Table of Contents

 



 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                                             to                                            

 

Commission File Number 000-09358

 

BULOVA TECHNOLOGIES GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Florida
(State or other jurisdiction of
incorporation or organization)

83-0245581
(IRS Employer
Identification No.)

 

1501 Lake Avenue SE
Largo, Florida 33771

(Address of principal executive offices) (Zip Code)

 

(727) 536-6666
(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $.001 par value

(Title of Class)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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   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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “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.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No 

 

As of August 14, 2017, the Company had 545,031,216 shares of Common Stock and 4,000,000,000 shares of Preferred Stock issued and outstanding.

 

 

EXPLANATORY NOTE

 

 

The Company has not been able to have its independent auditor complete their review of the financial statements for the three and nine months ended June 30, 2017 as reported in this Form 10Q.

 

The Company understands that this report is deficient because the unaudited financial statements contained in this report for the three and nine months ended June 30, 2017 have not been reviewed by an independent registered public accountant as required by rule 10 - 01(d) regulation S-X.  The Company understands that completion of this independent review of its quarterly financial statements and the filing of an amendment will make this report current, although it will not be deemed timely for purposes of the rules governing eligibility to use registration statement on forms S-2 and S-3.  When the review is complete, the Company will file an amendment to this report which will include the required certifications of the Company's Principal Executive Officer and Principal Financial and Accounting Officer as required by sections 302 and 906 of the Sarbanes-Oxley Act.

 

 

BULOVA TECHNOLOGIES GROUP, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2017

 

TABLE OF CONTENTS

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 4. Controls and Procedures

26

 

 

PART II – OTHER INFORMATION

 

 

 

Item 6. Exhibits

28

 

 

Signatures

29

 

 

PART I

 

Item 1. Consolidated Financial Statements

 

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

   

June 30,

         
   

2017

   

September 30,

 
   

(unaudited)

   

2016

 

ASSETS

               
                 

Cash and equivalents

  $ 140,628     $ 650,262  

Accounts receivable, net

    2,191,188       2,325,582  

Inventory

    176,244       421,331  

Other current assets

    538,855       353,203  

Current assets from discontinued operations

    -       -  
                 

Total current assets

    3,046,915       3,750,378  
                 

Fixed assets, net

    9,880,724       10,745,924  

Other assets

    186,957       113,215  

Goodwill - (Note 4)

    4,789,772       4,789,772  

Non-current assets from discontinued operations

    -       -  
                 

Total Assets

  $ 17,904,368     $ 19,399,289  
                 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

               
                 

Accounts payable

  $ 1,894,353     $ 1,598,445  

Accounts payable – related parties

    2,412,400       1,786,436  

Accrued expenses and other current liabilities

    255,212       413,720  

Accrued expenses and other current liabilities – related parties

    1,378,416       1,137,163  

Current portion of long term debt

    11,531,457       4,553,201  

Current portion of notes payable – related parties

    848,889       412,720  

Current liabilities from discontinued operations

    -       1,111,962  
                 

Total current liabilities

    18,320,727       11,013,647  
                 

Amounts due shareholders

    97,015       419,260  

Derivative liability

    300,746       269,538  

Long term debt, net of current portion

    7,001,704       8,078,716  

Notes payable – related parties, net of current portion

    14,936,127       14,862,451  

Long term liabilities from discontinued operations

    -       10,800,000  
                 

Total liabilities

    40,656,319       45,443,612  
                 

Commitments and contingencies – (Note 9)

    -       -  
                 

Shareholders’ deficit:

               

Preferred stock, $.00001 par, authorized 5,000,000,000 shares; 4,000,000,000 issued and outstanding at June 30, 2017 and September 30, 2016

    40,000       40,000  

Common stock, $.001 par; authorized 500,000,000 shares; 499,658,688 and 343,752,151 issued and outstanding at June 30, 2017 and September 30, 2016

