business opportunities could involve unknown risks that could harm our business and adversely affect our financial condition and results of operations.
We are a holding company that owns interests in a number of different businesses. We have in the past, and intend in the future, to acquire businesses that involve unknown risks, some of which will be particular to the industry in which the investment or acquisition targets operate, including risks in industries with which we are not familiar or experienced. There can be no assurance our due diligence investigations will identify every matter that could have a material adverse effect on us or the entities that we may acquire. We may be unable to adequately address the financial, legal and operational risks raised by such investments or acquisitions, especially if we are unfamiliar with the relevant industry, which can lead to significant losses on material investments. The realization of any unknown risks could expose us to unanticipated costs and liabilities and prevent or limit us from realizing the projected benefits of the investments or acquisitions, which could adversely affect our financial condition and liquidity. In addition, our financial condition, results of operations and the ability to service our debt may be adversely impacted depending on the specific risks applicable to any business we invest in or acquire and our ability to address those risks.
We could consume resources in researching acquisitions, business opportunities or financings and capital market transactions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or invest in another business.
We are a holding company in the business of owning diverse and profitable businesses. Our business model also encompasses researching and investigating new acquisitions and business opportunities to support the growth of our Company. With each new contemplated acquisition or business opportunity, there are resources that must be allocated towards acquisition or engaging in a new business opportunity such as, the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments with respect to such transaction and may require substantial management time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors. If a decision is made not to consummate a specific acquisition, business opportunity or financing and capital market transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific acquisition, investment target or financing, we may fail to consummate the investment or acquisition for any number of reasons, including those beyond our control. Any such event could consume significant management time and result in a loss to us of the related costs incurred, which could adversely affect our financial position and our ability to consummate other acquisitions and investments.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
As of June 30, 2019 the Company did not own noany plants or real property.
Facilities
Administrative offices are housedco-located in the facility leased by our Chief Financial Officer, David Neibert,subsidiary, Original Sprout, whose mailing address is 29115 Valley Center Rd., K-206, Valley Center, CA 92082. The Company pays no rent and has no lease obligations.1202 Puerta Del Sol, San Clemente, California 92673. Our wholly-owned subsidiary, Brigadier, rents facilities in Saskatoon and Regina, Canada. Our wholly-owned subsidiary, Gourmet Foods, rents facilities in Tauranga, New Zealand. Wainwright leases office space in Walnut Creek, California. We believe that the facilities described herein are adequate for our current and immediately foreseeable operating needs.
From time to Brookside Investments Ltd. (“Brookside”) against, jointly and severally, our company, Allen E. Kahn, and The Whitehall Companiestime, the Company is involved in legal proceedings arising mainly from the amount of $135,000 plus interest and legal fees. Concierge did not defend against the complaint by Brookside, which alleged that Brookside was entitled to a refundordinary course of its investment as a resultbusiness. Currently, there are no legal proceedings pending.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our Common Stock presently trades on the OTC Markets QB Exchange. The high and low bid prices, as reported by OTC Markets, are as follows for fiscal years ended June 30, 20152018 and 2016.2019. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The prices are adjusted for the 1:1030 reverse stock split effectuated on December 15, 2015.
High | Low | |
Calendar 2014 | ||
3rd Qtr. | $0.146 | $0.085 |
4th Qtr | $0.099 | $0.025 |
Calendar 2015 | ||
1st Qtr | $0.068 | $0.029 |
2nd Qtr | $0.119 | $0.043 |
3rd Qtr. | $0.095 | $0.03 |
4th Qtr | $0.089 | $0.02 |
Calendar 2016 | ||
1st Qtr | $0.10 | $0.02 |
2nd Qtr | $0.04 | $0.02 |
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| Calendar 2017 |
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3rd Quarter |
| $ | 1.79 |
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| $ | 1.17 |
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4th Quarter |
| $ | 2.15 |
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| $ | 1.22 |
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| Calendar 2018 |
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1st Quarter |
| $ | 1.61 |
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| $ | 1.21 |
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2nd Quarter |
| $ | 1.41 |
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| $ | 0.90 |
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3rd Quarter |
| $ | 1.23 |
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| $ | 0.55 |
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4th Quarter |
| $ | 1.85 |
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| $ | 0.86 |
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| Calendar 2019 |
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1st Quarter |
| $ | 1.40 |
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| $ | 0.80 |
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2nd Quarter |
| $ | 1.30 |
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| $ | 0.65 |
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Holders
On June 30, 2016,September 27, 2019, there were approximately 353365 registered holders of record of our common stock.
Dividends
We have had no retained earnings and have declared no dividends on our capital stock.for the current year nor do we expect to in the foreseeable future. Our ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that a corporation’s assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business. Under Nevada law, a company - such as our company - can pay dividends only
from retained earnings, orand
no distribution can be made, if after giving it effect,
the dividend is made,
except as otherwise specifically allowed by the articles of incorporation, the corporation’s total assets would equal at least 11/4 times its liabilities, and
Our strategy on dividends is to declare and pay dividends only from retained earnings and only when our Board of Directors deems it prudent and in the best interests of the company to declare and pay dividends.
Penny Stock Regulations
Our common stock trades on the OTC Markets QB Exchange at a price less than $5 a share and therefore is subject to the rules governing "penny stocks."
A "penny stock" is any stock that:
• | sells for less than $5 a share. | |
• | is not listed on an exchange or authorized for quotation on The NASDAQ Stock Market, and | |
• | is not a stock of a "substantial issuer." We currently have net tangible assets of at least $2 million which would qualify us as a “substantial issuer”. |
There are statutes and regulations of the Commission that impose a strict regimen on brokers that recommend penny stocks.
Before a broker-dealer can recommend and sell a penny stock to a new customer who is not an institutional accredited investor, the broker-dealer must obtain from the customer information concerning the person's financial situation, investment experience and investment objectives. Then, the broker-dealer must "reasonably determine" (1) that transactions in penny stocks are suitable for the person and (2) that the person, or his advisor, is capable of evaluating the risks in penny stocks.
After making this determination, the broker-dealer must furnish the customer with a written statement setting forth the basis for this suitability determination. The customer must sign and date a copy of the written statement and return it to the broker-dealer.
Finally, the broker-dealer must also obtain from the customer a written agreement to purchase the penny stock, identifying the stock and the number of shares to be purchased.
The above exercise delays a proposed transaction. It causes many broker-dealer firms to adopt a policy of not allowing their representatives to recommend penny stocks to their customers.
The Penny Stock Suitability Rule, described above, and the Penny Stock Disclosure Rule, described below, do not apply to the following:
• | transactions not recommended by the broker-dealer, | |
• | sales to institutional accredited investors, | |
• | transactions in which the customer is a director, officer, general partner, or direct or indirect beneficial owner of more than 5 percent of any class of equity security of the issuer of the penny stock that is the subject of the transaction, and | |
• | transactions in penny stocks by broker-dealers whose income from penny stock activities does not exceed five percent of their total income during certain defined periods. |
The Penny Stock Disclosure Rule
Another Commission rule - the Penny Stock Disclosure Rule - requires a broker-dealer, who recommends the sale of a penny stock to a customer in a transaction not exempt from the suitability rule described above, to furnish the customer with a "risk disclosure document." This document is set forth in a federal regulation and contains the following information:
• | A statement that penny stocks can be very risky, that investors often cannot sell a penny stock back to the dealer that sold them the stock, | |
• | A warning that salespersons of penny stocks are not impartial advisers but are paid to sell the stock, | |
• | The statement that federal law requires the salesperson to tell the potential investor in a penny stock, | |
• | the "offer" and the "bid" on the stock, and | |
• | the compensation the salesperson and his firm will receive for the trade, | |
• | An explanation that the offer price and the bid price are the wholesale prices at which dealers are willing to sell and buy the stock from other dealers, and that in its trade with a customer the dealer may add a retail charge to these wholesale prices, | |
• | A warning that a large spread between the bid and the offer price can make the resale of the stock very costly, | |
• | Telephone numbers a person can call if he or she is a victim of fraud, | |
• | Admonitions - |
• | to use caution when investing in penny stocks, | |
• | to understand the risky nature of penny stocks, | |
• | to know the brokerage firm and the salespeople with whom one is dealing, and | |
• | to be cautious if one’s salesperson leaves the firm. |
Finally, the customer must be furnished with a monthly statement including prescribed information relating to market and price information concerning the penny stocks held in the customer's account.
The above penny stock regulatory scheme is a response by the Congress and the Commission to known abuses in the telemarketing of low-priced securities by "boiler shop" operators. The scheme imposes market impediments on the sale and trading of penny stocks. It has a limiting effect on a stockholder's ability to resell a penny stock.
Our shares likely will trade below $5 a share on the OTC Markets exchange and be, for some time at least, shares of a "penny stock" subject to the trading market impediments described above.
Recent Sales of Unregistered Securities; Outstanding Stock Options
The following sets forth certain information concerningCompany sold no shares of any class of stock, nor issued any securities which were sold or issued by us without the registration of the securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements within the past three years:
Date | No. of Shares | Shareholder | Type of Consideration | Value of Consideration | |
2/19/2014 | 53,571 | Lisa Powell Brown | Debt settlement | $750 | |
9/22/2014 | 4,346,247 | Asher Enterprises | Debt settlement | $28,000 | |
10/10/2014 | 5,424,000 | Asher Enterprises | Debt settlement | $27,120 | |
1/26/2015 | 266,666,667 | Nicholas & Melinda Gerber Living Trust | Cash | $773,333 | |
1/26/2015 | 133,333,333 | Schoenberger Family Trust | Cash | $386,667 | |
1/26/2015 | 8,270,000 | Polly Force Company, Ltd | Debt settlement | $82,700 |
Date | No. of Shares | Shareholder | Type of Consideration | Value of Consideration | |
9/8/12 | 560,000 | Gonzalez & Kim | Cash and Debt settlement | $112,000 | |
1/26/2015 | 21,634,332 | Nicholas & Melinda Living Trust | Cash | $1,226,667 | |
1/26/2015 | 10,817,167 | Schoenberger Family Trust | Cash | $613,333 |
Date | No. of Shares Converted | Type of Shares | Shareholder | Common Stock Issued | |
10/22/2014 | 2,203,182 | Series B Pref | Peter Park | 44,063,640 | |
10/22/2014 | 2,203,182 | Series B Pref | Nelson Choi | 44,063,640 | |
6/4/2015 | 206,186 | Series A Pref | Jan Carter | 1,030,930 |
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
The following discussion and analysis should be read in conjunction with the financial statements and the accompanying notes thereto and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere.elsewhere in this annual report on Form 10-K. See "Financial"Consolidated Financial Statements."
Introduction
Concierge Technologies, Inc. (“Concierge”) or the (“Company”) conducts business through its wholly-owned operating subsidiaries operating in the U.S., New Zealand and Canada. 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 that 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 (2000) Ltd. (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems. | |
● | Kahnalytics, Inc. dba/Original Sprout (“Original Sprout”), a U.S. based company, is engaged in the wholesale distribution of hair and skin care products under the brand name Original Sprout on a global scale. The former business of Kahnalytics, providing live-streaming mobile video on a subscription basis, was insignificant and was terminated after transitioning to the current business of distributing hair and skin care products as of December 18, 2017. |
Because the Company conducts its businesses through Planet Haloits wholly-owned operating subsidiaries, the risks related to our wholly-owned subsidiaries are also risks that impact the Company's financial condition and Wireless Village, had been selling subscriptionsresults of operations. See, "Note 2. Summary of Significant Accounting Policies / Major Customers and Suppliers - Concentration of Credit Risk" in the consolidated financial statements for more information.
Critical Accounting Policies
A summary of our significant accounting policies is described in detail in Note 2 to our Consolidated Financial Statements.
Plan of Operation for the Next Twelve Months
Our plan of operation for the next twelve months is to apply necessary resources, which may include experienced personnel, cash, or synergistic acquisitions made with cash, equity or debt, into growing each of our business units to their potential. Original Sprout is in the initial stages of transitioning from a largely boutique offering to a more mainstream product and as such we anticipate measurable growth in revenues for the coming years. Additionally, we are expecting moderate growth in Brigadier through focused management initiatives and consolidation within the security industry coupled with expanded product offerings. Similarly, we expect Gourmet Foods to be operating more efficiently under current management and continue to increase market share through additional product offerings and channels to market, including distribution in New Zealand of the products from Original Sprout. Wainwright will continue to develop innovative and new fund products to grow its wireless Internet access serviceportfolio. In addition to our long-term mission that is an acquisition strategy based upon identifying and acquiring profitable, mature, companies of a diverse nature and with in-place management that produces increased revenue streams, the Company is also focused upon building expertise and developing FinTech opportunities in various increments, including daily, weekly, monthlythe financial services sector. In a more general sense, the Company is characterizing its business in two categories; 1) financial services and yearly since 2007. During2) other operating units. The purpose is to isolate the fiscal year endingcyclical nature of the financial services business from our other industry segments. As revenues from financial services fluctuate over time due to varying performance of the commodities markets, our other operations are expected to be stable and sustainable by comparison. By these initiatives we seek to:
● | continue to gain market share for our wholly-owned subsidiaries’ areas of operation, | |
● | increase our gross revenues and realize net operating profits, | |
● | lower our operating costs by unburdening certain selling expenses to third party distributors, | |
● | have sufficient cash reserves to pay down accrued expenses, | |
● | attract parties who have an interest in selling their privately held companies to us, | |
● | achieve efficiencies in accounting and reporting through consolidated operations of our subsidiaries from a management perspective, | |
● | strategically pursue additional company acquisitions, and | |
● | invest in the development of FinTech opportunities in the financial services space. |
Results of Operations
Concierge and Subsidiaries
For the Year Ended June 30, 2011, we completed2019 Compared to the transition away from this business and refocused our efforts, through our majority owned subsidiary Wireless Village dba/Janus Cam, on the sale and distribution of mobile video surveillance systems, generically known as “drive cams”. During the fiscal year endedYear Ended June 30, 2013, we sold Planet Halo to a shareholder through a stock redemption agreement and we acquired all2018
Financial Summary
The table below summarizes each of the minority owned sharesConcierges subsidiaries into one of Wireless Village through a stock-for-stock exchange. Having Wireless Village as a wholly-owned subsidiary for 2 years produced operating losses and we elected to raise additional working capital through equity as well as change our strategic focus. Accordingly, during the fiscal year ended June 30, 2015, we raised $3 million in cash, sold Wireless Village to its executive management team through a stock redemption agreement, established Kahnalytics as our wholly-owned subsidiary in order to carry on certain profitable aspects of the former Wireless Village line oftwo categories. The Wainwright business acquired Gourmet Foods, and acquired Brigadier. The acquisition of Gourmet Foods was completed on August 11, 2015, and the acquisition of Brigadier on June 2, 2016, both consummated as cash transactions. As of June 30, 2016, our financial statements are representative of the operating results of these three wholly-owned subsidiaries.
($’s in thousands) | Financial Services | Other Operating Units | Concierge Corporate | Consolidated | ||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||
$ | % | $ | % | $ | % | $ | % | |||||||||
Revenue | $15,021 | $18,744 | ($3,723) | (20%) | $11,928 | $9,967 | $1,961 | 20% | $26,949 | $28,711 | ($1,762) | (6%) | ||||
% of total revenue | 56% | 65% |
| (9%) | 44% | 35% |
| 9% | ||||||||
Cost of revenue |
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| $6,936 | $5,915 | $1,021 | 17% | $6,936 | $5,915 | $1,021 | 17% | |||||
Gross profit | $15,021 | $18,744 | ($3,723) | (20%) | $4,992 | $4,052 | $940 | 23% | $20,013 | $22,796 | ($2,783) | (12%) | ||||
Operating expenses | $14,095 | $15,527 | ($1,432) | (9%) | $3,950 | $3,488 | $462 | 13% | $1,212 | $974 | $238 | 24% | $19,257 | $19,989 | ($732) | (4%) |
% of total operating expenses | 73% | 78% | (5%) | 21% | 17% | 4% | 6% | 5% | 1% | |||||||
Income (loss) from operations | $926 | $3,217 | ($2,291) | (71%) | $1,042 | $564 | $478 | 85% | ($1,212) | ($974) | ($238) | (24%) | $756 | $2,807 | ($2,051) | (73%) |
Other (expense) / income | ( $148) | ($324) | $176 | 54% | $25 | $43 | ($18) | (42%) | ($24) | ($25) | $1 | 4% | ($147) | ($306) | $159 | (52%) |
Income (loss) before income taxes | $778 | $2,893 | ($2,115) | (73%) | $1,067 | $607 | $460 | 76% | ($1,236) | ($999) | ($237) | (24%) | $609 | $2,501 | ($1,892) | (76%) |
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Revenue and 2) a FMS data plan where subscribers were provided hardware needed to connect wirelessly to the Internet and also charged a monthly fee for the air time usage. Kahnalytics also charged a subsidized price of $50 per each wireless hardware device used in creating the wireless connection. For the year ended June 30, 2016, the total revenues from FMS related hardware sales was $2,250. Kahnalytics purchases data plans from a network reseller and, in turn, resells that plan to its subscribers. For the year ended June 30, 2016, sales of FMS basic subscriptions were $480 and FMS data plans were $0. There were no FMS related subscription or hardware salesOperating Income
Consolidated revenue for the year ended June 30, 2015. Hardware sales2019 was $26.9 million representing a $1.8 million decrease from the prior year revenue of cameras and SD cards$28.7 million. While net revenues decreased as a result of lower Fund assets under management ("AUM") from our fund management business by approximately $3.7 million for the year ended June 30, 2016, were $117,7002019 as compared to $95,057 for the year ended June 30, 2015. Other2018, the corporation's revenues derived from its other operating units increased by approximately $1.9 million over the same period, resulting in a net reduction to revenue in fiscal year 2019 of approximately 6%. Concierge produced an operating income for the year ended June 30, 2016, was $81 and comprised2019 of adjustments to sales tax liability$0.8 million as compared to $0$2.8 million for the year ended June 30, 2015. Accounts receivable as2018. This represents a decrease in operating income of June 30, 2016, were $2,640 as compared to $95,417 as of June 30, 2015. The difference is attributed to the discontinuation of most hardware sales during the current fiscal year and the focus on subscription services instead, which results in less gross revenues overall rather than any significant change in the aging of accounts receivable. Net loss after the impairment of inventory of $48,330 and provision for income tax of $800 was $60,612 as compared to a net loss$2.0 million for the year ended June 30, 20152019 when compared to the year ended June 30, 2018 of $10,332.approximately 73%. The decrease in operating income was primarily attributable to lower fund management revenue from Wainwright due to lower AUM.
