Equity Investment | 6 Months Ended |
Sep. 30, 2013 |
EquityMethodInvestmentsDisclosureAbstract | ' |
Equity Investment | ' |
|
Note 4: Equity Investment |
On August 24, 2012, the Company entered into an agreement with Naked Edge whereby the Company completed the purchase of 50% of Naked Edge Common Units for $65,000. At that time, the Company also received an option to acquire 33.33% of Naked Edge Preferred Units for $85,000 on or before August 24, 2013 (“Option”). The Company exercised the Option for a total of $85,000 during March and April 2013. The Common Units provide the Company with 50% of the voting rights and 20% of the economic rights of Naked Edge and the Preferred Units provide us with an additional 20% of the economic rights of Naked Edge for a total of 40%. The Company has accounted for this investment under the equity method of accounting. |
Naked Edge is a Colorado Limited Liability Company organized on January 7, 2011. Naked Edge manufactures and distributes Veggie Go’s, an organic fruit and vegetable snack. The product is made with natural ingredients and no preservatives. Naked Edge produces four blends of Veggie Go’s and they are dairy free, soy free, gluten free and vegan. Naked Edge produces four blends of Veggie Go’s. |
Summarized balance sheet information of Naked Edge as of September 30, 2013 is as follows: |
Assets | | | | | | | | |
| | 30-Sep-13 | | | | | |
Cash | | $ | 14,843 | | | | | |
Accounts receivable | | | 52,828 | | | | | |
Other current assets | | | 4,666 | | | | | |
Fixed assets | | | 118,365 | | | | | |
Total assets | | $ | 190,702 | | | | | |
| | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | |
| | | | | | | | |
Current liabilities | | $ | 52,614 | | | | | |
Long term portion of capital leases | | | 49,588 | | | | | |
Long term portion of notes payable | | | 17,172 | | | | | |
Stockholders' equity | | | 71,328 | | | | | |
Total liabilities and stockholders' equity | | $ | 190,702 | | | | | |
|
Summarized results of operations for the three and six months ended September 30, 2013 of Naked Edge are as follows: |
|
| | Three months | | | Six months | |
ended | ended |
September 30, | September 30, |
2013 | 2013 |
Net Revenues | | $ | 127,163 | | | $ | 204,815 | |
Cost of Goods Sold | | | (66,072 | ) | | | (106,236 | ) |
Gross Profit | | | 61,091 | | | | 98,578 | |
Operating Expenses: | | | | | | | | |
General and Administrative | | | (60,638 | ) | | | (112,511 | ) |
Total Operating Expenses | | | (60,638 | ) | | | (112,511 | ) |
| | | | | | | | |
Net income (loss) | | $ | 453 | | | $ | (13,933 | ) |
|
Under the equity method of accounting, we record our proportional share of the losses of Naked Edge in which we have invested, up to the amount of our investment. The Company’s investment and equity in losses of Naked Edge is as follows: |
|
Investment balance as of March 31, 2013 | | $ | 65,863 | | | | | |
Equity loss | | | (5,573 | ) | | | | |
Investment contribution | | | 64,600 | | | | | |
Investment balance as of September 30, 2013 | | $ | 124,890 | | | | | |
|
Naked Edge rents its facilities and the future minimum payments by fiscal year are as follows: |
By fiscal year | | | | | | | | |
| | | | | | | | |
2014 | $ | 11,597 | | | | | | |
2015 | | 23,383 | | | | | | |
2016 | | 11,786 | | | | | | |
2017 | | — | | | | | | |
Thereafter | | — | | | | | | |
Total | $ | 46,766 | | | | | | |
|
In March 2012, Naked Edge entered into a promissory note in the amount of $10,500. The note has a 5 year term and an annual interest rate of 5% on the unpaid balance. The monthly payments are $198.15 including interest. |
|
In November 2012, Naked Edge entered into a promissory note in the amount of $20,000. The note has a 5 year term and an annual interest rate of 5% on the unpaid balance. The monthly payments are $377.42 including interest. |
|
In September 2013, Naked Edge entered into a promissory note in the amount of $15,000. The note is due March 15, 2014 and an annual interest rate of 5% on the unpaid balance. The monthly payments are $2,562, including interest. |
|
In November 2012, Naked Edge entered into two financing agreements for the purchase of equipment. The cost basis for the two pieces of equipment totals $52,192. The term of both financing agreements range is 48 months and interest rates range from 32% to 41%. The agreements are secured by the respective underlying equipment and are guaranteed by either Naked Edge’s CEO or Naked Edge’s CEO and President. Monthly payments range from $893 to $1,200 and there is no prepayment penalties associated with these agreements. Useful life of equipment is 48 months |
|
In November 2012, Naked Edge entered into a capital lease for equipment. The cost basis of the equipment is $9,099. The lease term is 44 months and the imputed interest rate is 37%. The lease is secured by the underlying equipment and is guaranteed by Naked Edge’s CEO and President. The monthly lease payment is $378 and there is no prepayment penalty associated with the agreement. Useful life of the leased equipment for depreciation purposes is 44 months. |
|
In April 2013, Naked Edge entered into a capital lease for equipment. The cost basis of the equipment is $10,800. The lease term is 48 months and the imputed interest rate is 17%. The lease is secured by the underlying equipment and is guaranteed by Naked Edge’s CEO and President. The monthly lease payment is $313 and there is no prepayment penalty associated with the agreement. Useful life of the leased equipment for depreciation purposes is 48 months. |
Future minimum lease payments due under the capital lease agreements are as follows for the fiscal years ending as of September 30, 2013: |
2014 | | $ | 16,709 | | | | | |
2015 | | | 33,417 | | | | | |
2016 | | | 33,417 | | | | | |
2017 | | | 19,548 | | | | | |
2018 | | | 186 | | | | | |
Total minimum lease payments | | | 103,277 | | | | | |
Less imputed interest | | | (39,742 | ) | | | | |
Present value of minimum lease payments | | | 63,535 | | | | | |
Less: current maturities of capital lease obligations | | | (13,947 | ) | | | | |
Noncurrent maturities of capital lease obligations | | $ | 49,588 | | | | | |
|
As of September 30, 2013, there were no related party transactions. |
Naked Edge receives consulting services for matters relating to product development, packaging, sales, marketing, distribution, and business management in exchange for 5% of Naked Edge’s net income once Naked Edge generates a net income of $300,000 in any calendar year. |