    499,659       343,752  

Subscription receivable

    (66,000 )     (66,000 )

Additional paid in capital in excess of par

    28,910,827       28,799,184  

Accumulated deficit

    (51,761,355 )     (55,419,392 )

Total Bulova Technologies Group, Inc. shareholders’ deficit

    (22,376,869 )     (26,302,456 )

Non-controlling interest in BT-Twiss Transport LLC

    (375,082 )     258,133  

Total shareholders’ deficit

    (22,751,951 )     (26,044,323 )
                 

Total liabilities and shareholders’ deficit

  $ 17,904,368     $ 19,399,289  

 

See accompanying notes to consolidated financial statements.

 

 

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JUNE 30, 2017 AND 2016
(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

June 30,

   

June 30,

 
   

2017

   

2016

   

2017

   

2016

 
                                 

Revenues

    6,347,699       6,802,451     $ 18,994,103     $ 12,202,964  

Cost of revenues

    5,065,152       4,587,366       14,332,043       8,492,667  
                                 

Gross profit

    1,282,547       2,215,085       4,662,060       3,710,297  
                                 

Selling and administrative expense

    1,753,233       2,144,986       5,548,638       4,332,125  

Stock based compensation

    -       19,125       3,100       1,835,124  

Depreciation and amortization expense

    531,028       426,339       1,242,866       624,572  

Interest expense

    2,837,583       621,110       5,662,899       1,348,431  
                                 

Total expenses

    5,121,844       3,211,560       12,457,503       8,140,252  
                                 

Loss from operations

    (3,839,297 )     (996,475 )     (7,795,443 )     (4,429,955 )
                                 

Other income (expense)

                               

Derivative gain (loss)

    101,121       (267,153 )     100,382       (267,153 )

Other income (loss)

    (37,710 )     30,001       (43,132 )     163,771  
                                 

Loss from continuing operations before income taxes

    (3,775,886 )     (1,233,627 )     (7,738,193 )     (4,533,337 )
                                 

Income tax expense

    -       -       -       -  
                                 

Loss from continuing operations

    (3,775,886 )     (1,233,627 )     (7,738,193 )     (4,533,337 )

Income (loss) from discontinued operations, net of tax

                               

Operating expenses and interest

    -       (22,409 )     (33,385 )     (492,971 )

Gain on deconsolidation of subsidiary

    -       -       10,796,400       -  
                                 

Total income (loss) from discontinued operations, net of tax

    -       (22,409 )     10,763,015       (492,971 )
                                 

Net income (loss)

    (3,775,886 )     (1,256,036 )     3,024,,822       (5,026,308 )

Net income (loss) attributable to non-controlling interest in BT-Twiss Transport LLC

    (245,469 )     (4,781 )     (633,215 )     20,889  
                                 

Net income (loss) attributable to Bulova Technologies Group, Inc.

    (3,530,417 )     (1,251,255 )   $ 3,658,037     $ (5,047,197 )
                                 

Basic and diluted net income (loss) per share

                               

Income (loss) from continuing operations

  $ (.01 )   $ (.01 )   $ (.02 )   $ (.05 )

Income (loss) from discontinued operations

    -       -       .02       (.01 )

Net income (loss) per share

  $ (.01 )   $ (.01 )   $ -     $ (.06 )
                                 

Weighted average shares outstanding, basic and diluted

    499,658,688       84,365,877       461,958,885       77,319,557  

 

See accompanying notes to consolidated financial statements.