Other Expenses
Other expense, including provision for income tax of $0.3 million and $0.8 million, for the years ended June 30, 2019 and 2018 were $0.5 million and $1.1 million for the years ended June 30, 2019 and 2018, respectively, resulting in a net income of $0.3 million and $1.7 million, respectively. After giving consideration to currency translation losses of $45 thousand our comprehensive income for the year ended June 30, 2019 was $0.2 million as compared to the year ended June 30, 2018 where there was a currency translation loss of $214 thousand and a short-term investment valuation increase of $244 thousand resulting in comprehensive income of $1.8 million. Comprehensive gain and loss are comprised of fluctuations in foreign currency exchange rates and effects in the valuation of our holdings in New Zealand and Canada.
Net Income
Overall, the net income between the year ended June 30, 2019 as compared to the year ended June 30, 2018 decreased by approximately $1.4 million or approximately 85% to approximately $0.3 million. The reduction in profits for the year ended June 30, 2019 was primarily attributable to lower fund management revenue from Wainwright due to a lower amount of AUM, partially offset by decreases in Wainwright variable operating expenses, and general and administrative costs.
Income Tax
Provision for income tax for the years ended June 30, 2019 and 2018 are $0.3 million and $0.8 million, respectively, primarily attributable to our United States operations through our Wainwright subsidiary.
Wainwright Holdings
Wainwright was founded as a holding company in March 2004 as a Delaware corporation with one subsidiary, Ameristock Corporation, which was an investment adviser to Ameristock Mutual Fund, Inc., a registered 1940 Act large cap value equity fund. In January 2010, Ameristock Corporation was spun off as a standalone company. In May 2005, USCF was formed as a single member limited liability company in the state of Delaware. In June 2013, USCF Advisers was formed as a Delaware limited liability company and in July 2014, was registered as an investment adviser under the Investment Advisers Act of 1940, as amended. In November 2013, the USCF Advisers board of managers formed USCF ETF Trust (“ETF Trust”) and in July 2016, the USCF Mutual Funds Trust (“Mutual Funds Trust” and together with “ETF Trust” the “Trusts”) both as open-end management investment companies registered under the Investment Company Act of 1940, as amended ("the 1940 Act"). The Trusts are authorized to have multiple segregated series or portfolios. Wainwright owns all of the issued and outstanding limited liability company membership interests of its subsidiaries, USCF and USCF Advisers, each a Delaware limited liability company and are affiliated companies. USCF serves as the general partner (“General Partner”) for various limited partnerships (“LP”) and sponsor (“Sponsor”) as noted below. USCF and USCF Advisers are subject to federal, state and local laws and regulations generally applicable to the investment services industry. USCF is a commodity pool operator (“CPO”) subject to regulation by the Commodity Futures Trading Commission (the "CFTC") and the National Futures Association (the “NFA”) under the Commodities Exchange Act (“CEA”). USCF Advisers is an investment adviser registered under the Investment Advisers Act of 1940, as amended and has registered as a CPO under the CEA. Exchange traded products (“ETPs”) issued or sponsored by USCF are required to be registered with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Act of 1933. As of June 30, 2018, USCF Advisers advises three exchange traded funds (“ETFs”) and one commodity mutual fund registered with the SEC under the Investment Company Act of 1940. Wainwright and subsidiaries USCF and USCF Advisers are collectively referred to as “Wainwright” hereafter.
USCF is currently the General Partner in the following Securities Act of 1933 LP commodity based index funds and Sponsor (“Sponsor”) for the fund series within the United States Commodity Index Funds Trust (“USCIF Trust”) and the USCF Funds Trust (“USCF Funds Trust”):
USCF as General Partner for the following funds: | |
United States Oil Fund, LP (“USO”) | Organized as a Delaware limited partnership in May 2005 |
United States Natural Gas Fund, LP (“UNG”) | Organized as a Delaware limited partnership in November 2006 |
United States Gasoline Fund, LP (“UGA”) | Organized as a Delaware limited partnership in April 2007 |
United States Diesel Heating Oil Fund, LP (“UHN”) | Organized as a Delaware limited partnership in April 2007; Liquidated September 12, 2018 |
United States 12 Month Oil Fund, LP (“USL”) | Organized as a Delaware limited partnership in June 2007 |
United States 12 Month Natural Gas Fund, LP (“UNL”) | Organized as a Delaware limited partnership in June 2007 |
United States Short Oil Fund, LP (“DNO”) | Organized as a Delaware limited partnership in June 2008; Liquidated September 12, 2018 |
United States Brent Oil Fund, LP (“BNO”) | Organized as a Delaware limited partnership in September 2009 |
USCF as fund Sponsor - each a series within the USCIF Trust | |
United States Commodity Index Funds Trust (“USCIF Trust”) | A series trust formed in Delaware December 2009 |
United States Commodity Index Fund (“USCI”) | A commodity pool formed in April 2010 and made public August 2010 |
United States Copper Index Fund (“CPER”) | A commodity pool formed in November 2010 and made public November 2011 |
United States Agriculture Index Fund (“USAG”) | A commodity pool formed in November 2010 and made public April 2012; Liquidated September 12, 2018 |
USCF as fund Sponsor - each a series within the USCF Funds Trust: | |
USCF Funds Trust (“USCF Funds Trust”) | A series trust formed in Delaware March 2016 |
United States 3X Oil Fund (“USOU”) | A commodity pool formed in May 2017 and made public July 2017 |
United States 3X Short Oil Fund (“USOD”) | A commodity pool formed in May 2017 and made public July 2017 |
USCF Advisers serves as the investment adviser to the fund(s) listed below within the Trusts and has overall responsibility for the general management and administration for the Trusts. Pursuant to the current Investment Advisory Agreements, USCF Advisers provides an investment program for the Trusts’ fund(s) and manages the investment of the assets.
Advisers as fund manager for each series within the USCF ETF Trust and the USCF Mutual Funds Trust: | |
USCF ETF Trust (“ETF Trust”) | Organized as a Delaware statutory trust in November 2013 |
USCF SummerHaven SHPEI Index Fund ("BUY") | Fund launched November 30, 2017 |
USCF SummerHaven SHPEN Index Fund ("BUYN") | Fund launched November 30, 2017 |
Stock Split Index Fund (“TOFR”) | Fund launched September 2014; Liquidated October 20, 2017 |
Restaurant Leaders Index Fund (“MENU”) | Fund launched November 2016; Liquidated October 20, 2017 |
USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund | Fund launched May 2018 |
USCF Mutual Funds Trust ("Mutual Funds Trust") | Organized as a Delaware statutory trust in July 2016 |
USCF Commodity Strategy Fund ("USCFX" and "USCIX") | Fund launched March 2017; Liquidated March 21, 2019 |
All USCF funds and the Trusts' funds are collectively referred to as the “Funds” hereafter.
Wainwright’s revenue and expenses are primarily driven by the amount AUM. Wainwright earns monthly management and advisory fees based on agreements with each Fund as determined by the contractual basis point management fee structure in each agreement multiplied by the average AUM over the given period. Many of the company’s expenses are dependent upon the amount of AUM. These variable expenses include Fund administration, custody, accounting, transfer agency, marketing and distribution, and sub-adviser fees and are primarily determined by multiplying contractual fee rates by AUM. Total Operating Expenses are grouped into the following financial statement line items: General and Administrative, Marketing, Operations and Salaries and Compensation.
For the Year Ended June 30, 2019, Compared to the Year Ended June 30, 2018
Revenue
Average AUM for the year ended June 30, 2019 was at $2.7 billion, as compared to approximately $3.4 billion from the year ended June 30, 2018 primarily due to a decrease in USO,USCI and UNG AUM. As a result, the revenues from management and advisory fees decreased by approximately $3.7 million, or 20%, to $15.0 million for the year ended June 30, 2019 as compared to the year ended June 30, 2018 where revenues from management and advisory fees totaled $18.7 million.
Expenses
Wainwright’s total operating expenses for year ended June 30, 2019 decreased by $1.4 million to $14.1 million, or approximately 10%, from $15.5 million for the year ended June 30, 2018. Variable expenses, as described above, decreased by $0.8 million over the respective twelve-month period due to due to lower AUM which reduced variable marketing and distribution expenses, sub-advisory fees and other variable costs. General and Administrative expenses decreased $0.4 million to $2.1 million for the year ended June 30, 2019 from $2.5 million for the year ended June 30, 2018 due to decreases in legal and professional fees and new fund startup expenses. Total marketing expenses decreased $0.8 million to $2.5 million for the year ended June 30, 2019 as compared to the prior year period due to a decrease of $0.4 million in advertising and marketing conferences along with a $0.4 million reduction in variable distribution costs as a result of lower AUM. Employee Salaries and Compensation expenses were approximately $4.8 million and $4.6 million for the years ended June 30, 2019 and June 30, 2018, respectively, due to accrued vacation and small increases in annual compensation offset by a reduction in annual bonuses.
Income
Income before income taxes for the year ended June 30, 2019 decreased $2.1 million to $0.8 million from $2.9 million for year ended June 30, 2018 due to $3.7 million in lower revenue as a result of lower AUM, offset by a $1.4 million reduction in operating expenses along with a decrease of $0.2 million in other expenses.
Gourmet Foods,
Gourmet Foods Limited (“Gourmet Foods”), was organized in its current form in 2005 (previously known as Pats Pantry Ltd. (“Pats Pantry”))Ltd). Pats Pantry was founded in 1966 to produce and sell wholesale bakery products, meat pies and patisserie cakes and slices, in New Zealand. Gourmet Foods, located in Tauranga, New Zealand, sells substantially all of its goods to supermarkets and service station chains with stores located throughout New Zealand. Gourmet Foods also has a large number of smaller independent lunch bars, cafes and corner dairies among the customer list, however they comprise a relatively insignificant dollar volume in comparison to the primary accounts of large distributors and retailers. We purchased all of the issued and outstanding shares of Gourmet Foods effective as of August 1, 2015, even though the transaction did not officially close until August 11, 2015.
Gourmet Foods operates exclusively in New Zealand and thus the New Zealand dollar is its functional currency. In order to consolidate ourConcierge’s reporting currency, the US dollar, with that of Gourmet Foods, we recordConcierge records foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation.ASC 830-30. The translation of New Zealand currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Gains and losses resulting from the foreign currency translations are included in Otherforeign currency translation (loss) gain on the Consolidated Statements of Comprehensive Income (Loss)as well as accumulated other comprehensive (loss) income found on the Condensed Consolidated StatementsBalance Sheets.
For the Year Ended June 30, 2019, Compared to the Year Ended June 30, 2018
Revenue
Net revenues for the year ended June 30, 2016.
Expenses
General, administrative and selling expenses, including wages and marketing, for the years ended June 30, 2019 and 2018 were $1 million and $1.1 million producing operating income of $0.4 million and $0.4 million, respectively, or approximately 33% gross margin. General and administrative expenses9% net operating profit for the eleven-month period were $967,180 resulting in a net income before other income and expenses and income tax of $289,147.2019, 8% for 2018. The depreciation expense, incentive bonus, and other income (expense) totaled approximately $0.4 million for Gourmet Foods over the eleven-month period endingyear ended June 30, 2016, was $225,810. The2019 as compared to $0.3 million for the year ended June 30, 2018.
Income
Income for the year ended June 30, 2019, after expenses of approximately $0.4 million, resulted in approximately $46 thousand before income tax provision of $80,892, the interest income of $3,842 and other income of $2,370approximately $59 thousand resulted in a net loss of approximately $13 thousand as compared to a net income of $214,467. Accounts receivable as of$99 thousand for the year ended June 30, 2016 were $285,673.
Brigadier Security Systems
Brigadier Security Systems (2000) Ltd. (“Brigadier”) was founded in 1985 and through internal growth and acquisitions the core business of Brigadier began in 1998. Today Brigadier is one of the largest SecurTek security monitoring dealers in Saskatchewan with offices in both major urban areas of Regina (under the fictitious business name of “Elite Security”(dba Elite Security Systems (2005) Ltd.) and Saskatoon. SecurTek is owned by SaskTel which is Saskatchewan's leading Information and Communications Technology (ICT) provider with over 1.4 million customer connections across Canada. Brigadier is also a Honeywell Certified Access Control Distributor,Integrator, Kantech Global DealerCorporate Certified Integrator and UTC Interlogix Security ProAuthorized dealer and the largest independent security contractor in the province. Brigadier provides comprehensive security solutions including access control, camera monitoring, motion detection,systems, fire alarm panels, and intrusion alarms to home and business owners as well as government offices, schools and public buildings. Brigadier typically sells hardware, to customersinstallation service, and a full time monitoring contract to customers. Under the terms of its authorized dealer contract with the monitoring company, Brigadier earns monthly payments during the term of the premises. Themonitoring contract for monitoring the premise is then conveyed to a third party telecom in exchange for an upfront payment and recurring residuals basedperformance of customer service activities on subscriber contracts.
Brigadier operates exclusively in Canada and thus the Canadian dollar is its functional currency. In order to consolidate ourConcierge’s reporting currency, the USU.S. dollar, with that of Brigadier, we recordConcierge records foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation.ASC 830-30. The translation of Canadian currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period.
Gains and losses resulting from the foreign currency translations are included in Otherforeign currency translation (loss) gain on the Consolidated Statements of Comprehensive Income (Loss)as well as accumulated other comprehensive (loss) income found on the Condensed Consolidated Statements of Operations and Comprehensive Income and are listed as a gain of $5,098Balance Sheets.
For the Year Ended June 30, 2019, Compared to the Year Ended June 30, 2018
Revenue
Net revenues for the year ended June 30, 2016.
Expenses
General, administrative and selling expenses for the year ended June 30, 2019 were $1.4 million producing an operating profit of $0.6 million or approximately 15% as compared to the year ended June 30, 2018 where operating profits were $0.4 million, or approximately 13%, with general, administrative and selling expenses of $1.4 million.
Income
Other expense comprised of depreciation, income tax, interest income, other income, and gain on sale of assets totaled approximately $145 thousand for the year ended June 30, 2019 resulting in income after income taxes of approximately $0.4 million as compared to income after income taxes of approximately $0.4 million for the year ended June 30, 2018 where other expense totaled $31 thousand.
Original Sprout
Kahnalytics was founded in 2015 and adopted the dba/Original Sprout in December 2017 (see Note 12 to the Consolidated Financial Statements). For the year ended June 30, 2017 (prior to the acquisition of 15%the Original Sprout assets), Kahnalytics had incurred de minimis operating losses insignificant to the overall enterprise. Prior to the acquisition of the Original Sprout assets, and as of June 30, 2017, the residual business the company was founded to oversee was being wound down and management expected to transition focus to another industry. As of June 30, 2018, this legacy business had been completely wound down. Accordingly, the results of operations for the twelve-month period ending June 30, 2018 reflects only two quarters of business operations with the newly acquired assets and should not be viewed as indicative of a full twelve-month period of operations. Similarly, there is no meaningful comparative data for the twelve-month period ending June 30, 2018 as the business included nominal subscription sales to a web hosted service and not the wholesale distribution of beauty products as it currently exists. As a result, only the operating results for the twelve months ended June 30, 2019 are included below. Pro forma results for the fiscal year ended June 30, 2018 are included in Note 12.
For the Year Ended June 30, 2019
Revenue
Net revenues for the year ended June 30, 2019 were $3.6 million with cost of goods sold recorded as approximately $2 million resulting in a gross profit of approximately $1.6 million and a gross margin of approximately 46%. Operating costs include generalPro forma results for the year ended June 30, 2018 are included in Note 12.
Expenses
General, administrative and administrative expense of $1,411,047 and inventory impairment of $48,330selling expenses were approximately $0.9 million resulting in an operating income of $19,876 for the year ended June 30, 2016 as comparedapproximately $0.7 million or approximately 20%.
Income
After consideration given to a loss of $131,690 for the year ended June 30, 2015
Liquidity and Capital Resources
Concierge is a holding company that conducts its operations through its subsidiaries. At its holding-company level, its liquidity needs relate to operational expense, the funding of additional business acquisitions and new investment opportunities. Our operating subsidiaries' principal liquidity requirements arise from cash used in operating activities, debt service, and capital expenditures, including purchases of equipment and services, operating costs and expenses, and income taxes.
As of June 30, 2019, we had $6.5 million of cash and cash equivalents on a consolidated basis as compared to $7.5 million as of June 30, 2018. The reduction in cash was due to a reduction in net loss before taxesincome as well as cash paid for a prior year acquisition. Additionally, the movement of $204,216 for$0.75 million from administrative cash accounts to interest bearing investment accounts along with a reduction in current liabilities from payments made during the year ended June 30, 2015. We attribute2019 had an impact on the increased income to the inclusion of acquired subsidiaries Brigadier and Gourmet Foods as well as disposal of non-revenue producing subsidiaries present during the fiscal year ended June 30, 2015. The net loss after income tax provision of $96,022 on a consolidated basis for the year ended June 30, 2016 was $81,952 as compared to an income of $14,191 for the year ended June 30, 2015.
During the current and past fiscal year we haveyears combined, Concierge has invested approximately $3.5 million in cash towards purchasing and assimilating the Original Sprout assets into the Concierge Technologies group of companies. During the previous years ended June 30, 2016 through June 30, 2017, Concierge invested approximately $3.3 million in cash to acquire Gourmet Foods and Brigadier into our groupSecurity Systems as well as the acquisition through a stock-for-stock exchange of companies. We have continued to pursue business opportunities with Kahnalytics and intend to grow that opportunity by implementation of a software development project in the coming months that is envisioned to produceWainwright, which provides a significant recurring revenue stream when finalized. We forecastand value. Despite these cash investments, our working capital position remains strong at $12.3 million and our position has strengthened year-to-year. Management forecasts Wainwright, Gourmet Foods, Brigadier and BrigadierOriginal Sprout to continue toall produce a profit during the coming fiscal year and the realization of those profits by Concierge mayis not expected to be augmentedsignificantly impacted by a resurgence of the New Zealand and Canadian currenciesforeign currency fluctuations against the U.S. dollar during the coming fiscal year.period. While we intendConcierge intends to maintain and improve ourits revenue stream from wholly owned subsidiaries, Kahnalytics, Brigadier and Gourmet Foods, we are also lookingConcierge continues to expand our business to includepursue acquisitions of other synergistic partners and pursue possible licensing agreements for product distribution on a global scale.profitable companies which meet its target profile. Provided ourConcierge’s subsidiaries continue to operate as they are presently, and are projected to operate, we haveConcierge has sufficient capital to pay ourits general and administrative expenses for the coming fiscal year and to adequately pursue ourits long term business objectives.
