Aristocrat Group Corp., a Nevada corporation, was incorporated on July 20, 2011. Our year-end is July 31.
On April 1, 2015, the Company reincorporated from Florida to Nevada. The Company’s board of directors and majority shareholder consented to the reincorporation. Each of our shareholders on the record date received one share of the Nevada company’s common stock for each 100 shares of common stock they own in the Florida company. Fractional shares will be rounded up to the next whole share, and each shareholder received at least five shares. The Nevada company is authorized to issue 480 million shares of common stock and 20 million shares of preferred stock, each with a par value of $0.001 per share. The board of directors and officers of the Nevada company consists of the same persons who are currently directors and officers
On October 17, 2012, we formed Luxuria Brands LLC as a wholly owned subsidiary. On January 10, 2013, we formed Level Two Holdings, LLC as our wholly owned subsidiary. On January 15, 2013, we formed Top Shelf Distributing, LLC (“Top Shelf”) as our wholly owned subsidiary.
Top Shelf is focused on developing our distilled spirits line of business and currently markets and sells RWB Ultra Premium Handcrafted Vodka (“RWB Vodka”).
Critical Accounting Policies
We prepare our Consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended July 31, 2015 on Form 10-K.
Results of Operations
Nine months ended April 30, 2016 compared to the nine months ended April 30, 2015.
Revenue
Revenue decreased to $65,385 for the nine months ended April 30, 2016, compared to $85,895 for the nine months ended April 30, 2015. The decline is largely due to reduced prices on our RWB Vodka product.
Cost of Goods Sold
Cost of goods sold decreased to $51,247 for the nine months ended April 30, 2016, compared to $70,550 for the comparable period in 2015. The decline is due to lower manufacturing costs.
Gross Profit
Gross profit decreased to $14,138 for the nine months ended April 30, 2016, compared to $15,345 for the nine months ended April 30, 2015. This was caused by the decrease in sales prices and manufacturing costs discussed above.
Sales and Marketing Expenses
We recognized sales and marketing expenses of $189,934 and of $387,786 for the nine months ended April 30, 2016 and 2015, respectively. We have reduced to the cost of our advertising and promotional spend as we have targeted more effective methods.
General and Administrative Expenses
We recognized general and administrative expenses $703,032 and of $711,158 for the nine months ended April 30, 2016 and 2015, respectively. The decrease was due to lower expenditure on professional fees and payroll expenses.
Interest Expense
Interest expense increased from $427,798 for the nine months ended April 30, 2015 to $782,569 for the nine months ended April 30, 2016. Interest expense for the nine months ended April 30, 2016 included amortization of discount on convertible notes payable in the amount of $597,548, compared to $329,354 for the comparable period of 2015. The remaining amount is the result of the Company entering into interest-bearing convertible notes payable.
Net Loss
We incurred a net loss of $1,661,397 for the nine months ended April 30, 2016 as compared to $1,511,397 for the comparable period of 2015. The increase in the net loss was primarily the result of increased interest expense.
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Three months ended April 30, 2016 compared to the three months ended April 30, 2015.
Revenue
Revenue decreased to $29,053 for the three months ended April 30, 2016, compared to $34,885 for the three months ended April 30, 2015 as we earned less revenue per bottle of RWB Vodka.
Cost of Goods Sold
Cost of Goods Sold decreased to $20,665 for the three months ended April 30, 2016, compared to $32,583 for the comparable period in 2015. This is due to lower manufacturing costs for our RWB Vodka product.
Gross Profit
Gross profit increased to $8,388 for the nine months ended April 30, 2016, compared to $2,302 for the three months ended April 30, 2015 as a result of the decline in per unit revenue and lower manufacturing costs.
Sales and Marketing Expenses
We recognized sales and marketing expenses of $16,076 and $126,493 for the three months ended April 30, 2016 and 2015, respectively. This is a result of decreased expenses as we retarget our advertising.
General and Administrative Expenses
We recognized general and administrative expenses of $182,569 and $246,595 for the three months ended April 30, 2016 and 2015, respectively. The decline is due to lower professional fees.
Interest Expense
Interest expense increased from $137,730 for the three months ended April 30, 2015 to $236,834 for the nine months ended April 30, 2016. Interest expense for the three months ended April 30, 2016 included amortization of discount on convertible notes payable in the amount of $39,065, compared to $97,866 for the comparable period of 2015. The remaining difference is due to higher interest on our convertible notes payable, as we carried higher average debt balance this year.
Net Loss
We incurred a net loss of $427,091 for the three months ended April 30, 2016 as compared to $508,516 for the comparable period of 2015. The increase in the net loss was primarily the result of increased interest expense.
Liquidity and Capital Resources
At April 30, 2016, we had cash on hand of $3,042. The company has negative working capital of $1,447,443 . Net cash used in operating activities for the nine months ended April 30, 2016 was $833,506. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of April 30, 2016.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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