 

 

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2017 AND 2016
(Unaudited)

 

   

2017

   

2016

 

Cash flows from operating activities:

               

Loss from continuing operations

  $ (7,738,193 )   $ (4,533,337 )

Income (Loss) from discontinued operations

    10,763,015       (492,971 )

Net income (loss)

    3,024,822       (5,026,308 )

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

               

Depreciation and amortization

    1,069,976       624,572  

Stock based compensation

    3,100       1,835,124  

Amortization of debt discount

    172,890       144,878  

Interest expense from refinance transactions

    2,859,825       -  

(Gain) loss on sale of fixed assets

    40,818       (73,728 )

Gain on change in fair value of derivative liability

    (100,382 )     267,153  

Changes in operating assets and liabilities

               

Accounts receivable

    134,394       (493,219 )

Inventory

    245,087       (507,320 )

Prepaid expenses and other assets

    (259,394 )     (319,324 )

Accounts payable and accrued expenses

    1,251,567       1,461,979  
                 

Net cash flows from operating activities – continuing operations

    8,442,703       (2,086,193 )

Net cash flows from operating activities – discontinued operations

    (10,800,462 )     450,000  

Net cash flows from operating activities

    (2,357,759 )     (1,636,193 )
                 

Cash flows from investing activities:

               

Acquisition of fixed assets

    (1,172 )     (1,846 )

Cash purchased with business acquisition

    -       196,229  

Proceeds from disposal of assets

    458,559       132,500  

Cash payments in business acquisition

    -       (5,166,155 )
                 

Net cash flows from investing activities – continuing operations

    457,387       (4,839,272 )

Net cash flows from investing activities – discontinued operations

    -       -  

Net cash flows from investing activities

    457,387       (4,839,272 )
                 

Cash flows from financing activities:

               

Repayment of amounts due shareholders

    (322,245 )        

Increases in long term debt

    7,228,298       9,958,923  

Repayment of long term debt

    (5,894,897 )     (2,875,330 )

Increases in notes payable – related parties

    815,500       133,940  

Repayment of notes payable – related parties

    (408,418 )     -  
                 

Net cash flows from financing activities – continuing operations

    1,418,238       7,217,533  

Net cash flows from financing activities – discontinued operations

    (27,500 )     -  

Net cash flows from financing activities

    1,390,738       7,217,533  
                 

Decrease in cash and cash equivalents

    (509,634 )     742,068  

Cash and cash equivalents, beginning

    650,262       70,347  
                 

Cash and cash equivalents, ending

  $ 140,628     $ 812,415  

Cash paid for interest

  $ 2,399,792     $ 905,776  

Cash paid for taxes

  $ -     $ -  
                 

Supplemental disclosure of Non-Cash Investing and Financing Activities

               
                 

December 2015, issuance of 1,000,000 common stock warrants in satisfaction of debt

  $ -     $ 26,228  

January 2016, issuance of 5,100,000 common shares in partial satisfaction of debt

  $ -     $ 306,000  

October 2016, issuance of 6,561,299 common shares as a true up to a prior conversion of debt

  $ -     $ -  

October 2016, issuance of 7,500,000 common shares from exercise of warrants

  $ 14,250     $ -  

December 2016, issuance of 26,041,667 as partial payment on a settlement

  $ 25,000     $ -  

December 2016, issuance of 67,000,000 common shares as partial payment of account payable to a related party

  $ 207,700     $ -  

December 2016, issuance of 27,803,571 common shares as conversion of debt

  $ 10,000     $ -  

January 2017, issuance of 20,000,000 common shares as conversion of debt

  $ 7,500     $ -  

February 2017, issuance of 1,000,000 common shares for services

  $ 3,100     $ -  

Financed the acquisition of new equipment

  $ 719,425     $ -  

Satisfaction of debt on sale of assets

  $ 16,444     $ -  

Principal and interest payments through refinanced debt

  $ 5,596,750     $ -  

 

See accompanying notes to consolidated financial statements.