Borrowings
As of June 30, 2019, we had $0.7 million of related-party and third-party indebtedness on a consolidated basis as compared to $0.8 million as of June 30, 2018. Concierge, without inclusion of its subsidiary companies, as of June 30, 2019 and June 30, 2018, had $0.6 million of indebtedness. We believeare not required to make interest payments on our notes until the maturity date.
Current related party notes payable consist of the following:
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Notes payable to shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due) |
|
| 3,500 |
|
|
| 3,500 |
|
Notes payable to shareholder, interest rate of 4%, unsecured and payable on May 25, 2022 |
|
| 250,000 |
|
|
| 250,000 |
|
Notes payable to shareholder, interest rate of 4%, unsecured and payable on April 8, 2022 |
|
| 350,000 |
|
|
| 350,000 |
|
|
| $ | 603,500 |
|
| $ | 603,500 |
|
As of June 30, 2019, Brigadier had, in the aggregate, an outstanding principal balance of CD$114,292 (approx. US$87,297) related to new vehicle purchases. For each vehicle purchased, the loan principal together with interest is amortized over 60 equal monthly installments. The Consolidated Balance Sheets as of June 30, 2019 and June 30, 2018 reflect the amount of the principal balance which is due within twelve months as a current liability of US$26,241 and US$46,705, respectively. Principal amounts under the loans which is due after twelve months are recorded in long term liabilities as US$61,057 and US$149,491 at June 30, 2019 and June 30, 2018 respectively. Interest on the loans is expensed or accrued as it becomes due. Total interest on all vehicle loans for the years ended June 30, 2019 and 2018 was US$5,197 and US$4,209, respectively.
Investments
Wainwright, from time to time, provides initial investments in the creation of ETP funds that through executionWainwright manages. Wainwright classifies these investments as current assets as these investments are generally sold within one year from the balance sheet date. These investments are described further in Note 7 to our Financial Statements.
Reverse Stock Split
On November 17, 2017 our Board and the majority stockholders approved the adoption of a one-for-thirty (1:30) reverse stock split whereby each thirty shares of our current business plan,common stock and Series B Preferred stock issued and outstanding as of the record date established by the Board shall be combined into one share of common stock or preferred stock, as applicable (the “Reverse Stock Split”). The Reverse Stock Split became effective on December 15, 2017 and all share amounts have been retroactively adjusted for this reverse stock split.
Dividends
Our strategy on dividends is to declare and pay dividends only from retained earnings and only when our Board of Directors deems it prudent and in the best interests of the company to declare and pay dividends. We have paid no dividends and we will be able to continuedo not expect to pay our financial obligations and to avoid increases in its accrued liabilities inany dividends over the comingnext fiscal year.
Off-Balance Sheet Arrangements
At June 30, 2019, and as of October 3, 2016,September 30, 2019, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have:
● | An obligation under a guarantee contract, |
● | A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets, |
● | An obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to, us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging, or research and development services with us. |
ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Our financial statements appear as follows:
F-1 | ||
Consolidated Balance Sheets, as of June 30, | F-2 | |
F-3 | ||
F-4 | ||
F-5 | ||
Consolidated Statements of Cash Flows, for the years Ended June 30, | F-6 | |
F-7 |
To the Board of Directors
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Concierge Technologies, Inc. and its subsidiaries (the "Company") as of June 30, 20162019 and 2015, and2018, the related consolidated statements of operations, comprehensive income, convertible preferred stock and stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2016. 2019, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on thesethe Company's consolidated financial statements based on our audits. We did not auditare a public accounting firm registered with the financial statements of Brigadier Security Systems (2000) Limited, a wholly-owned subsidiary, which statements reflect total assets of 20% of consolidated total assets as of June 30, 2016Public Company Accounting Oversight Board (United States) ("PCAOB") and total revenues of 8% of consolidated total revenues for the one year period ended June 30, 2016. Those statements were audited by another auditor, whose report has been furnishedare required to us, and our opinion, insofar as it relatesbe independent with respect to the amounts included for Brigadier Security Systems (2000) Limited, is based solely onCompany in accordance with the reportU.S. federal securities laws and the applicable rules and regulations of the other auditor.
We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. Anmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit includesof its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits and the report of the other auditor provide a reasonable basis for our opinion.
/s/ BPM LLP
San Francisco, California
September 30, 2019
We have served as the Company's auditor since 2017.
CONSOLIDATED BALANCE SHEETS |
June 30, 2019 | June 30, 2018 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 6,481,815 | $ | 7,524,114 | ||||
Accounts receivable, net | 939,649 | 1,068,240 | ||||||
Accounts receivable - related parties | 1,037,146 | 1,458,159 | ||||||
Inventories | 1,008,662 | 931,065 | ||||||
Prepaid income tax and tax receivable | 1,754,369 | 2,138,636 | ||||||
Investments | 3,756,596 | 3,204,005 | ||||||
Other current assets | 546,105 | 374,617 | ||||||
Total current assets | 15,524,342 | 16,698,836 | ||||||
Restricted cash | 13,436 | 13,536 | ||||||
Property and equipment, net | 757,014 | 1,080,471 | ||||||
Goodwill | 915,790 | 915,790 | ||||||
Intangible assets, net | 2,659,723 | 2,995,231 | ||||||
Deferred tax assets, net | 859,696 | 865,120 | ||||||
Other assets, long - term | 523,607 | 532,165 | ||||||
Total assets | $ | 21,253,608 | $ | 23,101,149 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 2,867,081 | $ | 3,249,387 | ||||
Expense waivers – related parties | 325,821 | 662,650 | ||||||
Purchase consideration payable | - | 1,205,000 | ||||||
Notes payable - related parties | 3,500 | 3,500 | ||||||
Equipment loans, current portion | 26,241 | 46,705 | ||||||
Total current liabilities | 3,222,643 | 5,167,242 | ||||||
LONG TERM LIABILITIES | ||||||||
Notes payable - related parties | 600,000 | 600,000 | ||||||
Equipment loans, net of current portion | 61,057 | 149,491 | ||||||
Deferred tax liabilities | 176,578 | 208,419 | ||||||
Total liabilities | 4,060,278 | 6,125,152 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock, $0.001 par value; 50,000,000 authorized | ||||||||
Series B: 53,032 issued and outstanding at June 30, 2019 and 436,951 at June 30, 2018 | 53 | 437 | ||||||
Common stock, $0.001 par value; 900,000,000 shares authorized; 37,237,519 shares issued and outstanding at June 30, 2019 and 29,559,139 at June 30, 2018 | 37,237 | 29,559 | ||||||
Additional paid-in capital | 9,178,838 | 9,186,132 | ||||||
Accumulated other comprehensive (loss) income | (175,659 | ) | 148,808 | |||||
Retained earnings | 8,152,861 | 7,611,061 | ||||||
Total stockholders' equity | 17,193,330 | 16,975,997 | ||||||
Total liabilities and stockholders' equity | $ | 21,253,608 | $ | 23,101,149 |
The accompanying notes are an integral part of these consolidated financial statements. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
Year Ended | Year Ended | |||||||
June 30, 2019 | June 30, 2018 | |||||||
Net revenue | ||||||||
Fund management - related party | $ | 15,021,439 | $ | 18,744,313 | ||||
Food products | 4,747,358 | 4,968,158 | ||||||
Security systems | 3,558,580 | 3,303,584 | ||||||
Beauty products and other | 3,621,246 | 1,694,534 | ||||||
Net revenue | 26,948,623 | 28,710,589 | ||||||
Cost of revenue | 6,936,421 | 5,914,719 | ||||||
Gross profit | 20,012,202 | 22,795,870 | ||||||
Operating expense | ||||||||
General and administrative expense | 4,205,389 | 4,828,241 | ||||||
Fund operations | 4,494,001 | 4,933,437 | ||||||
Marketing and advertising | 2,910,447 | 3,554,507 | ||||||
Depreciation and amortization | 702,320 | 576,674 | ||||||
Salaries and compensation | 6,944,457 | 6,096,232 | ||||||
Total operating expenses | 19,256,614 | 19,989,091 | ||||||
Income from operations | 755,588 | 2,806,779 | ||||||
Other (expense) income: | ||||||||
Other (expense) income | (484,028 | ) | (316,337 | ) | ||||
Interest and dividend income | 366,796 | 111,929 | ||||||
Interest expense | (29,493 | ) | (101,089 | ) | ||||
Total other (expense) income, net | (146,725 | ) | (305,497 | ) | ||||
Income before income taxes | 608,863 | 2,501,282 | ||||||
Provision of income taxes | 347,014 | 766,596 | ||||||
Net income | $ | 261,849 | $ | 1,734,686 | ||||
Weighted average shares of common stock | ||||||||
Basic | 32,588,418 | 29,559,139 | ||||||
Diluted | 38,298,159 | 38,298,159 | ||||||
Net income per common share | ||||||||
Basic | $ | 0.01 | $ | 0.06 | ||||
Diluted | $ | 0.01 | $ | 0.05 |
The accompanying notes are an integral part of these consolidated financial statements. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
Year Ended | Year Ended | |||||||
June 30, 2019 | June 30, 2018 | |||||||
Net income | $ | 261,849 | $ | 1,734,686 | ||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation (loss) gain | (44,516 | ) | (214,284 | ) | ||||
Changes in short-term investment valuation | - | 243,754 | ||||||
Comprehensive income | $ | 217,333 | $ | 1,764,156 |
The accompanying notes are an integral part of these consolidated financial statements. |
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY |
FOR THE YEARS ENDED JUNE 30, 2019 AND 2018 |
|
| Preferred Stock (Series B) |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Number of Shares |
|
| Amount |
|
| Number of Shares |
|
| Par Value |
|
| Additional Paid - in Capital |
|
| Accumulated Other Comprehensive Income (Loss) |
|
|
Retained Earnings |
|
| Total Stockholders' Equity |
| ||||||||
Balance at July 1, 2017 |
|
| 436,951 |
|
| $ | 2,011,934 |
|
| 29,559,139 |
|
| $ | 29,559 |
|
| $ | 7,174,635 |
|
| $ | 119,338 |
|
| $ | 5,876,375 |
|
| $ | 13,199,907 |
| |
Reclassification of Series B Preferred stock par value (1) |
|
| - |
|
|
| 437 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 437 |
|
Reclassification of Series B Preferred stock to additional paid-in capital (1) |
|
| - |
|
|
| (2,011,497 | ) |
|
| - |
|
|
| - |
|
|
| 2,011,497 |
|
|
| - |
|
|
| - |
|
|
| 2,011,497 |
|
Stockholders' equity following reverse stock split (1) |
|
| 436,951 |
|
|
| 437 |
|
|
| 29,559,139 |
|
|
| 29,559 |
|
|
| 9,186,132 |
|
|
| 119,338 |
|
|
| 5,876,375 |
|
|
| 15,211,841 |
|
Change in investment valuation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 243,754 |
|
|
| - |
|
|
| 243,754 |
|
(Loss) on currency translation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (214,284 | ) |
|
| - |
|
|
| (214,284 | ) |
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,734,686 |
|
|
| 1,734,686 |
|
Balance at June 30, 2018 |
|
| 436,951 |
|
|
| 437 |
|
|
| 29,559,139 |
|
|
| 29,559 |
|
|
| 9,186,132 |
|
|
| 148,808 |
|
|
| 7,611,061 |
|
|
| 16,975,997 |
|
(Loss) on currency translation |
| (44,516 | ) |
| (44,516 | ) | ||||||||||||||||||||||||||
Reclassification of investment gains |
| (279,951 | ) | 279,951 | - | |||||||||||||||||||||||||||
Conversion of preferred shares |
| (383,919 | ) |
| (384 | ) | 7,678,380 | 7,678 |
| (7,294 | ) | - | ||||||||||||||||||||
Net income | 261,849 | 261,849 | ||||||||||||||||||||||||||||||
Balance at June 30, 2019 | 53,032 | $ | 53 | 37,237,519 | $ | 37,237 | $ | 9,178,838 | ($ | 175,659 | ) | $ | 8,152,861 | $ | 17,193,330 |
Note (1) Upon issuance of the preferred shares in the Wainwright acquisition, the Company no longer had sufficient authorized, unissued, common stock to allow for Series B conversion. Accordingly, the Series B was reclassified to the mezzanine section. On December 15, 2017 a 1:30 reverse stock split was completed and allowed for the Series B shares to be moved from the mezzanine section to stockholders' equity. All share amounts have been adjusted for the reverse stock split (Note 13).