 

 

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED JUNE 30, 2017
(Unaudited)

 

   

Total Bulova Technologies Group, Inc. Shareholders' Deficit

                 
   

Preferred Stock

   

Common Stock

                                                 
   

Number of

Shares

   

Amount

   

Number of

Shares

   

Amount

   

Subscription Receivable

   

Common Stock Issuable

   

Additional Paid-In Capital

   

Accumulated Deficit

   

Non-Controlling Interest

   

Total

 
                                                                                 

Balances, October 1, 2015

    4,000,000,000     $ 40,000       69,093,518     $ 69,093     $ (66,000 )   $ -     $ 26,231,658     $ (47,350,507 )   $ -     $ (21,075,756 )

Issuance of shares from the exercise of warrants

                    75,000       75                       (75 )                     -  

Issuance of warrants associated with settlement of debt

                                                    26,228                       26,228  

Issuance of shares for services

                    5,000,000       5,000                       317,500                       322,500  

Issuance of warrants for services

                                                    1,380,999                       1,380,999  

Issuance of shares for services

                    2,500,000       2,500                       110,000                       112,500  

Issuance of shares as part of acquisition

                    3,000,000       3,000                       154,500                       157,500  

Issuance of warrants as part of acquisition

                                                    26,250                       26,250  

Issuance of shares as partial settlement of debt

                    5,100,000       5,100                       300,900                       306,000  

Issuance of shares from the exercise of warrants

                    3,510,811       3,511                       (3,511 )                     -  

Issuance of shares for services

                    850,000       850                       18,275                       19,125  

Issuance of shares for debt conversion

                    9,163,834       9,164                       45,836                       55,000  

Issuance of shares for debt conversion

                    206,458,988       206,459                       116,324                       322,783  

Issuance of shares from the exercise of warrants

                    39,000,000       39,000                       74,300                       113,300  

Net loss for the year ended September 30, 2016

                                                            (8,068,885 )     258,133       (7,810,752 )
                                                                                 

Balances, September 30, 2016

    4,000,000,000     $ 40,000       343,752,151     $ 343,752     $ (66,000 )   $ -     $ 28,799,184     $ (55,419,392 )   $ 258,133     $ (26,044,323 )

Issuance of shares for debt conversion

                    6,561,299       6,561                       (6,561 )                     -  

Issuance of shares from the exercise of warrants

                    7,500,000       7,500                       6,750                       14,250  

Issuance of shares for a settlement

                    26,041,667       26,042                       (1,042 )                     25,000  

Issuance of shares as partial satisfaction of an account payable to a related party

                    67,000,000       67,000                       140,700                       207,700  

Issuances of shares for debt conversion

                    27,803,571       27,804                       (17,804 )                     10,000  

Issuance of shares for debt conversion

                    20,000,000       20,000                       (12,500 )                     7,500  

Issuance of shares for services

                    1,000,000       1,000                       2,100                       3,100  

Net income (loss) for the nine months ended June 30, 2017

                                                            3,658,037       (633,215 )     3,024,822  
                                                                                 

Balances, June 30, 2017

    4,000,000,000     $ 40,000       499,658,688     $ 499,659     $ (66,000 )   $ -     $ 28,910,827     $ (51,761,355 )   $ (375,082 )   $ (22,751,951 )

 

See accompanying notes to consolidated financial statements.

 

 

BULOVA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED JUNE 30, 2017

(Unaudited)

 

 

1.

Description of business:

 

Bulova Technologies Group, Inc. ("BTGI" or the "Company") was originally incorporated in Wyoming in 1979 as “Tyrex Oil Company”. During 2007, the Company divested itself of all assets and previous operations. During 2008, the Company filed for domestication to the State of Florida, and changed its name to Bulova Technologies Group, Inc. and changed its fiscal year from June 30 to September 30.

 

On January 1, 2009, the Company acquired the stock of 3Si Holdings, Inc. (“3Si”), a private company that was under common control and began operations in Florida.  The assets and operations of 3Si at that time were accounted for in three operating subsidiaries, BT Manufacturing Company LLC, Bulova Technologies Ordnance Systems LLC, and Bulova Technologies (Europe) LLC (formerly Bulova Technologies Combat Systems LLC).

 

From January 1, 2009, Bulova Technologies Group, Inc. operated in multiple business segments. Government Contracting was focused on the production and procurement of military articles for the US Government and other Allied Governments throughout the world, and was accounted for through two of the Company’s wholly owned subsidiaries, Bulova Technologies Ordnance Systems LLC, and Bulova Technologies (Europe) LLC. In October 2012, this segment was discontinued through the sale of substantially all of the assets of Bulova Technologies Ordnance Systems LLC, with any remaining assets and liabilities associated with that operation being segregated and reported as a discontinued operation. Contract Manufacturing included the production of cable assemblies and circuit boards accounted for through BT Manufacturing Company LLC, a wholly owned subsidiary that was discontinued and disposed of in March 2011.

 

In July of 2013, the Company began the sale of high precision industrial machine tools through a distributor network accounted for through Bulova Technologies Machinery LLC, a newly formed subsidiary.

 

In January 2016, the Company, through a newly created joint venture, BT-Twiss Transport LLC, acquired 100% of the outstanding common stock of Twiss Transport, Inc., Twiss Logistics, Inc. and Twiss Cold Storage, Inc. and entered into the transportation and logistics industry of freight storage and movement. The joint venture agreement provides for Bulova’s 30% ownership interest, however, Bulova is fully responsible for operational management of the acquired entities, and is liable for approximately 4.6 million of convertible debt utilized to accomplish the acquisition. Accordingly, the joint venture financial statements have been consolidated with those of the Company.

 

 

 

2.

Principles of consolidation and basis of presentation:

 

The accompanying consolidated balance sheet as of September 30, 2016, has been derived from audited financial statements.

 

The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s latest Form 10-K.

 

We consolidate all entities we control by ownership of a majority voting interest and variable interest entities for which we have the power to direct activities and the obligation to absorb losses. Our judgment in determining if we consolidate a variable interest entity includes assessing which party if any has the power and benefits. Therefore, we evaluate which activities most significantly affect the variable interest entities economic performance, and determine whether we or another party have the power to direct these activities. The following is a listing of the entities we control, and the variable interest entity we have included in our consolidated financial statements:

 

Bulova Technologies Machinery LLC - Formed in July of 2013, Bulova Technologies Machinery LLC represents the Company's entree into the machine tool business, and imports industrial machine tools and related equipment from international sources and establishes a Distributor/Dealer Network throughout the United States and Canada.

 

 

Bulova Technologies Finance LLC - This subsidiary was created in 2015 to provide in-house financing to purchasers of BTM equipment. In August and September of 2015, the Company accomplished its first finance activities through equipment leasing transactions.

 

Bulova Technologies (Europe) LLC – co-located at the Company’s headquarters in Clearwater, Florida, this wholly-owned subsidiary (“Europe”), has been engaged in several lines of related business, including a Mortar Exchange Program, the offsets program, the administration of the blanket purchase agreement awarded to Ordnance by the Government, and the brokerage of commercial, small caliber ammunition. Europe continues to pursue the brokerage of the sale of Eastern European commercial small caliber ammunition to large U.S. customers on a wholesale basis and to small retail customers in the U.S.

 

Bulova Technologies Advanced Products LLC - co-located at the Company’s headquarters in Clearwater, Florida, this subsidiary (“BTAP”) actively seeks technologically innovative products in industries in which the Bulova Technologies name and management team can bring value. The Company commenced operations in mid-2015 through Bulova Technologies Healthcare Products LLC and a joint venture relationship with Bulova Technologies Compliance and Security LLC.

 

Bulova Technologies Healthcare Products LLC -This subsidiary was formed in 2015 as the Company’s entrant into the health care field. This subsidiary has focused its attention initially on a technologically innovative and patented cast product for which it has certain U.S. distribution rights.