The accompanying notes are an integral part of these consolidated financial statements. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the years ended | ||||||||
2019 | 2018 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 261,849 | $ | 1,734,686 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 702,320 | 576,674 | ||||||
Deferred taxes | (26,417 | ) | 564,992 | |||||
Bad debt expense | 2,075 | 51,747 | ||||||
Unrealized loss on investments | 1,995 | 359,666 | ||||||
Realized (gain) on sale of investments | (30,718 | ) | (3,592 | ) | ||||
(Gain) on disposal of equipment | (3,369 | ) | (8,364 | ) | ||||
(Increase) decrease in current assets: | ||||||||
Accounts receivable, net | 128,105 | 7,137 | ||||||
Accounts receivable - related party | 421,013 | 304,112 | ||||||
Prepaid income taxes and tax receivable | 421,845 | (906,085 | ) | |||||
Inventories | (79,127 | ) | (162,388 | ) | ||||
Other current assets | (161,254 | ) | 4,045 | |||||
Increase (decrease) in current liabilities: | ||||||||
Accounts payable and accrued expenses | (425,690 | ) | 406,126 | |||||
Expense waiver - related party | (336,829 | ) | 73,557 | |||||
Net cash provided by operating activities | 875,798 | 3,002,313 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Cash paid for acquisition of business assets | (1,205,000 | ) | (2,277,172 | ) | ||||
Purchase of equipment - net of disposals | (50,165 | ) | (318,064 | ) | ||||
Sale of investments | 3,230,891 | 1,372,019 | ||||||
Purchase of investments | (3,754,132 | ) | (1,109,596 | ) | ||||
Net cash used in investing activities | (1,778,406 | ) | (2,332,813 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds of equipment loan | - | 178,604 | ||||||
Repayment of equipment loan | (108,898 | ) | (67,660 | ) | ||||
Net cash (used in) provided by financing activities | (108,898 | ) | 110,944 | |||||
Effect of exchange rate change on cash, cash equivalents and restricted cash | (30,893 | ) | 13,184 | |||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,042,399 | ) | 793,628 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING BALANCE | 7,537,650 | 6,744,022 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE | $ | 6,495,251 | $ | 7,537,650 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Interest paid | $ | 29,493 | $ | - | ||||
Income taxes paid | $ | 202,363 | $ | 965,272 | ||||
Purchase consideration payable (see Note 12) | $ | - | $ | 1,205,000 |
The accompanying notes are an integral part of these consolidated financial statements. |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES | ||
CONSOLIDATED BALANCE SHEET | ||
As of June 30, 2016 | As of June 30, 2015 | |
ASSETS | ||
CURRENT ASSETS: | ||
Cash & cash equivalents | $1,060,184 | $1,970,062 |
Accounts receivable, net | 839,220 | 95,417 |
Inventory, net | 436,541 | 85,849 |
Other current assets | 24,876 | - |
Total current assets | 2,360,821 | 2,151,328 |
Deposit | - | 182,931 |
Property and equipment, net | 1,166,693 | - |
Goodwill | 219,256 | - |
Intangible Assets-Net | 1,018,213 | - |
Total assets | $4,764,983 | $2,334,259 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | $997,644 | $269,501 |
Purchase consideration payable | 214,035 | - |
Notes payable - related parties | 308,500 | 8,500 |
Notes payable | 8,500 | 8,500 |
Convertible debenture - related parties, net | 1,300,000 | - |
Total liabilities | 2,828,680 | 286,501 |
COMMITMENT & CONTINGENCY | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, 50,000,000 authorized par $0.001 | ||
Series B: 3,754,355 issued and outstanding at June 30, 2016 and June 30, 2015 | 3,754 | 3,754 |
Common stock, $0.001 par value; 900,000,000 shares authorized; 67,953,870 shares issued and outstanding at at June 30, 2016 and June 30, 2015 | 67,954 | 67,954 |
Additional paid-in capital | 8,325,620 | 8,325,620 |
Accumulated other comprehensive income (loss) | (29,503) | - |
Accumulated deficit | (6,431,522) | (6,349,570) |
Total Stockholders' equity | 1,936,303 | 2,047,758 |
Total liabilities and Stockholders' equity | $4,764,983 | $2,334,259 |
The accompanying notes are an integral part of these consolidated financial statements. |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES | ||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
For the Years Ended June 30 | ||
2016 | 2015 | |
Net revenue | $4,225,385 | $223,565 |
Cost of revenue | 2,746,132 | 188,325 |
Gross profit | 1,479,253 | 35,240 |
Operating expense | ||
General & administrative expense | 1,411,047 | 166,930 |
Impairment of inventory value | 48,330 | - |
Total Operating Expenses | 1,459,377 | 166,930 |
Operating Income (Loss) | 19,876 | (131,690) |
Other income (expense) | ||
Other income | 2,880 | 5,086 |
Interest expense | (8,686) | (77,611) |
Total other expense | (5,806) | (72,525) |
Income (Loss) from continuing operations before income taxes | 14,070 | (204,216) |
Provision of income taxes | (96,022) | - |
Loss from continuing operations | (81,952) | (204,216) |
Income from Discontinued Operations | ||
Gain on disposal of subsidiary | - | 109,600 |
Income from discontinued operations | - | 108,807 |
Income from Discontinued Operations | - | 218,407 |
Net Income (Loss) | $(81,952) | $14,191 |
Other Comprehensive Income (Loss) | ||
Foreign currency translation gain (loss) | (29,503) | - |
Comprehensive Income (Loss) | $(111,455) | $14,191 |
Weighted average shares of common stock | ||
Basic | 67,953,870 | 47,229,336 |
Diluted | 67,953,870 | 84,974,973 |
Net loss per common share - continuing operations | ||
Basic & Diluted | $(0.00) | $(0.00) |
Net loss per common share - Discontinued operations | ||
Basic | $- | $0.00 |
Diluted | $- | $0.00 |
Net income per common share | ||
Basic | $(0.00) | $0.00 |
Diluted | $(0.00) | $0.00 |
The accompanying notes are an integral part of these consolidated financial statements. |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||||||
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||
FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 | ||||||||||
Preferred Stock (Series A) | Preferred Stock (Series B) | Common Stock | Total | |||||||
Number of | Par | Number of | Par | Number of | Par | Additional | Accumulated | Accumulated | Concierges' | |
Shares | Value | Shares | Value | Shares | Value | Paid In Capital | OCI | Deficit | Equity (Deficit) | |
Balance at June 30, 2014 | 206,186 | $206 | 949,841 | $950 | 24,033,785 | $24,034 | $4,179,070 | $- | $(4,893,708) | $(689,448) |
Issuance of Common Stock in settlement of convertible debenture | - | - | - | - | 1,804,025 | 1,804 | 156,257 | - | 158,061 | |
Beneficial conversion feature liability on debt issuance | - | - | - | - | - | - | 67,571 | - | 67,571 | |
Gain on debt settlement with a related party | - | - | - | - | - | - | - | - | ||
Issuance of Common Stock for cash | - | - | - | - | 40,000,000 | 40,000 | 1,120,000 | - | 1,160,000 | |
Issuance of series B Preferred Stock for cash | - | - | 3,245,150 | 3,245 | - | - | 1,836,755 | - | 1,840,000 | |
Benefical conversion feature for issuance of series B Preferred Stock | - | - | - | - | - | - | 1,470,053 | (1,470,053) | - | |
Cancellation of Common Stock as consideration for disposal of subsidiary | - | - | - | - | (6,800,000) | (6,800) | (495,816) | - | (502,616) | |
Conversion of series A Preferred Stock to Common Stock | (206,186) | (206) | - | - | 103,093 | 103 | 103 | - | 0 | |
Conversion of series B Preferred Stock to Common Stock | - | - | (440,636) | (441) | 8,812,728 | 8,813 | (8,373) | - | (0) | |
Net income for the year ended June 30, 2015 | 14,191 | 14,191 | ||||||||
Balance at June 30, 2015 | - | 0 | 3,754,355 | 3,754 | 67,953,630 | 67,954 | 8,325,620 | - | (6,349,570) | 2,047,758 |
Gain (Loss) on currency translation for the year ended June 30, 2016 | (29,503) | (29,503) | ||||||||
Net loss for the year ended June 30, 2016 | (81,952) | (81,952) | ||||||||
Balance at June 30, 2016 | - | $- | 3,754,355 | $3,754 | 67,953,630 | $67,954 | $8,325,620 | $(29,503) | $(6,431,522) | $1,936,303 |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
For the years ended June 30, | ||
2016 | 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $(81,952) | $14,191 |
(Income) / Loss from discontinued operations | - | (108,807) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||
Depreciation | 226,556 | - |
Amortization | 27,658 | - |
Impairment of Inventory | 48,330 | - |
Gain on disposal of subsidiary | - | (109,600) |
Amortization of debt issuance cost | - | 67,571 |
(Increase) decrease in current assets: | ||
Accounts receivable | (32,863) | (95,417) |
Inventory | 106,393 | (85,849) |
Other current assets | (4,285) | - |
Increase (decrease) in current liabilities: | ||
Accounts payable & accrued expenses | 160,386 | 16,275 |
Net cash provided by (used in) operating activities | 450,223 | (301,636) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of equipment | (103,662) | - |
Payment of cash to subsidiary disposed as part of sale agreement | - | (353,100) |
Cash used in purchase of new subsidiaries net of cash acquired | (2,766,205) | (182,931) |
Net cash used in investing activities | (2,869,866) | (536,031) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from related party debts | 1,600,000 | - |
Repayments of related party debts | - | (29,500) |
Proceeds from notes payable & debentures | - | 43,500 |
Repayments of notes payable & debentures | - | (222,000) |
Proceeds from sale of common shares | - | 1,160,000 |
Proceeds from sale of preferred shares | - | 1,840,000 |
Net cash provided by financing activities | 1,600,000 | 2,792,000 |
Effect of currency exchange rate fluctuation on cash and cash equivalents | (90,235) | - |
NET INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS | (909,878) | 1,954,332 |
CASH & CASH EQUIVALENTS, BEGINNING BALANCE | 1,970,062 | 15,730 |
CASH & CASH EQUIVALENTS, ENDING BALANCE | $1,060,184 | $1,970,062 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Cash paid during the period for: | ||
Interest - continuing operations | $29 | $7,984 |
Interest - discontinued operations | $- | $4,103 |
Income taxes - continued operations | $14,393 | $- |
Income taxes - discontinued operations | $35,538 | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Purchase consideration payable | $214,035 | $- |
Beneficial conversion feature for issuance of Series B Preferred Stock | $- | $1,470,053 |
Cancellation of common stock in connection with disposal of subsidiary | $- | $(502,616) |
Issuance of common stock in settlement of convertible debentures & Notes & Accrued Interest | $- | $158,061 |
The accompanying notes are an integral part of these audited consolidated financial statements. |
Concierge Technologies, Inc., (the “Company” or “Concierge”), a Nevada corporation, was originally incorporated in California on August 18, 1993 as Fanfest, Inc. On March 20, 2002, the Company changed its name to Concierge Technologies, Inc. The Company’s principal operations include the purchase and sale of digital equipmentoperates through its wholly owned subsidiaries Wireless Village doingwho are engaged in varied business activities. The operations of the Company’s wholly-owned subsidiaries are more particularly described herein but are summarized as Janus Cam (untilfollows:
● | Wainwright Holdings, Inc. (“Wainwright”), a U.S. based company, is the sole member of two investment services limited liability company subsidiaries, United States Commodity Funds LLC (“USCF”), and USCF Advisers LLC (“USCF Advisers”), each of which manages, operates or is an investment advisor to exchange traded funds organized as limited partnerships or investment trusts that issue shares which trade on the NYSE Arca stock exchange. | |
● | Gourmet Foods, Ltd. (“Gourmet Foods”), a New Zealand based company, manufactures and distributes New Zealand meat pies on a commercial scale. | |
● | Brigadier Security Systems (2000) Ltd. (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems. | |
● | Kahnalytics, Inc. dba/Original Sprout (“Original Sprout”), a U.S. based company, is engaged in the wholesale distribution of hair and skin care products under the brand name Original Sprout on a global scale. The former business of Kahnalytics, providing live-streaming mobile video on a subscription basis, was insignificant and was terminated after transitioning to the current business of distributing hair and skin care products. |
See “Note 12. Business Combinations” for a description of the terms of our acquisitions for our operating businesses.
Concierge manages its disposaloperating 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 May 7, 2015), Gourmet Foods, a manufacturerits operating subsidiary businesses. Concierge’s corporate management is responsible for capital allocation decisions, investment activities and distributorselection and retention of meat piesthe 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 New Zealand, Brigadier Security Systems, a providergovernance-related issues of security alarm installation and monitoring located in Canada, and
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Company has prepared the accompanying financial statements on a consolidated basis. In the opinion of management, the accompanying consolidated financialbalance sheets and related statements of income and comprehensive income, and cash flows include the accountsall adjustments, consisting only of Concierge Technologies, Inc., and its wholly owned subsidiaries, Kahnalytics, Gourmet Foods, Ltd., Brigadier Security Systems and Wireless Village (discontinuednormal recurring items, necessary for their fair presentation, prepared on May 7, 2015). All significant intercompany accounts and transactions have been eliminated in consolidation.
Principles of Consolidation
The accompanying condensed consolidated financial statements, which are referred herein as the “Financial Statements” include the accounts of Concierge and its wholly owned subsidiaries, Wainwright, Gourmet Foods, Brigadier and Original Sprout.
All significant inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of the Financial Statements are in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statementsFinancial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
Accounts Receivable, net and Accounts Receivable - Related Parties
Accounts receivable, net, consist of receivables from the Brigadier, Gourmet Foods and Original Sprout businesses. Management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends and changes in customer payment patterns to determine whether or not an account should be deemed uncollectible. Reserves, if any, are recorded on a specific identification basis. Account balances are not covered by insurance.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, 2016,2019 and June 30, 2018, the Company had uninsured deposits$2,075 and $51,747, respectively, listed as doubtful accounts.
Accounts receivable - related to cash deposits in uninsured accounts maintained within foreign entitiesparties, consist of approximately $568,427. The Company has not experienced any losses in such accounts.
Major Customers and Suppliers – Concentration of these products were discontinued during the current fiscal year.
Concierge, through Brigadier, Security Systems, is partially dependent upon its contractual relationship with the alarm monitoring company who purchases the monitoring contracts and provides monitoring services to Brigadier’s customers. In the event this contract is terminated, Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the two largest customerscustomer, which includes contracts and recurring monthly support fees, totaled 55%46% and 41% of the total Brigadier revenues for the one-month periodyears ended June 30, 2016,2019 and June 30, 2018, respectively. The same customer accounted for approximately 38.6%37% of Brigadier's accounts receivable as of the balance sheet date of June 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 11-month period endingyear ended and balance sheet date of June 30, 2016, our2019, Gourmet Foods’ largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 14%22% of our grossGourmet Foods sales revenues and 34%28% of ourGourmet Foods accounts receivable.receivable as compared to 21% and 33% for the prior year ended June 30, 2018, respectively. The second largest in the grocery industry accounted for approximately 10% of our gross revenues and 12% of ourGourmet Foods sales revenues for the year ended June 30, 2019 as compared to 12% for the year ended June 30, 2018. This same group accounted for 19% of Gourmet Foods accounts receivable.receivable as of June 30, 2019 as compared to 16% as of June 30, 2018. In the gasoline convenience store market we supplyGourmet Foods supplies two major accounts.channels. The largest is a marketing consortium of gasoline dealers accountingoperating under the same brand who, for the year ended and balance sheet date of June 30, 2019, accounted for approximately 44%43% of ourGourmet Foods’ gross sales revenues and 24%as compared to 41% for the year ended June 30, 2018. No single member of our accounts receivable. The second largest are independent operators accountingthe consortium is responsible for approximately 13%a significant portion of gross sales and 17% ofGourmet Foods’ accounts receivable. The third category of independent retailers and cafes accounted for the remaining balance of ourGourmet Foods’ gross sales revenue, however the group is fragmentedmembers are independently owned and individually responsible for their financial obligations with no one customer accountsaccounting for a significant portion of our revenues. Gourmet Foodsrevenues or accounts receivable.
Concierge, through Original Sprout, is not dependent upon any one major suppliercustomer or group of customers 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 – related parties as of $3,600June 30, 2019 and $Nil, respectively.June 30, 2018 as depicted below.
Year ended June 30, 2019 | Year ended June 30, 2018 | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Fund | ||||||||||||||||
USO | $ | 7,308,354 | 49 | % | $ | 9,752,223 | 52 | % | ||||||||
USCI | 4,051,605 | 27 | % | 4,253,921 | 23 | % | ||||||||||
UNG | 1,922,596 | 13 | % | 2,753,723 | 15 | % | ||||||||||
All Others | 1,738,884 | 11 | % | 1,984,446 | 10 | % | ||||||||||
Total | $ | 15,021,439 | 100 | % | $ | 18,744,313 | 100 | % |
June 30, 2019 | June 30, 2018 | |||||||||||||||
Accounts Receivable | Accounts Receivable | |||||||||||||||
Fund | ||||||||||||||||
USO | $ | 526,981 | 51 | % | $ | 674,535 | 46 | % | ||||||||
USCI | 236,251 | 23 | % | 431,288 | 30 | % | ||||||||||
UNG | 141,413 | 13 | % | 182,399 | 12 | % | ||||||||||
All Others | 132,501 | 13 | % | 169,937 | 12 | % | ||||||||||
Total | $ | 1,037,146 | 100 | % | $ | 1,458,159 | 100 | % |
Inventories
Inventories, consisting primarily of food products and packaging in New Zealand, hair and skin care finished products and components in the U.S. and security system hardware in Canada, are valued at the lower of cost (determined on a FIFO basis) or market.net realizable value. Inventories include product cost, inbound freight and warehousing costs.costs where applicable. Management compares the cost of inventories with the marketnet realizable value and an allowance is made for writing down the inventories to their marketnet realizable value, if lower. DuringFor the yearyears ended June 30, 2016,2019 and 2018 impairment to inventory value was recorded as $0 and $0, respectively. An assessment is made at the Company incurred an impairment lossend of $48,330 dueeach fiscal year to valuingdetermine what slow-moving inventory at market whichitems, if any, should be deemed obsolete and written down to their estimated net realizable value. For the years ended June 30, 2019 and June 30, 2018, the expense for slow-moving or obsolete inventory was lower than cost.
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 various methodsthe straight line method over anthe estimated useful life of the asset.asset (see Note 5 to the Consolidated Financial Statements).
Category |
| Estimated Useful Life (in years) |
| |||
Plant and equipment: |
|
| 5 | to | 10 |
|
Furniture and office equipment: |
|
| 3 | to | 5 |
|
Vehicles |
|
| 3 | to | 5 |
|
Intangible Assets
Intangible assets consist of brand names, domain names, recipes, non-compete agreements and customer lists. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the discounted expected future cash flows. If the future discounted cash flows are less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.
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 reviewedtested 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, thefairthe fair value of the reporting unit is compared with its carrying value including goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. There was no impairment recorded for the years ended June 30, 2019 and 2018
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.
Investments and Fair Value of Financial Instruments
Short-term investments are classified as available-for-sale securities. The Company's financial instruments primarily consistCompany measures the investments at fair value at period end with any changes in fair value reflected as unrealized gains or (losses) which is included as part of cashother (expense) income. The Company values its investments in accordance with Accounting Standards Codification ("ASC") 820 – Fair Value Measurements and cash equivalents, accounts receivable,Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and accounts payable.
Level 1:1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such asindirectly. Level 2 assets include the following: quoted prices for similar assets or liabilities;liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active;active, inputs other than quoted prices that are observable for the asset or otherliability, and inputs that are observablederived principally from or can be corroborated by observable market data by correlation or other means (market-corroborated inputs).
Level 3 – Unobservable pricing input at the measurement date for substantially the full termasset 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 assets or liabilities.
Revenue Recognition
Revenue primarily 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 monitoringmaintenance services in Canada, and salewholesale distribution of mobile video recording deviceshair and gathering of live-streaming video recording data displayed online to subscribers in the U.S.A.skin care products. Revenue is accounted for net of sales taxes, sales returns, trade discounts. RevenueThe performance obligation is recognizedsatisfied 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 itproduct 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.
Recently Adopted Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that set forth a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company measures stock-based compensation cost atadopted this new standard and its related amendments as of July 1, 2018 using the grant datemodified retrospective transition method, whereby the cumulative effect of initially applying the new standard recognized as an adjustment to the opening balance of stockholders equity. Results for reporting periods commencing on or after July 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for that prior period. The impact of adoption did not have a material effect on our financial results. The adoption of the new standard impacted the identification of separate obligations for certain sales of security systems and related monitoring sales. The Company generates revenue, in part, through contractual monthly recurring fees received for providing ongoing customer support services to monitoring company clientele. The five-step process governing contract revenue reporting includes:
1. Identifying the contract(s) with customers
2. Identifying the performance obligations in the contract
3. Determining the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when or as the performance obligation is satisfied
Transactions involve security systems that are sold outright to the customer where the Company's performance obligations include customer support services and the sale and installation of the security systems. For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on a relative stand-alone selling price. Revenue associated with the fair valuesale and installation of security systems is recognized once installation is complete, and is reflected as security system revenue in the Consolidated Statements of Operations. Revenue associated with customer support services is recognized as those services are provided, and is included as a component of security system revenue in the Consolidated Statements of Operations, which for the year ended June 30, 2019, were approximately US$352,249, or approximately 10% of the award and recognize it as expense overtotal security system revenues. These revenues for the applicable vesting periodyear ended June 30, 2019 account for approximately 1% of total consolidated revenues. None of the stock award usingother subsidiaries of the straight-line method.
Because the Company has no contract with the end user, and the monthly payments for customer support services are made to the Company by the monitoring company who has a contract with the end user, and end user customers are subject to cancellation through no control of the Company; therefore, no deferred revenues or contingent liability reserves have been established with respect to these contracts. The services are deemed delivered as the obligation is acknowledged on a monthly basis.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits or if future deductibility is uncertain.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.
The Company expenses the cost of advertising as incurred. AdvertisingMarketing and advertising costs for the years ended June 30, 20162019 and 20152018 were negligible.
Other Comprehensive Income (Loss) and
Foreign Currency Translation
We record foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, ASC 830-30, Foreign Currency Translation.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 weighted average exchange rate throughout the period. Foreign currency transaction gains and (losses) can also occur if a transaction is settled in a currency other than the entity's functional currency. Accumulated currency translation lossgains and (losses) are classified as an item of accumulated other comprehensive lossincome (loss) in the stockholders’ equity section of the consolidated balance sheet was $29,503 as of June 30, 2016.
Short-Term Investment Valuation
In January 2016, the local currencies. As a result, amountsFASB issued authoritative guidance related to assetsthe accounting for equity investments, financial liabilities under the fair value option, and liabilities reported on the statement of cash flowspresentation and disclosure requirements for financial instruments. Under the new guidance, equity investments with readily determinable fair values, except those accounted for under the equity method, will not necessarily agreebe measured at fair value with changes in fair value recognized in earnings rather than other comprehensive income (loss). In addition, this update clarifies the corresponding balancesguidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from the unrealized losses on certain debt securities. The Company adopted this guidance effective on July 1, 2018. See Recent Accounting Pronouncements below related to July 1, 2018 reclassification of accumulated other comprehensive income to retained earnings. Besides this reclassification there was no material impact to Consolidated Financial Statements as a result of the consolidated balance sheet.
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 (see(Refer to Note 20)16 of the Consolidated Financial Statements).
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, withassumed. For the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequentyears ended June 30, 2019 and 2018 a determination was made that no adjustments are recorded to earnings.