 

Bulova Technologies Compliance and Security LLC - co-located at the Company’s headquarters in Clearwater, Florida, this company is a joint venture. The Company’s ownership interest in this joint venture is 30 percent. The Company accounts for this joint venture interest using the equity method of accounting and does not consolidate its operations. At June 30, 2017, the operations of the joint venture reflect a loss in excess of the Company’s investment. As a result, the amount carried on the balance sheet as of June 30, 2017, is $0. This company was established to market the Enterprise Content Management Library ("ECM Library"©) and the companion K-3 Data Encryption software to government agencies, banks, law firms and mid to large size businesses. The ECM Library© software system provides for advanced search capability, high demand security, protection notification alerts, and back-up repository maintenance. The software provides unique layers of security in the access to the stored data. These layers actively monitor access to repository data, download and transmission of confidential files, insertion of external memory devices, on-line searches that have been performed, web-sites visited, and e-mails sent or received using the repository content.

 

Bulova Technologies Ordnance Systems LLC. - Prior to discontinuance, this operation was located on 261 acres in Mayo, Florida. Ordnance was a load, assembly, and pack facility specializing in fuzes, safe and arming devices and explosive simulators. Bulova Technologies Ordnance Systems LLC is registered with the United States Department of State Directorate of Defense Trade Controls (DDTC). It produced a variety of pyrotechnic devices, ammunition and other energetic materials for the U. S. Government and other allied governments throughout the world. In October 2012, Ordnance sold substantially all of its assets to an unrelated party.  As a result, the only remaining work with the DoD performed by Ordnance was the nominal performance of the contracts which were transferred (until a novation of the transferred contracts was to take place) and a remaining blanket purchase agreement (BPA) with the DoD whereby the DoD may order non-standard (e.g. Eastern European) weapons for shipment to friendly forces abroad. The BPA expired in October 2015. Ordnance has not sought any new contracts from the DoD since 2012. On March 29, 2017, the Company sold all of its ownership interests in Ordnance.

 

BT Twiss Transport LLC – This company is a joint venture. The Company’s ownership interest in this joint venture is 30 percent. The Company accounts for this joint venture interest as a variable interest entity, and consolidates its operations. This company was established to facilitate the acquisition on January 28, 2016 of Twiss Transport, Inc., Twiss Logistics, Inc., and Twiss Cold Storage, Inc.

 

 

Twiss Transport, Inc. is a full-service Truckload and LTL freight shipping company specializing in the transportation of Frozen, Chilled and Dry goods to and from anywhere within the Continental United States.

 

Twiss Logistics, Inc. is a Truckload Brokerage company that negotiates competitive rates and utilizes a network of reliable carriers other than Twiss Transport, to facilitate the movement of additional freight in and out of Florida and anywhere else in the Continental United States.

 

Twiss Cold Storage, Inc. operates a Cold Storage facility of 132,055 square feet of frozen and chilled warehouse space providing refrigeration service for perishable products in transit through multiple distribution channels, as well as those provided by Twiss Transport and Twiss Logistics.

 

In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments, unless otherwise indicated) necessary to present fairly the financial position as of June 30, 2017, and September 30, 2016 and the results of operations and cash flows for the three and nine months ended June 30, 2017 and 2016.

 

 

Subsequent Events

 

The Company has evaluated subsequent events through the date of filing this Form 10-Q to assess the need for potential recognition or disclosure in this report. Based upon this evaluation, management determined that all subsequent events that require recognition in the financial statements have been included (Note 12).

 

Business Segments

 

Commencing with the acquisition of Twiss Transport, Inc., Twiss Logistics, Inc. and Twiss Cold Storage, Inc., the Company began operating in two distinct business segments, transportation services and commercial sales. The transportation segment provides freight handling as well as transport, and the commercial sales segment is involved in sales and distribution of industrial machines, ammunition, and healthcare products. Financial information by segment is presented in the notes to the consolidated financial statements.

 

Concentrations – Major Customers

 

For the nine months ended June 30, 2017, approximately 40% of the revenue accounted for within the Company’s transportation business segment was provided by three customers, one representing approximately 26% and the other two approximately 7% each.