Recent Accounting Pronouncements
On July 1, 2018 the Company adopted ASU 2016-01 Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities and Accounting Standards Update (“ASU”Codification ("ASC") 2014-09,606 - Revenue from Contracts with Customers which provides a single("ASC 606"). A summary of the effects of the initial adoption of ASU 2016-01 and ASC 606 follows:
ASU 2016-01 | ASC 606 | Total | ||||||||||
Increase (decrease): | ||||||||||||
Assets | $ | - | $ | - | $ | - | ||||||
Liabilities | $ | - | $ | - | $ | - | ||||||
Accumulated other comprehensive income | $ | (279,951 | ) | $ | - | $ | (279,951 | ) | ||||
Retained earnings | $ | 279,951 | $ | - | $ | 279,951 |
The above (“ASU 2016-01”) entry reclasses accumulated gains from changes in short-term investment valuations previously recorded in comprehensive model for entitiesincome to use in accounting for revenueretained earnings. ASU 2016-01 requires that unrealized gains and losses arising from contracts with customerschanges in market values of our investments in equity securities be recorded in the condensed consolidated statements of operations rather than in accumulated other comprehensive income (loss) on the balance sheet. Prior to July 1, 2018 investment gains and will supersede most current revenue recognition guidance. losses related to equity securities were reflected on the condensed consolidated statements of comprehensive income.
The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflectsCompany has reviewed new accounting pronouncements issued between September 28, 2018, the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effectivefiling date of our most recent prior Annual Report on Form 10-K, and the filing date of this Annual Report on Form 10-K, and has determined that no new revenue standard by one year, which will make it effective forpronouncements, apart from Topic 842 described below, issued are relevant to the Company, in the first quarter of its fiscal year ending June 30, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on its consolidated financial statements.
On July 1, 2019, the Company adopted FASB ASU 2016-02, Leases (Topic 842), which supersedes the requirements in Topic 840, Leases. The objective of Topic 842 is to establish the first quarterprinciples that lessees and lessors shall apply to report useful information to users of fiscal 2017. Earlyfinancial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption is permitted and allowsdate; however, based on the Company to apply the amendment prospectively or retrospectively. The adoptioncurrent level of long term leases in place, this guidance is not expectedmaterial to have a material impact on the Company’s consolidated financial statements.
NOTE 3. BASIC AND DILUTED NET LOSS PER SHARES
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 for the year ended June 30, 2015 reflectedreflects the effects of shares actually potentially issuable upon conversion of convertible preferred stock.
The components of basic and diluted earnings per share were as follows:
For the year ended June 30, 2019 | ||||||||||||
Net Income | Shares | Per Share | ||||||||||
Basic income per share: | ||||||||||||
Net income available to common shareholders | $ | 261,849 | 32,588,418 | $ | 0.01 | |||||||
Effect of dilutive securities | - | - | - | |||||||||
Preferred stock Series B | - | 5,709,741 | - | |||||||||
Diluted income per share | $ | 261,849 | 38,298,159 | $ | 0.01 |
For the year ended June 30, 2018 | ||||||||||||
Net Income | Shares | Per Share | ||||||||||
Basic income per share: | ||||||||||||
Net income available to common shareholders | $ | 1,734,686 | 29,559,139 | $ | 0.06 | |||||||
Effect of dilutive securities | - | - | - | |||||||||
Preferred stock Series B | - | 8,739,020 | - | |||||||||
Diluted income per share | $ | 1,734,686 | 38,298,159 | $ | 0.05 |
For the year ended June 30, 2016 | |||
Net Loss | Shares | Per Share | |
Basic loss per share: | |||
Net loss available to common shareholders | $(81,952) | 67,953,870 | $(0.00) |
Effect of dilutive securities | |||
Preferred stock Series B | - | ||
Convertible Debt | - | ||
Diluted loss per share | $(81,952) | 67,953,870 | $(0.00) |
For the year ended June 30, 2015 | |||
Net Income | Shares | Per Share | |
Basic income per share: | |||
Net income available to common shareholders | $14,191 | 47,229,336 | $0.00 |
Effect of dilutive securities | |||
Preferred stock Series B | 37,745,637 | ||
Convertible Debt | - | ||
Diluted income per share | $14,191 | 84,974,973 | $0.00 |
NOTE 4. GOING CONCERN
Inventories for customers within the areas of interest for its Canadian and New Zealand held subsidiaries.
June 30, | June 30, | |||||||
2019 | 2018 | |||||||
Raw materials | $ | 208,284 | $ | 195,674 | ||||
Supplies and packing materials | 188,035 | 142,257 | ||||||
Finished goods | 612,343 | 593,134 | ||||||
Total inventories | $ | 1,008,662 | $ | 931,065 |
June 30, | June 30, | |
2016 | 2015 | |
Raw materials | $50,023 | $- |
Supplies and packing materials | 77,497 | - |
Finished goods | 357,351 | 85,849 |
484,871 | 85,849 | |
Less : Impairment of Finished Goods | (48,330) | - |
Total | $436,541 | $85,849 |
NOTE 6. PROPERY5. PROPERTY AND EQUIPMENT
Property, Plantplant and Equipmentequipment consisted of the following as of June 30, 20162019 and 2015.2018:
June 30, 2019 | June 30, 2018 | |||||||
Plant and equipment | $ | 1,511,629 | $ | 1,487,568 | ||||
Furniture and office equipment | 188,370 | 171,978 | ||||||
Vehicles | 332,672 | 351,381 | ||||||
Total property and equipment, gross | 2,032,671 | 2,010,927 | ||||||
Accumulated depreciation | (1,275,657 | ) | (930,456 | ) | ||||
Total property and equipment, net | $ | 757,014 | $ | 1,080,471 |
June 30, 2016 | June 30, 2015 | |
Plant and Equipment | $1,477,411 | $- |
Furniture & Office Equipment | 119,123 | 12,910 |
Vehicles | 58,850 | - |
Total Property and Equipment, Gross | 1,655,384 | 12,910 |
Accumulated Depreciation | (488,691) | (12,910) |
Total Property and Equipment, Net | $1,166,693 | $- |
For the years ended June 30, 20162019 and 2015,2018, depreciation expense for property, plant and equipment totaled $226,556$366,812 and $0,$342,628, respectively.
NOTE 7.6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
June 30, 2019 | June 30, 2018 | |||||||
Customer relationships | $ | 700,252 | $ | 700,252 | ||||
Brand name | 1,142,122 | 1,142,122 | ||||||
Domain name | 36,913 | 36,913 | ||||||
Recipes | 1,221,601 | 1,221,601 | ||||||
Non-compete agreement | 274,982 | 274,982 | ||||||
Total | 3,375,870 | 3,375,870 | ||||||
Less : accumulated amortization | (716,147 | ) | (380,639 | ) | ||||
Net intangibles | $ | 2,659,723 | $ | 2,995,231 |
June 30, | June 30, | |
2016 | 2015 | |
Brand name | $402,123 | $- |
Domain name | 36,913 | - |
Customer relationships | 500,252 | - |
Non-compete agreement | 84,982 | - |
Recipes | 21,601 | - |
Total | 1,045,871 | - |
Less : Accumulated Amortization | (27,658) | - |
Net Intangibles | $1,018,213 | $- |
CUSTOMER RELATIONSHIP
On August 11, 2105,2015, the Company acquired Gourmet Foods, Ltd.Foods. The fair value on the acquired customer relationships was estimated to be $66,153 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired customer relationships was estimated to be $434,098$434,099 and is amortized over the remaining useful life of 10 years. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired customer relationships was determined to be $200,000 and is amortized over the remaining useful life of 7 years.
June 30, 2019 | June 30, 2018 | |||||||
Customer relationships | $ | 700,252 | 700,252 | |||||
Less: accumulated amortization | (203,492 | ) | (124,895 | ) | ||||
Total customer relationships, net | $ | 496,760 | 575,357 |
BRAND NAME
On August 11, 2105,2015, the Company acquired Gourmet Foods, Ltd.Foods. The fair value on the acquired brand name was estimated to be $61,429 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired brand name was estimated to be $340,694 and is amortized over the remaining useful life of 10 years. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired brand name was determined to be $740,000 and is considered to have an indefinite life. Unlike the brand names Gourmet Foods and Brigadier Security Systems, Original Sprout is an actual product name and recognized associated brand that is identifiable to consumers of the product and is the basis of the value proposition. That brand name will forever be associated with the product offering unless and until such time in the future as the Company may elect to discontinue the use of the brand and move towards establishment of an alternative product offering. Therefore, the Company will test for impairment of the brand name "Original Sprout" at each reporting interval with no amortization recognized.
June 30, 2019 | June 30, 2018 | |||||||
Brand name | $ | 1,142,122 | $ | 1,142,122 | ||||
Less: accumulated amortization | (129,084 | ) | (88,872 | ) | ||||
Total brand name, net | $ | 1,013,038 | $ | 1,053,250 |
DOMAIN NAME
On August 11, 2105,2015, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired domain name was estimated to be $21,601 and is amortized over the remaining useful life of 5 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired domain name was estimated to be $15,312 and is amortized over the remaining useful life of 5 years.
June 30, 2019 | June 30, 2018 | |||||||
Domain name | $ | 36,913 | $ | 36,913 | ||||
Less: accumulated amortization | (26,341 | ) | (18,958 | ) | ||||
Total brand name, net | $ | 10,572 | $ | 17,955 |
RECIPES
On August 11, 2105,2015, the Company acquired Gourmet Foods, Ltd.Foods. The fair value on the recipes was estimated to be $21,601 and is amortized over the remaining useful life of 5 years. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired recipes and formulas was determined to be $1,200,000 and is amortized over the remaining useful life of 8 years.
June 30, 2019 | June 30, 2018 | |||||||
Recipes and formulas | $ | 1,221,601 | $ | 1,221,601 | ||||
Less: accumulated amortization | (246,622 | ) | (92,303 | ) | ||||
Total recipes and formulas, net | $ | 974,979 | $ | 1,129,298 |
June 30, | June 30, | |
2016 | 2015 | |
Recipes | $21,601 | $- |
Less: accumulated amortization | 3,937 | - |
Total Recipes, net | $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 $104,122$84,982 and is amortized over the remaining useful life of 5 years. On December 18, 2017 the Company’s wholly-owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired non-compete agreement was determined to be $190,000 and is amortized over the remaining useful life of 5 years.
June 30, 2019 | June 30, 2018 | |||||||
Non-compete agreement | $ | 274,982 | $ | 274,982 | ||||
Less: accumulated amortization | (110,608 | ) | (55,612 | ) | ||||
Total non-compete agreement, net | $ | 164,374 | $ | 219,370 |
AMORTIZATION EXPENSE
The total amortization expense for intangible assets for the years ended June 30, 2019 and June 30, 2018 was $335,508 and $234,046, respectively.
Estimated amortization expenses of intangible assets for the next five twelve monthstwelve-month periods endedending June 30, are as follows:
Years Ending June 30, | Expense | |||
2020 | $ | 335,508 | ||
2021 | 326,034 | |||
2022 | 306,809 | |||
2023 | 286,507 | |||
2024 | 268,809 | |||
Thereafter | 1,136,056 | |||
Total | $ | 2,659,723 |
NOTE 7. OTHER ASSETS
Other Current Assets
Other current assets totaling $546,105 as of June 30, 2019 and $374,617 as of June 30, 2018 are comprised of various components as listed below.
As of June 30, 2019 | As of June 30, 2018 | |||||||
Prepaid expenses | $ | 462,215 | $ | 358,869 | ||||
Other current assets | 83,890 | 15,748 | ||||||
Total | $ | 546,105 | $ | 374,617 |
Investments
Wainwright, from time to time, provides initial investments in the creation of ETP funds that Wainwright manages. Wainwright classifies these investments as current assets as these investments are generally sold within one year from the balance sheet date. Investments in which no controlling financial interest or significant influence exists are recorded at fair value included in comprehensive income (loss) through June 30, 2018 and subsequently through earnings in accordance with ASU 2016-01. As ofJune 30, 2019 and June 30, 2018, investments were approximately $3.8 million and $3.2 million, respectively. Investments in which no controlling financial interest exists, but significant influence exists are recorded as per the equity method of investment accounting. As of June 30, 2019 and June 30, 2018, there were no investments requiring the equity method investment accounting.
Investments measured at estimated fair value consist of the following as of June 30, 2019 and June 30, 2018:
As of June 30, 2019 | ||||||||||||||||
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Money market funds | $ | 3,005,182 | $ | - | $ | - | $ | 3,005,182 | ||||||||
Other short term investments | 749,988 | - | (739 | ) | 749,249 | |||||||||||
Other equities | 3,421 | - | (1,256 | ) | 2,165 | |||||||||||
Total short-term investments | $ | 3,758,591 | $ | - | $ | (1,995 | ) | $ | 3,756,596 |
As of June 30, 2018 | ||||||||||||||||
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Money market funds | $ | 180,138 | $ | - | $ | - | $ | 180,138 | ||||||||
USCI mutual fund investment | 2,500,000 | 280,480 | - | 2,780,480 | ||||||||||||
Hedged asset | 523,100 | - | (280,761 | ) | 242,339 | |||||||||||
Other equities | 1,577 | - | (529 | ) | 1,048 | |||||||||||
Total short-term investments | $ | 3,204,815 | $ | 280,480 | $ | (281,290 | ) | $ | 3,204,005 |
The following tables summarize the valuation of the Company’s securities at June 30, 2019 and June 30, 2018 using the fair value hierarchy:
Years Ending June 30, | Expense |
2017 | $118,937 |
2018 | $118,937 |
2019 | $118,937 |
2020 | $118,937 |
2021 | $109,385 |
As of June 30, 2019 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Money market funds | $ | 3,005,182 | $ | 3,005,182 | $ | - | $ | - | ||||||||
Other short term investments | 749,249 | 749,249 | - | - | ||||||||||||
Other equities | 2,165 | 2,165 | - | - | ||||||||||||
Total | $ | 3,756,596 | $ | 3,756,596 | $ | - | $ | - |
As of June 30, 2018 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Money market funds | $ | 180,138 | $ | 180,138 | $ | - | $ | - | ||||||||
Mutual fund investment | 2,780,480 | 2,780,480 | - | - | ||||||||||||
Hedge asset | 242,339 | - | 242,339 | - | ||||||||||||
Other equities | 1,048 | 1,048 | - | - | ||||||||||||
Total | $ | 3,204,005 | $ | 2,961,666 | $ | 242,339 | $ | - |
During the years ended June 30, 2019 and 2018, there were no transfers between Level 1 and Level 2.
Restricted Cash
At June 30, 2019 and 2018, Gourmet Foods had on deposit approximately NZ$20,000 (approximately US$13,437 and US$13,536, respectively after currency translation) securing a lease bond for one of its properties. The cash securing the bond is restricted from access or withdrawal so long as the bond remains in place.
Long - Term Assets
Other long term assets totaling $523,607 and $532,165 at June 30, 2019 and June 30, 2018, respectively, were attributed to Wainwright and Original Sprout and consisted of
(i) | $500,000 as of June 30, 2019 and June 30, 2018 representing 10% equity investment in a registered investment adviser accounted for on a cost basis, | |
(ii) | and $23,607 as of June 30, 2019 and $32,165 at June 30, 2018 representing deposits and prepayments of rent. |
NOTE 8. GOODWILL
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations. The amounts recorded in goodwill for June 30, 2019 and 2018 were $915,790 and $915,790, respectively.
Goodwill is comprised of the following amounts:
As of June 30, 2019 | As of June 30, 2018 | |||||||
Goodwill – Original Sprout | $ | 416,817 | $ | 416,817 | ||||
Goodwill – Gourmet Foods | 147,628 | 147,628 | ||||||
Goodwill - Brigadier | 351,345 | 351,345 | ||||||
Total | $ | 915,790 | $ | 915,790 |
As of June 30, | As of June 30, | |
2016 | 2015 | |
Trained workforce – Gourmet Foods | $51,978 | $- |
Trained workforce - Brigadier | 75,795 | - |
Goodwill – Gourmet Foods | 45,669 | - |
Goodwill - Brigadier | 45,814 | - |
$219,256 | $- |
The Company tests for goodwill impairment at each reporting unit. There was no goodwill impairment for the year ended June 30, 2016.2019 or June 30, 2018.
NOTE 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
June 30, 2019 | June 30, 2018 | |||||||
Accounts payable | $ | 1,720,902 | $ | 1,935,645 | ||||
Accrued interest | 117,555 | 56,689 | ||||||
Taxes payable | 181,563 | 3,938 | ||||||
Deferred rent | 37,076 | 3,681 | ||||||
Accrued payroll, vacation and bonus payable | 345,520 | 299,630 | ||||||
Accrued expenses | 464,465 | 949,804 | ||||||
Total | $ | 2,867,081 | $ | 3,249,387 |
June 30, 2016 | June 30, 2015 | |
Accounts payable | $288,170 | $108,860 |
Accrued judgment | 135,000 | 135,000 |
Accrued interest | 13,918 | 781 |
Taxes Payable | 167,683 | - |
Accrued Payroll and Vacation Pay | 127,271 | - |
Accrued Expenses | 265,502 | 24,860 |
Total | $997,644 | $269,501 |
NOTE 10. NOTES PAYABLE - RELATED PARTY
Notes Payable - Related Parties
Current related party notes payable consist of the following:
June 30, 2019 | June 30, 2018 | |||||||
Notes payable to shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due) | $ | 3,500 | $ | 3,500 | ||||
Notes payable to shareholder, interest rate of 4%, unsecured and payable on May 25, 2022 | 250,000 | 250,000 | ||||||
Notes payable to shareholder, interest rate of 4%, unsecured and payable on April 8, 2022 | 350,000 | 350,000 | ||||||
$ | 603,500 | $ | 603,500 |
June 30, 2016 | June 30, 2015 | |
Notes payable to shareholder, interest rate of 10%, unsecured and payable on July 31, 2004 (past due) | $5,000 | $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 affiliate of director/shareholder, interest rate of 4%, unsecured and payable on June 30, 2017 | 300,000 | - |
$308,500 | $8,500 |
Interest expense for all related party notes for the years ended June 30, 2019 and 2018 was $24,280 and $24,280, respectively.
Wainwright - Related Party Transactions
The Funds managed by USCF and USCF Advisers are deemed by management to be related parties. The Company’s Wainwright revenues, totaling $15.0 million and $18.7 million for the years ended June 30, 2019 and 2018, respectively, were earned from these related parties. Accounts receivable, totaling $1.0 million and $1.5 million as of June 30, 2019 and June 30, 2018, respectively, were owed from these related parties. Fund expense waivers, totaling $0.3 million and $0.7 million and fund expense limitation amounts, totaling $0.2 million and $0.5 million, for the years ended June 30, 2019 and 2018, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $0.3 million and $0.7 million as of June 30, 2019 and June 30, 2018, respectively, were owed to these related parties. Fund expense waivers and fund expense limitation obligations are defined under Note 15 to the Consolidated Financial Statements.
NOTE 11. EQUIPMENT LOANS
As of June 30, 2019, Brigadier had, in the aggregate, an outstanding principal balance of CD$114,292 (approx. US$87,297) related to new vehicle purchases. For each vehicle purchased, the loan principal together with interest is amortized over 60 equal monthly installments. The Consolidated Balance Sheets as of June 30, 2019 and June 30, 2018 reflect the amount of the principal balance which is due within twelve months as a current liability of US$26,241 and $46,705, respectively. Principal amounts under the loans which is due after twelve months are recorded in long term liabilities as US$61,057 and $149,491 for the years ended June 30, 2019 and 2018 respectively. Interest on the loans is expensed or accrued as it becomes due. Total interest on all vehicle loans for the year ended June 30, 2016 amounted to $7822019 was US$5,197 and was $781$12,662 for the year ended June 30, 2018.
NOTE 12. BUSINESS COMBINATION
Acquisition of the assets of The Original Sprout, LLC
Kahnalytics, Inc., a wholly owned subsidiary of Concierge Technologies domiciled in California, was founded during May 2015 for the purpose of carrying on the residual business from the disposal of Concierge Technologies.
Item | Amount | |||
Inventory | $ | 371,866 | ||
Accounts receivable | 288,804 | |||
Furniture, fixtures and equipment | 1,734 | |||
Pre-payments of inventory | 8,775 | |||
Discount on installment payments** | 64,176 | |||
Intangible assets* | 2,330,000 | |||
Goodwill | 416,817 | |||
Total Purchase Price | $ | 3,482,172 |
*See Note 6 for further detail of intangible assets acquired.
**This amount of $50,000, the proceeds of which were used to pay down inventory purchase costs. Interestrepresents a discount on the Note accrued at the rate of 10% per annuminstallment payments and was payable in monthly installments with a maturitycharged to interest expense.
On the closing date of February 19, 2014 payable by Wireless Village. On February 19, 2014 the unaffiliated individual agreedtransaction, December 18, 2017, Kahnalytics paid $982,172 in cash towards the purchase price and deposited an additional $1,250,000 in an attorney-held client trust account which was released to extend the maturity datesellers, after downward adjustments due to June 1, 2014 andchanges in acquired accounts receivable, on May 18, 2018. The balance of the Company agreed to pay a loan commitment fee of 1.5%, or $750. By agreement, that fee was paid by the issuance of 53,571 shares of common stock with a market value on the date of issuance of $0.014 per share. The note was subsequently extended to mature on January 5,2015, and then again to mature on February 27, 2015 provided Concierge Technologies guaranteed the repayment on behalf of Wireless Village. A fee in the amount of 1%, or $500,purchase price, after consideration for monthly installment payments, was paid in cash to the noteholder by Wireless Village in exchange for the agreement to extend the maturity date. On February 13, 2015 the note was repaid in full by Concierge Technologies.
Supplemental Pro Forma Information (Unaudited)
The note and accrued interest was due and payable on or before June 30, 2015. The proceeds of the loan were reserved in anticipation of the need to pay a convertible debenture maturing in January 2015. On January 26, 2015 the noteholder became an investor and shareholder of the Company and the amount of $35,000 due under the note agreement was repaid as a credit to the amount of funds due per the stock subscription agreement. No interest was accrued or paid on the note.
Year Ended | ||||
June 30, 2018 | ||||
Pro Forma(1) | ||||
Net Revenues | $ | 30,782,940 | ||
Net Income | $ | 2,044,203 | ||
Basic Earnings per Share | $ | 0.07 | ||
Diluted Earnings per Share | $ | 0.05 |
(1) | Includes the operation of the assets acquired from Original Sprout LLC on a consolidated basis and the estimated transaction costs, amortization of intangible assets, and estimated income tax. |
NOTE 14.13. STOCKHOLDERS' EQUITY TRANSACTIONS
Reverse Stock Split
On November 11, 2015,17, 2017, the Board of Directors (the “Board’) of the Company approved the implementation of a one-for-tenone-for-thirty (1:10)30) reverse stock split of all of the Company’s issued and outstanding common and preferred stock (the “Reverse Stock Split”). The Reverse Stock Split became effective when trading opened on December 15, 2015.2017. The Reverse Stock Split was previously approved by the Company’s shareholders pursuant to a majority written consent and by the Board pursuant to unanimous written consent on February 26, 2015.13, 2017. The approvals provided discretion to the Board to implement the Reverse Stock Split by the end of 2015. 2017. The number of the Company’s authorized shares of common stock did not change. All figures have been presented on the basis of reverse split where ever applicable for all the periods presented in these financial statements.
Convertible Preferred Stock
Each issued Series B Voting, Convertible Preferred Stock is convertible into 20 shares of common stock and carries a vote of 20 shares of common stock in all matters brought before the shareholders for a vote. On February 7, 2019, the Company converted 383,919 shares of Series B Voting, Convertible Preferred Stock to 7,678,380 shares of common stock per the request of the shareholder and pursuant to the stock designation. After the conversion, there remain 53,032 shares of Series B Voting, Convertible Preferred Stock outstanding as of June 30, 2019.
Accumulated Other Comprehensive Income
The following table presents activity for the years ending June 30, 2019 and June 30, 2018:
Balance as of June 30, 2017 | $ | 119,338 | ||
Change in short-term investment valuation before reclassification to earnings | 329,629 | |||
Foreign currency translation (loss) | (214,284 | ) | ||
Change in short-term investment valuation due to reclassification to earnings | (85,875 | ) | ||
Balance as of June 30, 2018 | 148,808 | |||
Foreign currency translation (loss) | (44,516 | ) | ||
Change in short-term investment valuation due to reclassification to earnings | (279,951 | ) | ||
Balance as of June 30, 2019 | $ | (175,659 | ) |
NOTE 15.14. INCOME TAXES
The following table summarizes income before income taxestaxes:
Years Ended June 30, | ||||||||
2019 | 2018 | |||||||
U.S. | $ | 414,961 | $ | 2,276,390 | ||||
Foreign | 193,902 | 224,892 | ||||||
Income before income taxes | $ | 608,863 | $ | 2,501,282 |
Years Ended June 30, | ||
2016 | 2015 | |
US | $(324,936) | $14,191 |
Canada | 43,646 | - |
New Zealand | 295,359 | - |
Income before income taxes | $14,070 | $14,191 |
Income Tax Provision
Provision for income tax as listed on the Consolidated Statements of Operations for the years ended June 30, 20162019 and 20152018 are $95,222$347,014 and $Nil,$766,596, respectively.
Provision for taxes consisted of the following:
Years Ended June 30, | ||||||||
2019 | 2018 | |||||||
U.S. operations | $ | 183,025 | $ | 658,293 | ||||
Foreign operations | 163,989 | 108,303 | ||||||
Total | $ | 347,014 | $ | 766,596 |
Years Ended June 30, | ||
2016 | 2015 | |
US operations | $800 | $- |
Foreign operations | 95,222 | - |
$96,022 | $- |
Provisions for income tax consisted of the following as of the years ended:
For the year ended: | June 30, 2019 | June 30, 2018 | ||||||
Current: | ||||||||
Federal | $ | 149,239 | $ | 572,227 | ||||
States | 36,183 | (510,765 | ) | |||||
Foreign | 188,009 | 140,142 | ||||||
Total current | 373,431 | 201,604 | ||||||
Deferred: | ||||||||
Federal | (10,572 | ) | 502,364 | |||||
States | 8,175 | 94,467 | ||||||
Foreign | (24,020 | ) | (31,839 | ) | ||||
Total deferred | (26,417 | ) | 564,992 | |||||
Total | $ | 347,014 | $ | 766,596 |
Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets for the years ended June 30, 2019 and 2018 are presented below:
For the year ended: | June 30, 2019 | June 30, 2018 | ||||||
Deferred tax assets: | ||||||||
Property and equipment and intangible assets - U.S. | $ | 619,483 | $ | 745,420 | ||||
Net operating loss | 3,299 | 3,646 | ||||||
Capital loss carryover | 167 | 10,337 | ||||||
Accruals, reserves and other - foreign | 5,674 | 13,494 | ||||||
Accruals, reserves and other - U.S. | 233,646 | 104,607 | ||||||
Gross deferred tax assets | 862,269 | 877,504 | ||||||
Less valuation allowance | (2,573 | ) | (12,384 | ) | ||||
Total deferred tax assets | $ | 859,696 | $ | 865,120 | ||||
Deferred tax liabilities: | ||||||||
Intangible assets - foreign | $ | (176,578 | ) | $ | (208,419 | ) | ||
Total deferred tax liabilities | $ | (176,578 | ) | $ | (208,419 | ) |
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses; the nature of the Company’s deferred tax assets and liabilities
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect our business, such as imposing a one-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax asset balancerate, and adopting a territorial tax system. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of June 30, 2016 is approximately $2,113,296. A 100% valuation allowance has been established against2018. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the utilizationnet realizability of the loss carry forward cannot be reasonably assured.
The TCJA reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. As a result, net deferred tax assets were re-measured, which resulted in a reduction of our deferred tax assets by approximately $504,905 for the tax year ended June 30, 2018.
Furthermore, the TCJA includes a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries. The GILTI is broadly the excess income of foreign subsidiaries over a 10% rate of routine return on tangible business assets. The US taxable GILTI amount is subject to a 50% GILTI deduction allowance, with the new US federal corporate tax of 21%, the effective US tax rate on GILTI is 10.5%. The GILTI is effective for taxable years of foreign corporation beginning after December 31, 2017. Due to the Company's net operating loss carryforwards,aggregated positive E&P of the foreign subsidiaries there is GILTI inclusion for 2018.
Income tax expense (benefit) for the years ended June 30, 2019 and are presented as follows at June 30:
2016 | 2015 | |
Deferred tax assets: | ||
US | $2,113,296 | $2,003,217 |
Canada | ||
Cumulative eligible capital | 8,449 | - |
Property, plant & equipment | (1,856) | - |
Deferred tax liability | (2,357) | - |
New Zealand | - | |
Inventory | (4,048) | - |
Accrued expenses | 23,549 | - |
Total Deferred Tax Assets | 2,137,033 | 2,003,217 |
Valuation allowance, US | (2,113,296) | (2,003,217) |
Net deferred tax assets | $23,737 | $- |
For the year ended: | June 30, 2019 | June 30, 2018 | ||||||
Federal tax expense (benefit) at statutory rate | $ | 127,861 | $ | 687,853 | ||||
State income taxes | 36,760 | (437,242 | ) | |||||
Permanent differences | 112,814 | (46,251 | ) | |||||
Deferred tax impact of the Tax Act | - | 504,905 | ||||||
U.S. toll charge (net of FTC) | - | 1,112 | ||||||
Foreign tax credit | (43,930 | ) | ||||||
Change in valuation allowance | (9,761 | ) | 9,761 | |||||
Foreign rate differential | 123,270 | 46,458 | ||||||
Total tax expense | $ | 347,014 | $ | 766,596 |
For the year ended: | June 30, 2019 | June 30, 2018 | ||||||
% | % | |||||||
Federal tax expense (benefit) at statutory rate | 21.00 | % | 27.50 | % | ||||
State income taxes | 6.04 | % | (17.48 | %) | ||||
Permanent differences | 18.52 | % | (1.85 | %) | ||||
Deferred tax impact of the Tax Act | - | 20.19 | % | |||||
Foreign rate differential | 20.25 | % | 1.86 | % | ||||
U.S. toll charge (net of FTC) | - | 0.04 | % | |||||
Foreign tax credit | (7.22 | %) | - | |||||
Change in valuation allowance | (1.60 | %) | 0.39 | % | ||||
Total tax expense | 56.99 | % | 30.65 | % |
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as followsthe largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which includes interest and penalties, for the years ended June 30:30, 2019 and 2018 are as follows:
Balance at June 30, 2018 | $ | 264,543 | ||
Additions based on tax positions taken during a prior period | 12,597 | |||
Reductions based on tax positions taken during a prior period | - | |||
Additions based on tax positions taken during the current period | - | |||
Reductions based on tax positions taken during the current period | - | |||
Reductions related to settlement of tax matters | - | |||
Reductions related to a lapse of applicable statute of limitations | - | |||
Balance at June 30, 2019 | $ | 277,140 |
2016 | 2015 | |||
Amount | Rate | Amount | Rate | |
Tax expense (benefit) at federal statutory rate | $(96,803) | -35.0% | $28,617 | -35.0% |
State taxes, net of federal benefit | (13,276) | -4.8% | 7,228 | .-8.8% |
Beneficial conversion expense | - | (27,028) | 8.4% | |
Minimum franchise tax | 800 | 0.3% | - | 0.0% |
Change in valuation allowance | 110,076 | 39.8% | (8,816) | 35.4% |
Foreign earnings taxed at different rates | 97,857 | 28.9% | - | - |
Other adjustments – foreign | (2,635) | -0.9% | - | - |
Foreign tax at effective tax rate | $96,022 | 28.4% | $- | 0.0% |
The Company recordsfiles income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and foreign income tax returns are subject to tax examinations for the tax years 2015 through 2018 as of year ended June 30, 2019. To the extent the Company has tax attribute carry forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the U.S. Internal Revenue Service, state or foreign tax authorities to the extent utilized in a liability for uncertainfuture period. There were no ongoing examinations by taxing authorities as of June 30, 2019.
The Company had $251,946 of unrecognized tax positions when it is probablebenefits as of June 30, 2019 and $251,946 as of June 30, 2018 that if recognized would affect the effective tax rate. The Company does not anticipate a loss has been incurred andsignificant change to its unrecognized tax benefits in the amount can be reasonably estimated. year ending June 30, 2019.
The Company recognizes interest accruedand penalties related to unrecognizeduncertain tax benefitspositions in interest expense and penalties in operating expenses.
NOTE 19.15. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases various facilities and offices throughout the world including the following subsidiary locations:
Gourmet Foods. Ltd. (“GFL”)Foods has operating leases for its office, factory and warehouse facilities located in Tauranga, New Zealand, as well as for certain equipment including vehicles. These leases are generally for three-year terms, with options to renew for additional three-year periods. The leases mature between September 20162019 and August 2021,September 2022, and require monthly rental payments of approximately US$11,225 per month11,561 translated to USU.S. currency as of June 30, 2016.
Brigadier leases office and storage facilities as well as certain office equipment in Saskatoon and Regina, Saskatchewan. As of June 30, 2019, the Company had entered into an agreement to purchase its leased facility in Saskatoon effective July 1, 2019 (see Note 17-Subsequent Events). The minimum lease obligations for the Regina facility and office equipment require monthly payments of approximately US$2,725 translated to U.S. currency as of June 30, 2019.
Original Sprout currently leases office and warehouse space in San Clemente, CA under a three-year lease agreement expiring or renewing at March 1, 2021. Minimum monthly lease payments are approximately $7,837 with increases annually.
Wainwright leases office space in Walnut Creek, California under an operating lease which expires in December 2024. Minimum monthly lease payments are approximately $12,000 with increases annually.
For the years ended June 30, 2019 and 2018, the combined lease payments of the Company and its subsidiaries totaled $413,429 and $254,150, respectively.
Future minimum consolidated lease payments for Gourmet FoodsConcierge and its subsidiaries are as follows:
Year Ended June 30, | Lease Amount | |||
2020 | $ | 412,025 | ||
2021 | 384,248 | |||
2022 | 243,412 | |||
2023 | 206,502 | |||
2024 | 109,958 | |||
2025 | 584 | |||
Total minimum lease commitment | $ | 1,356,729 |
Year Ended June 30, | Lease Amount |
2017 | $134,705 |
2018 | 134,705 |
2019 | 59,480 |
2020 | 18,353 |
2021 | 9,197 |
2022 | 2,299 |
Total Minimum Lease Commitment | $358,739 |
Additionally, Gourmet Foods entered into a General Security Agreement in favor of the Gerald O’Leary Family Trust and registered on the Personal Property Securities Register for a priority sum of NZ$110,000 (approximately US$84,915)73,901) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$15,439)13,436) bond has been posted through ANZ Bank and secured with a cash deposit of equal amount to secure a separate facilities lease. The General Security Agreement and the cash deposit will remain until such time as the respective leases are satisfactorily terminated in accordance with their terms. Interest from the cash deposit securing the lease accumulates to the benefit of GFLGourmet Foods and is listed as a component of interest income/expense on the accompanying Consolidated Statements of Operations.
Other Agreements 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$11,883.
Year Ended June 30, | Lease Amount |
2017 | $86,438 |
2018 | 33,753 |
2019 | 30,940 |
Total Minimum Lease Commitment | $151,131 |
USCF manages four funds (BNO, CPER, UGA, UNL) which have expense waivers provisions, whereby USCF will reimburse funds when fund expenditure levels exceed certain threshold amounts.As of June 30, 2016.2019 and June 30, 2018 the expense waiver payable was $0.3 million and $0.7 million, respectively. USCF has no obligation to continue such payments for these four funds into subsequent periods.
USCF Advisers previously managed one mutual fund, the USCF Commodity Strategy Fund ("USCFX" and USCIX") until it was liquidated on March 21, 2019. Prior to liquidation, USCF Advisers had an expense waiver provision for the USCF Commodity Strategy Fund, whereby, USCF Advisers reimbursed the USCF Commodity Strategy Fund when fund expenditure levels exceeded a certain threshold amount. The expense fee waiver terminated upon the liquidation of the fund on March 21, 2019.
Litigation
From time to time, the Company is involved in legal proceedings arising mainly from the ordinary course of its business. Currently, there are no legal proceedings pending.
Retirement Plan
Wainwright's wholly owned subsidiary USCF, has a 401(k) Profit Sharing Plan covering its employees who are over 21 years of age and who have completed a minimum of 1,000 hours of service and have worked for USCF for one or more years. Participants may make contributions pursuant to a salary reduction agreement. In addition, USCF makes an safe harbor matching contribution. Quarterly profit sharing contributions paid totaled approximately $158 thousand and $95 thousand for each of the years ended June 30, 2019 and 2018, respectively.
NOTE 20.16. SEGMENT REPORTING
With the acquisition of Wainwright Holdings, Gourmet Foods, Ltd., Brigadier, and Brigadier Security Systems,the launch of the Original Sprout business unit of Kahnalytics, the Company has identified threefour segments for its products and services;U.S.A., investment fund management, U.S.A. beauty products, New Zealand food industry and Canada.Canada security alarm systems. Our reportable segments are business units located in different global regions.
The following table presents a summary of identifiable assets as of June 30, 20162019 and June 30, 2015:2018:
As of June 30, 2019 | As of June 30, 2018 | |||||||
Identifiable assets: | ||||||||
Corporate headquarters | $ | 2,730,805 | $ | 2,123,048 | ||||
U.S.A. : fund management | 10,878,549 | 13,563,773 | ||||||
U.S.A. : beauty products | 3,780,278 | 3,739,979 | ||||||
New Zealand: food industry | 1,838,800 | 1,959,486 | ||||||
Canada: security systems | 2,025,176 | 1,714,863 | ||||||
Consolidated | $ | 21,253,608 | $ | 23,101,149 |
As of June 30, 2016 | As of June 30, 2015 | |
Identifiable assets: | ||
Corporate headquarters | $1,521,210 | $2,132,164 |
U.S.A. | 87,790 | 202,095 |
New Zealand | 2,199,128 | - |
Canada | 956,855 | - |
Consolidated | $4,764,983 | $2,334,259 |
The following table presents a summary of operating information for the yearyears ended June 30, 2016: (note: New Zealand is for a period of 11 months since acquisition2019 and Canada is for a period of 1 month since acquisition)June 30, 2018:
Year Ended June 30, 2019 | Year Ended June 30, 2018 | |||||||
Revenues: | ||||||||
U.S.A. : beauty products | $ | 3,621,246 | $ | 1,694,534 | ||||
U.S.A. : investment fund management | 15,021,439 | 18,744,313 | ||||||
New Zealand : food industry | 4,747,358 | 4,968,158 | ||||||
Canada : security systems | 3,558,580 | 3,303,584 | ||||||
Consolidated | $ | 26,948,623 | $ | 28,710,589 | ||||
Net income (loss) after taxes: | ||||||||
Corporate headquarters | $ | (1,223,930 | ) | $ | (744,992 | ) | ||
U.S.A. : beauty products | 406,963 | 42,702 |
| |||||
U.S.A. : investment fund management | 687,755 | 1,950,711 | ||||||
New Zealand : food industry | (13,326 | ) | 99,398 | |||||
Canada : security systems | 404,387 | 386,867 | ||||||
Consolidated | $ | 261,849 | $ | 1,734,686 |
Year Ended June 30, 2016 | Year Ended June 30, 2015 | |
Revenues from unaffiliated customers: | ||
U.S.A. : data streaming and hardware | $120,430 | $223,565 |
New Zealand : Food Industry | 3,756,402 | |
Canada | 348,553 | |
Consolidated | $4,225,385 | $223,565 |
Net income (loss) after taxes: | ||
Corporate headquarters | $(265,123) | $24,523 |
U.S.A. : Mobile video recording devices | (60,612) | (10,332) |
New Zealand : Food Industry | 214,467 | |
Canada : Security alarm system | 29,316 | |
Consolidated | $(81,952) | $14,191 |
The following table presents a summary of net capital expenditures for the year ended June 30:
2019 | 2018 | |||||||
Capital expenditures: | ||||||||
U.S.A. : corporate headquarters | $ | - | $ | 495 | ||||
U.S.A. : beauty products | 5,501 | 2,707 | ||||||
U.S.A.: investment fund management | - | - | ||||||
New Zealand: food industry | 48,856 | 165,414 | ||||||
Canada: security systems | (4,192 | ) | 149,449 | |||||
Consolidated | $ | 50,165 | $ | 318,065 |
The following table represents property, plant and equipment in use at each of the Company's locations as of June 30:
2019 | 2018 | |||||||
Asset Location: | ||||||||
U.S.A. : corporate headquarters | $ | 14,305 | $ | 14,305 | ||||
U.S.A. : beauty products | 10,745 | 5,244 | ||||||
U.S.A.: investment fund management | - | - | ||||||
New Zealand: food industry | 1,659,186 | 1,627,545 | ||||||
Canada: security systems | 348,435 | 363,833 | ||||||
Total All Locations | 2,032,671 | 2,010,927 | ||||||
Less accumulated depreciation | (1,275,657 | ) | (930,456 | ) | ||||
Net property, plant and equipment | $ | 757,014 | $ | 1,080,471 |
2016 | 2015 | |
Capital expenditures: | ||
Corporate headquarters | $902 | $- |
U.S.A | - | - |
New Zealand | 102,760 | - |
Canada | - | - |
Consolidated | $103,662 | $- |
NOTE 21.17. 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 September 19, 2016,July 2, 2019, Brigadier finalized the purchase of its office facility and land located in Saskatoon for CAN$750,000 (approximately US$572,858), funded by a bank loan of CAN$525,000 (approximately US$401,000) and CAN$225,000 (approximately US$171,858) in cash. The bank loan matures in 5 years and bears interest at the annual rate of 4.14%.
On June 24, 2019, Gourmet Foods, entered into an agreement to purchase the assets of Maketu Pies subject to, among other things, completion of due diligence. However, after completion of due diligence, the agreement was terminated by Gourmet Foods pursuant to its terms on July 31, 2019. (reference Form 8-K filed on June 27, 2019 and August 2, 2019)
USCF Advisers implemented fee waivers for all three of its exchange-traded funds ("ETFs") effective August 15, 2019: the USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund ("SDCI"), the USCF SummerHaven SHPEI Index Fund ("BUY") and the he USCF SummerHaven SHPEN Index Fund ("BUYN"). The fee waivers for the three ETFs will remain in effect through October 31, 2020 and may be renewed in the future with approval from the Funds Board of Trustees of USCF ETF Trust.
On August 15, 2019, the Company entered into a conditional Stock Purchase Agreement (the “Agreement”), dated September 19, 2016,letter of engagement with Wainwright Holdings, Inc., a Delaware corporation (“Wainwright”Maxim Group LLC ("Maxim") and certain shareholders of Wainwright (the “Sellers”), pursuantwho is to whichprovide investment banking services. In connection with the Sellers conditionally agreedfee arrangement for services to sell, andbe provided, the Company conditionally agreedissued to purchase, shares representing approximately 97% of the total issued and outstanding common stock of Wainwright (the “Wainwright Shares”). The Company intends to make an offer to acquire the remaining WainwrightMaxim 175,000 shares of its unregistered common stock prior to the Closing.stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
There were no disagreements or disputes with our independent accountant or any significant subsidiary has not resigned, declined to stand for re-election, or been dismissed by us during the periods for which financial statements are included herein.
CONTROLS AND PROCEDURES |
Evaluation of disclosure controlsDisclosure Controls and procedures
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as required by Exchange Act Rule 13a-15, as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures arewere effective as of June 30, 2019 (the end of the period covered by this annual report) and provideprovided reasonable assurances that the information the Company is required to disclose in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period required by the Commission's rules and forms. Further, the Company’s officersmanagement, including the Company's chief Executive Officer and Chief Financial Officer, concluded that its disclosure controls and procedures are also effective to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. There were no significant changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Internal control over financial reporting.
Management’s report on internal control over financial reporting
. Our management recognizes its responsibility for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Currently, the primary responsibility of the registrant is providing oversight control over its subsidiary operations which, in turn, are managed by their respective boards of directors who are appointed by the registrant for each of the subsidiaries. All debit and credit transactions with the company’s bank accounts, including those of the subsidiary companies, are reviewed by the officers as well as all communications with the company’s creditors. The directors of the subsidiary companies, which include representatives of the Company, meet frequently – as often as weekly – to discuss and review the financial status of the company and all developments. All filings of reports with the Commission are reviewed before filing by all directors.Our internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and chief financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP)("GAAP"). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting at the end of its most recent fiscal year, June 30, 2016.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework. Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of June 30, 2016.
Pursuant to Regulation S-K Item 308(b), this Annual Report on Form 10-K does not include an attestation report of our Company’s registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control and Financial Reporting
There have been no changes in our internal control over financial reporting induring the fiscal year ended June 30, 2016,2019, which were identified in connection with our management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION |
Not applicable.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
Set forth below are the names, and terms of office of each of our directors, executive officers and significant employees at June 30, 2016,2019, and a description of the business experience of each.
Person | Offices | Office Held Since | Term of Office | |||
Scott Schoenberger | Director | 2015 | 2017 | |||
Nicholas Gerber | CEO/Secretary and Director | 2015 | 2017 | |||
David W. Neibert | C.F.O. and Director | 2002 | 2017 | |||
Matt Gonzalez | Director | 2013 | 2017 |
Person |
Age |
Offices | Office Held Since | Term of Office |
Scott Schoenberger | 53 | Director | 2015 | 2019 |
Nicholas D. Gerber | 57 | Chief Executive Officer / Chairman and Director | 2015 | 2019 |
David W. Neibert | 64 | Chief Operations Officer and Secretary | 2002 | 2019 |
Matt Gonzalez | 55 | Director | 2013 | 2019 |
Stuart P. Crumbaugh | 56 | Chief Financial Officer | 2017 | 2019 |
Kathryn D. Rooney | 47 | Director / Chief Communications Officer | 2017 | 2019 |
Derek Mullins | 46 | Director | 2017 | 2019 |
Kelly J. Anderson | 51 | Director | 2019 | 2019 |
Joya Delgado Harris | 46 | Director | 2017 | 2019 |
Erin Grogan | 45 | Director | 2017 | 2019 |
Nicholas D. Gerber:
Mr. Gerber hasScott Schoenberger: Mr. Gerber is 54 years old.
David W. Neibert:
Mr. Neibert has been aMatt Gonzalez:
Erin Grogan: Ms. Grogan has served as Director of Concierge since 2017. Ms. Grogan serves as the Chief Financial Officer of the Association for California School Administrators. Previously, Ms. Grogan served as head of Finance and Operations at YouCaring, a fundraising platform for personal and charitable causes, until it was acquired by GoFundMe. Prior to joining YouCaring, Ms. Grogan was the Director of Finance and Planning as well as an adjunct faculty member at the University of San Francisco, School of Management, from 2012 until 2016. Ms. Grogan has over 20 years of experience in management and finance, including positions at ON24, Inc., Mooreland Partners, Cadbury Schweppes, Asbury Automotive Group, Banc of America Securities, PricewaterhouseCoopers, and American International Group. Ms. Grogan earned her B.A. from Columbia University and an M.B.A. in finance from the New York University Leonard N. Stern School of Business.
Derek Mullins: Mr. Mullins has served as Director of Concierge since 2017 and currently serves as Co-Founder and Managing Partner of PINE Advisor Solutions. Previously he was the Director of Operations at ArrowMark Colorado Holdings LLC and the Chief Financial Officer and Treasurer of Meridian Fund, Inc. and Destra Investment Trust. Mr. Mullins also served as Director of Operations at Black Creek Capital and Dividend Capital from 2004 to 2009 and as Manager of Fund Administration at ALPS Fund Services from 1996 to 2004. Mr. Mullins brings over 20 years of operations, accounting, finance and compliance experience to the Board. Mr. Mullins earned a B.S. in Finance from the University of Colorado, Boulder and a Master’s degree in Finance from the University of Colorado, Denver.
Kathryn D. Rooney: Ms. Rooney has served as Director of Concierge and as the Company’s Chief Communications Officer since January 2017. Ms. Rooney also serves as the Chief Marketing Officer of USCF and brings over 20 years of experience in marketing and investor relations. Ms. Rooney is 51responsible for marketing, brand management for Concierge and USCF and overall product distribution for USCF. Prior to joining USCF and Concierge, Ms. Rooney was Director of Business Development for the Ameristock Mutual Fund. She also served as National Sales Director for ALPS Mutual Fund Services and as a Trust Officer for Fifth Third Bank. Ms. Rooney received her B.A. in Economics and Psychology with a minor in Art History from Wellesley College. Ms. Rooney is a registered representative of ALPS Distributors, Inc.
Joya Delgado Harris: Ms. Harris has served as Director of Concierge since 2017. She has been the Director of Research Integration for the American Cancer Society since 2012. In this role she provides oversight and management of the integration of Extramural Grants Department research and training program outcomes into enterprise-wide organization and mission objectives. Before joining the American Cancer Society, Ms. Harris worked for Y-ME National Breast Cancer Organization. From 2008 to 2011, Ms. Harris has over a decade of experience in non-profit management, previously serving as the Executive Director for the Association of Village PRIDE and as the Director of Product Development for the Metropolitan Atlanta Chapter of the American Red Cross. Her experience and demonstrated accomplishments in key leadership functions including program development, implementation, and evaluation; curriculum design; grant-writing and resource development; meeting planning; board cultivation and management; and developing business partnerships. Ms. Harris has also served as a Consumer Peer Reviewer for the Congressionally Directed Medical Research Programs (CDMRP), administered by the Department of Defense, sitting alongside scientists to review and evaluate innovative breast cancer research grant proposals. Ms. Harris earned a B.A. from Wellesley College, and received a Masters of Public Health degree with concentration in public health policy and management from the Rollins School of Public Health of Emory University. She serves as the immediate Past President of the Atlanta Wellesley Club.
Kelly J. Anderson: Ms. Anderson has been a Director since May 2019. Ms. Anderson has over 35 years old.of experience in finance, accounting and operations roles in various industries. Since 2015, Ms. Anderson has been a managing partner in C Suite Financial Partners, a financial consulting services company dedicated to serving private, public, private equity, entrepreneurial, family office and government-owned firms in all industries. Between July 2014 and March 2015, Ms. Anderson was CFO of Mavenlink, a SaaS company. Between October 2012 and January 2014, Ms. Anderson was Chief Accounting Officer of Fisker Automotive. Between April 2010 and February 2012, Ms. Anderson was the President and Chief Financial Officer of T3 Motion, Inc., (“T3”), an electric vehicle technology company. Between March 2008 and April 2010, she served as T3’s Executive Vice President and Chief Financial Officer, and as a director from January 2009 until January 2010. From 2006 until 2008, Ms. Anderson was Vice President at Experian, a leading credit reporting agency. From 2004 until 2006, Ms. Anderson was Chief Accounting Officer for TripleNet Properties and its affiliates. From 1996 to 2004, Ms. Anderson held senior financial positions with The First American Corp., a Fortune 500 title insurance company. Ms. Anderson has served on the board of directors for Tomi Environmental Services (OCTQB: TOMZ) since 2016. Ms. Anderson is a CPA (Inactive). Ms. Anderson holds a B.A. degree in Business Administration with an accounting concentration from California State University Fullerton
Stuart P. Crumbaugh: Mr. Crumbaugh has served as the Chief Financial Officer of Concierge Technologies, Inc., the parent of Wainwright Holdings, Inc. (“Wainwright”) and its subsidiaries since December 2017, and also the Chief Financial Officer, Secretary and Treasurer of USCF, a subsidiary of Wainwright, since May 2015. In addition, Mr. Crumbaugh has served as a Director of Wainwright, the parent and sole member of USCF, since December 2016. Mr. Crumbaugh has been a principal of USCF listed with the CFTC and NFA since July 1, 2015 and, as of January 2017, he is a principal of USCF Advisers LLC. USCF Advisers LLC, an affiliate of USCF, is an investment adviser registered under the Investment Advisers Act of 1940, and, as of February 2017, is registered as a commodity pool operator, NFA member and swap firm. Since June 2015, Mr. Crumbaugh has been the Treasurer and Secretary of USCF Advisers LLC. He also serves as a Management Trustee of USCF ETF Trust from May 2015 to present and as Management Trustee of the USCF Mutual Funds Trust from October 2016 to present. Mr. Crumbaugh joined USCF as the Assistant Chief Financial Officer on April 6, 2015. Prior to joining USCF, Mr. Crumbaugh was the Vice President Finance and Chief Financial Officer of Sikka Software Corporation, a software service healthcare company providing optimization software and data solutions from April 2014 to April 6, 2015. Mr. Crumbaugh served as a consultant providing technical accounting, IPO readiness and M&A consulting services to various early stage companies with the Connor Group, a technical accounting consulting firm, for the periods of January 2014 through March 2014; October 2012 through November 2012; and January 2011 through February 2011. From December 2012 through December 2013, Mr. Crumbaugh was Vice President, Corporate Controller and Treasurer of Auction.com, LLC, a residential and commercial real estate online auction company. From March 2011 through September 2012, Mr. Crumbaugh was Chief Financial Officer of IP Infusion Inc., a technology company providing network routing and switching software enabling software-defined networking solutions for major mobile carriers and network infrastructure providers. Mr. Crumbaugh earned a B.A. in Accounting and Business Administration from Michigan State University in 1987 and is a Certified Public Accountant – Michigan (inactive).
Conflicts of Interest
Our officers and directors may be directors or principal shareholders of other companies and, therefore, could face conflicts of interest with respect to potential acquisitions. In addition, our officers and directors may in the future participate in business ventures, which could be deemed to compete directly with Concierge. Additional conflicts of interest and non-armsnon-arm's length transactions may also arise in the future in the event our officers or directors are involved in the management of any firm with which we transact business. In addition, if Concierge and other companies with which our officers and directors are affiliated both desire to take advantage of a potential business opportunity, then our board of directors has agreed that said opportunity should be available to each such company in the order in which such companies registered or became current in the filing of annual reports under the '34 Act.
Our officers and directors may actively negotiate or otherwise consent to the purchase of a portion of their common stock as a condition to, or in connection with, a proposed merger or acquisition transaction. It is anticipated that a substantial premium over the initial cost of such shares may be paid by the purchaser in conjunction with any sale of shares by our officers and directors which is made as a condition to, or in connection with, a proposed merger or acquisition transaction. The fact that a substantial premium may be paid to our officers and directors to acquire their shares creates a potential conflict of interest for them in satisfying their fiduciary duties to us and our other shareholders. Even though such a sale could result in a substantial profit to them, they would be legally required to make the decision based upon the best interests of Concierge and Concierge’s other shareholders, rather than their own personal pecuniary benefit.
No executive officer, director, person nominated to become a director, promoter or control person of Concierge has been involved in legal proceedings during the last five years such as
● | Bankruptcy |
● | Criminal proceedings (excluding traffic violations and other minor offenses), or |
● | Proceedings permanently or temporarily enjoining, barring, suspending or otherwise limiting his/her involvement in any type of business, securities or banking activities. |
● | Nor has any such person been found by a court of competent jurisdiction in a civil action, or the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law. |
None of the directors holds any directorships in any company with a class of securities registered under the Exchange Act or subject to the reporting requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940 other than the following: Nicholas Gerber, our CEO and member of our Board of Directors, is a director of United Sates Commodity Funds LLC which is the commodity pool operator and general partner or sponsor of 11 commodity based exchange traded products that are registered under Section 12 of the Exchange Act, and is also a director of USCF ETF Trust, a registered investment company under the Investment Company Act of 1940, which currently has one exchange traded fund and is advised by USCF Advisers LLC, a registered investment adviser.
Involvement in certain legal proceedings
. During the past five years, none of the directors has been involved in any of the following events:● | A petition under the Federal bankruptcy law or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
● | Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
● | Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: |
● | Other than Nicholas Gerber, through his involvement as a director of United Sates Commodity Funds LLC which is the commodity pool operator and general partner or sponsor of 13 commodity based exchange traded products that are registered under Section 12 of the Exchange Act, and as a director of USCF ETF Trust, a registered investment company under the Investment Company Act of 1940, which currently has one exchange traded fund and is advised by USCF Advisers LLC, a registered investment adviser, acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
● | Engaging in any type of business practice; or |
● | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
● | Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; or |
● | Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated. |
● | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Future Trading Commission has not been subsequently reversed, suspended or vacated. |
Code of Ethics
. We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Code of EthicsCorporate Governance
.Security holder recommendations of candidates for the board of directors
. Any shareholder may recommend candidates for the board of directors by writing to the president of our company the name or names of candidates, their home and business addresses and telephone numbers, their ages, and their business experience during at least the last five years. The recommendation must be received by the company by March 9 of any year or, alternatively, at least 60 days before any announced shareholder annual meeting.Audit committee
. We have no standing audit committee. Our directors perform the functions of an audit committee. OurCompliance with Section 16(a) of the Securities Exchange Act
.Based solely upon a review of Forms 3 and 4 furnished to the company under Rule 16a-3(e) of the Act during its most recent fiscal year and Forms 5 furnished to us with respect to our most recent fiscal year and any written representations received by us from persons required to file such forms, the following persons – either officers, directors or beneficial owners of more than ten percent of any class of equity of Concierge registered pursuant to Section 12 of the Act – failed to file on a timely basis reports required by Section 16(a) of the Act during the most recent fiscal year or prior fiscal years:
Name |
|
|
No. of Late Reports |
|
|
No. of Transactions Not Timely Reported |
|
| No. of Failures to File a Required Report |
| |||
- |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Name | No. of Late Reports | No. of Transactions Not Timely Reported | No. of Failures to File a Required Report | |||
- | 0 | 0 | 0 |
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to our executive officers for the fiscal years ended June 30, 20162019 and 2015.2018. Unless otherwise specified, the term of each executive officer is that as set forth under that section entitled, “Directors, Executive Officers, Promoters and Control Persons -- Term of Office”.
Name and Principal Position | Year Ended June 30, | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation on ($) | Total ($) |
David Neibert (1) Chief Financial Officer | 2015 | 75,000 | Nil | Nil | Nil | Nil | Nil | Nil | 75,000 |
2016 | 81,250 | Nil | Nil | Nil | Nil | Nil | Nil | 81,250 | |
Nicholas Gerber Chief Executive Officer and Secretary | 2015 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
2016 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
Name and Principal Position | Year Ended June 30, |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation |
|
| Nonqualified Deferred Compensation Earnings |
|
| All Other Compensation ($) |
|
| Total ($) |
| |||||||||
David W. Neibert | 2018 |
|
|
| 169,500 |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| 53,834 |
|
|
| 223,334 |
|
Chief Operations Officer(1) | 2019 |
|
| 200,000 | 25,000 | Nil | Nil | Nil | Nil | Nil | 225,000 |
| ||||||||||||||||||||||
Nicholas D. Gerber(2) | 2018 |
|
| 400,000 |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| 400,000 |
| |
Chief Executive Officer | 2019 | 400,000 | Nil | Nil | Nil | Nil | Nil | Nil | 400,000 |
| ||||||||||||||||||||||||
John P. Love (3) | 2018 |
|
| 406,250 |
|
|
| 67,000 |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| 473,250 |
| |
Chief Executive Officer - USCF | 2019 | 450,000 | 37,500 | Nil | Nil | Nil | Nil | Nil | 487,500 |
| ||||||||||||||||||||||||
Stuart P. Crumbaugh (4) | 2018 |
|
| 272,500 |
|
|
| 46,000 |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| Nil |
|
|
| 318,500 |
| |
Chief Financial Officer | 2019 | 286,000 | 28,600 | Nil | Nil | Nil | Nil | Nil | 314,600 |
|
(1)
(2) USCF pays Mr. Gerber a salary of $400,000.
(3) USCF pays Mr. Love a salary of $450,000 per year for consulting and administrative services.
(4) USCF pays Mr. Crumbaugh a salary of $286,000 per year which increased from $272,500 per year effective April 2018.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
There were no unexercised stock options, stock that has not vested, or equity incentive plan awards for any named officer outstanding at the end of the last fiscal year:
Compensation of Directors
The following compensation in FY 2015was paid to our directors for their services as directors.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensa- tion ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensa- tion ($) | Total ($) |
David W. Neibert | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Nicholas Gerber | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Scott Schoenberger | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Matt Gonzalez | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
DIRECTOR COMPENSATION
Name |
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
| Nonqualified Deferred Compensation Earnings ($) |
| All Other Compensation ($) |
|
| Total ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Neibert |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 0 |
Nicholas D. Gerber |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 0 |
Scott Schoenberger |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 0 |
Matt Gonzalez |
| 10,000 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 10,000 |
Erin Grogan |
| 10,000 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 10,000 |
Kathryn D. Rooney |
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 0 |
Derek Mullins |
| 10,000 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 10,000 |
Kelly J. Anderson |
| 4,167 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 4,167 |
Joya Delgado Harris |
| 10,000 |
|
| 0 |
|
| 0 |
|
| 0 |
| 0 |
| 0 |
|
| 10,000 |
Stock Options
.During the last two fiscal years, tourour officers and directors have received no Stock Options and no stock options are outstanding.
We have no equity compensation plans.
The following table below sets forth the ownership,information as of October 3, 2016,September 27, 2019, with respect to the beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of the Company’s common stock by (1) each individualdirector of the Company, (2) the named Executive Officers of the Company, (3) each person or group of persons known to usby the Company to be the beneficial owner of moregreater than five percent5% of Concierge’sthe Company’s outstanding common stock,
Name and Address of Beneficial Owner |
| Amount Owned |
|
| Percent of Class (5) |
| ||
Gonzalez & Kim 1202 Puerta Del Sol San Clemente CA 92673 |
|
| 233,400 | (1) |
|
| .61 | % |
Nicholas D. Gerber 1202 Puerta Del Sol San Clemente CA 92673 |
|
| 18,130,015 | (2) |
|
| 47.12 | % |
David W. Neibert 1202 Puerta Del Sol San Clemente CA 92673 |
|
| 36,248 | (3) |
|
| 0.09 | % |
Scott Schoenberger 1202 Puerta Del Sol San Clemente CA 92673 |
|
| 4,697,993 | (4) |
|
| 12.21 | % |
Kathryn D. Rooney 1202 Puerta Del Sol San Clemente CA 92673 |
|
| - |
|
|
| - | % |
Derek Mullins 1202 Puerta Del Sol San Clemente CA 92673 |
|
| - |
|
|
| - | % |
Erin Grogan 1202 Puerta Del Sol San Clemente CA 92673 |
|
| - |
|
|
| - | % |
Kelly J. Anderson 1202 Puerta Del Sol San Clemente CA 92673 |
|
| - |
|
|
| - | % |
Joya Harris 1202 Puerta Del Sol San Clemente CA 92673 |
|
| - |
|
|
| - | % |
Stuart P. Crumbaugh 1202 Puerta Del Sol San Clemente CA 92673 |
|
| - |
|
|
| - | % |
Officers and Directors as a Group |
|
| 23,097,656 | (5) |
|
| 60.03 | % |
Eliot and Sheila Gerber |
|
| 3,543,603 |
|
|
| 9.21 | % |
Gerber Family Trust |
|
| 5,623,543 |
|
|
| 14.62 | % |
(1) | Mr. Gonzalez is a member of the Board of the Company. Mr. Gonzalez and | |||
Mr. Hansu Kim are 50% partners and share voting and dispositive power in Gonzalez & Kim, | ||||
(2) | Mr. Gerber is the President and Chief Executive Officer of the Company and Chairman of the Board. Mr. Gerber’s shares are held by the Nicholas and Melinda Gerber Living Trust (the “Gerber Trust”) and Mr. and Mrs. Gerber serve as trustees of the Gerber Trust, which owns a total 18,130,015 shares, representing 47.12% of the outstanding shares of Common Stock (giving effect to the conversion of all Series B Preferred Stock). As such, the Gerber Trust and Mr. Gerber share power to vote or to direct the vote of the shares and share power to dispose or to direct the disposition of these shares. | |||
(3) | Mr. Neibert is the Chief Operations Officer of the Company and | |||
(4) | Mr. Schoenberger is a member of the Board of the Company. Mr. Schoenberger’s shares are held by the Schoenberger Family Trust (the “Schoenberger Trust”) and Mr. Schoenberger serves as sole trustee of the Schoenberger Trust, and total 4,697,993 shares, representing 12.21% of the outstanding shares of Common Stock which percentage is based on 38,473,159 outstanding shares of Common Stock (giving effect to the conversion of all Series B Preferred Stock). As such, the Schoenberger Trust and Mr. Schoenberger share power to vote or to direct the vote of the shares and share power to dispose or to direct the disposition of these shares. | |||
(5) | The percentage of class is calculated pursuant to Rule 13d-3(d) of the Exchange Act which percentages are calculated on the basis of the amount of outstanding securities, plus securities deemed outstanding pursuant to Rule 13d-3(d)(1). The percentage of common stock outstanding is as of September 24, 2019, and based upon 37,412,519 shares of common outstanding and 53,032 shares of Series B Preferred Stock, giving effect to the conversion of all Series B Preferred Stock at a |
Upon acquiring their shares of Voting Stock, Messrs. Gerber and Schoenberger have voted all shares of Voting Stock concurringly on matters submitted to the Company’s stockholders. Pursuant to a California general partnership whose partners are Hansu Kimvoting agreement, (the “Voting Agreement”), the Gerber Trust and Matt Gonzalez. Mr. Gonzalez is a directorSchoenberger Trust will continue to vote all shares of Voting Stock owned by them to elect each of Messrs. Gerber and Schoenberger to the Board along with other designees mutually agreed upon. By virtue of the company. Their ownership is in the form of 350,086 shares of Concierge Series B Voting Convertible, Preferred stock that, when converted at a ratio of 1:20, would equal to 7,001,720 shares of common stock. Their ownership rights are equal, thus Mr. Gonzalez is listed herein as a beneficial owner of 7,001,720 shares of common stock.
Director Independence
For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2).Section 803 of the NYSE American Company Guide. The OTCQB on which our shares of common stock are quoted does not have any director independence requirements. The NASDAQNYSE American definition of “Independent Director” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
The Board does not currently have any standing committees. The Board will review the NASDAQ definition, David Neibertappropriateness of forming standing audit, nominating, corporate governance and Nicholas Gerber are not independent directors because each is also an executive officercompensation committees in light of the Company. Additional, Mr. Schoenberger is also not an independent director due toCompany’s growth and will form such standing or ad hoc committees as the formation of a “group” under Section 13(d)(3) with Mr. Gerber. According to the NASDAQ Matt Gonzalez is the only independent director.
Related Party Transactions
During the previous two fiscal years preceding our last fiscal year, to present, there have been nowe did not enter into any transactions with related persons, promoters or certain control persons as covered by Item 404 of Regulation S-K. However, in connection with that certain Securities Purchase Agreement with Nicholas Gerber and Scott Schoenberger, certain now current executive officers and directors may have formed a “group” under Section 13(d)(3) of the Act which may result in related party transactions in the future. These affiliations are disclosed herein
On January 26, 2015, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with two accredited investors, Nicholas Gerber and Scott Schoenberger, (the “Purchasers”) pursuant to which we agreed to sell and the Purchasers agreed to purchase 400,000,000approximately 13,333,333 shares of common stock and 32,451,499approximately 108,172 shares of Series B preferred stock of the Company (adjusted for the effect of the 1:10 reverse stock split in December 2015 and the 1:30 reverse stock split in December 2017) in exchange for $3,000,000 USD. Pursuant to the terms of the Securities Purchase Agreement, Purchasers acquired a controlling interest in the Company pursuant to the issuance of the above shares which constituted approximately 70.0% of the voting control of the Company. Following the closing of the Securities Purchase Agreement, Mr. Gerber and Schoenberger became officers and directors of the Company.
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.
On September 19, 2016, the Company entered into a conditional Stock Purchase Agreement (the “Agreement”), dated September 19, 2016, with Wainwright Holdings, Inc., a Delaware corporation (“Wainwright”) and certain shareholders of Wainwright (the “Sellers”), pursuant to which the Sellers conditionally agreed to sell, and the Company conditionally agreed to purchase, shares representing approximately 97% of the total issued and outstanding common stock of Wainwright (the “Wainwright Shares”). The Company intends
In connection with the acquisition of Wainwright on December 9, 2016 the Promissory Notes were subsequently amended to make an offer to acquireremove the remaining Wainwright shares of common stock prior to the Closing.
Any future transactions by and among the parties mentioned above may qualify as related party transactions and will be disclosed accordingly.
We have adopted a policy that any transactions with directors, officers or entities of which they are also officers or directors or in which they have a financial interest, will only be on terms consistent with industry standards and approved by a majority of the disinterested directors of the Board of Directors and based upon a determination that these transactions are on terms no less favorable to us than those which could be obtained by unaffiliated third parties. This policy could be terminated in the future. In addition, interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which approves such a transaction.
Audit Fees
. Our principal independent accountant billed us, for each of the last two fiscal years, the following aggregate fees for its professional services rendered for the audit of our annual financial statements and review of financial statements included in our Form 10-Q reports or other services normally provided in connection with statutory and regulatory filings or engagements for those two fiscal years:Fiscal Year ended June 30, 2019 $342,597
Fiscal Year ended June 30, 2018 $333,191
Audit-Related Fees.
Our principal independent accountant, and those secondary accountants performing audit reviews of our subsidiaries on our behalf, billed us, for each of the last two fiscal years, the following aggregate fees for assurance and related services reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees”:Fiscal Year ended June 30, 2019 $nil
Fiscal Year ended June 30, 2018 $29,975
Tax Fees
. Our principal independent accountant billed us, for each of the last two fiscal years, the following aggregate fees for professional services rendered for tax compliance, tax advice and tax planning:Fiscal Year ended June 30, 2019 $158,477
Fiscal Year ended June 30, 2018 $ 75,353
All Other Fees
. Our principal independent accountant billed us, for each of the last two fiscal years, the following aggregate fees for products and services provided by it, other than the services reported in the above three categories:Fiscal Year ended June 30, 2019 $nil
Fiscal Year ended June 30, 2018 $nil
Pre-Approval of Audit and Non-Audit Services.
The Audit Committee, and in our case the board of directors, require that it pre-approve all audit, review and attest services and non-audit services before such services are engaged.EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
The following exhibits are filed as part of this Form 10-K:
101.INS | XBRL Instance Document# | ||
101.SCH | XBRL Taxonomy Extension Schema Document# | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document# | ||
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document# | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document# | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document# |
# Filed Herewith. Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
(1) | Filed herewith. |
1Previously filed with Report on Form 8-K12G3 on March 10, 2000; Commission File No. 000-29913, incorporated herein.
2Previously filed with Current Report on Form 8-K on January 29, 2015 and incorporated by reference herein.
3Previously filed with Current Report on Form 8-K on March 4,June 2, 2015 and incorporated by reference herein.
4Previously filed with Current Report on Form 8-K on February 2, 2016 and incorporated by reference herein.
5Previously filed with Current Report on Form 8-K on June 8, 2016 and incorporated by reference herein.
6Previously filed with Current Report on Form 8-K on September 19,20, 2016 and incorporated by reference herein.
7Previously filed with Definitive Proxy Materials on Schedule 14A on February 28, 2017 and incorporated by reference herein.
8Previously filed with Current Report on Form 8-K on November 21, 2017 and incorporated by reference herein.
9Previously filed with Current Report on Form 8-K on April 6, 2017 and incorporated by reference herein.
10Previously filed with Current Report on Form 10-K on September 28, 2018 and incorporated by reference herein.
11Previously filed with Current Report on from 8-K on June 27, 2019 and incorporated by referencence herein.
12Previously filed with Current Report on from 8-K on August 2, 2019 and incorporated by referencence herein.
13Concierge Technologies, Inc. - Subsidiary List
FORM 10-K SUMMARY |
Not applicable.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CONCIERGE TECHNOLOGIES, INC. | |||
Date: September 30, 2019 | /s/ Nicholas D. Gerber | ||
Nicholas D. Gerber, CEO | |||
In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: September 30, 2019 | /s/ David W. Neibert | ||
David W. Neibert, | |||
Date: September 30, 2019 | /s/ Scott Schoenberger | ||
Scott Schoenberger, Director | |||
Date: September 30, 2019 | /s/ Matt Gonzalez | ||
Matt Gonzalez, Director | |||
Date: September 30, 2019 | /s/ Derek Mullins | ||
Derek Mullins, Director | |||
Date: September 30, 2019 | /s/ Kathryn D. Rooney | ||
Kathryn D. Rooney, Director | |||
Date: September 30, 2019 | /s/ Erin Grogan | ||
Erin Grogan, Director | |||
Date: September 30, 2019 | /s/ Kelly J. Anderson | ||
Kelly J. Anderson, Director | |||
Date: September 30, 2019 | /s/ Joya Delgado Harris | ||
Joya Delgado Harris, Director |
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