 

Use of Estimates

 

The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

 

Financial Instruments

 

The carrying amounts of cash, receivables and current liabilities approximated fair value due to the short-term maturity of the instruments. Debt obligations are carried at cost, which approximated fair value due to the prevailing market rate for similar instruments.

 

Fair Value Measurement

 

All financial and nonfinancial assets and liabilities were recognized or disclosed at fair value in the consolidated financial statements. This value was evaluated on a recurring basis (at least annually). Generally accepted accounting principles in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a measurement date. The accounting principles also established a fair value hierarchy which required an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs were used to measure fair value.

 

Level 1: Quotes market prices in active markets for identical assets or liabilities.

 

Level 2: Observable market based inputs or unobservable inputs that were corroborated by market data.

 

Level 3: Unobservable inputs that were not corroborated by market data.

 

Equity method of accounting – Joint Venture

 

The Company accounts for its joint venture interest in Bulova Technologies Compliance and Security LLC using the equity method of accounting. The Company’s ownership interest in this joint venture is 30 percent. At June 30, 2017, the operations of the joint venture reflect a loss in excess of the Company’s investment. As a result, the amount carried on the balance sheet as of June 30, 2017, is $0.

 

Variable Interest Entities

 

Through the formation of BT Twiss Transport LLC, the Company is now a 30% owner in this new joint venture, which was utilized to acquire the three transportation services companies described in Note 4. To accomplish this acquisition, the Company provided approximately $4.6 million of the financing necessary through the issuance of convertible debt. Through a joint venture operating agreement, the Company has full power to direct the activities most significant to the economic performance of this joint venture. As a result, the Company is the primary beneficiary, and the joint venture has been consolidated in the Company’s consolidated financial statements.

 

 

Cash and Cash Equivalents

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains its cash deposits in major financial institutions in the United States. At times deposits within a bank may exceed the amount of insurance provided on such deposits. Generally, these deposits are redeemed upon demand and, therefore, are considered by management to bear minimal risk.

 

Accounts receivable

 

Accounts receivable represent amounts due from customers in the ordinary course of business from sales activities in each of the Company’s business segments. The Company considers accounts more than 90 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable. At June 30, 2017 and September 30, 2016, the Company has provided an allowance for doubtful accounts of $0 and $11,468 respectively.

 

Inventory

 

Inventory is stated at the lower of cost (first-in, first-out) or market. Market is generally considered to be net realizable value. Inventory consisted of items held for resale and materials and supplies for sale and service.

 

The breakdown of inventory at June 30, 2017 and September 30, 2016 is as follows:

 

   

June 30,

   

September 30,

 
   

2017

   

2016

 

Finished goods

  $ 126,244     $ 371,331  

Materials and supplies

    50,000       50,000  
                 

Total inventory of continuing operations

  $ 176,244     $ 421,331  

 

 

Other current assets

 

Other current assets are comprised of the following at June 30, 2017 and September 30, 2016

 

   

June 30,

2017

   

September 30,

2016

 
                 

Prepaid expenses and deposits

  $ 538,855     $ 353,203  
                 
    $ 538,855     $ 353,203  

 

 

Fixed Assets

 

Fixed assets are stated at cost, less accumulated depreciation. Capital lease assets are recognized at the lower of fair value or the present value of future minimum lease payments. Depreciation on assets under capital leases is included in depreciation expense. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related assets. Useful lives range from 5 to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Fixed assets acquired as part of a business acquisition are valued at fair value. 

 

 

Fixed assets are comprised of the following at June 30, 2017 and September 30, 2016

 

   

June 30,

   

September 30,

 
   

2017

   

2016

 
                 

Funiture, fixtures and equipment

    368,419       476,350  

Tractors and trailers

    9,993,798       9,936,769  

Capital lease assets

    1,336,243       1,336,243  

Vehicle and other

    55,770       39,654  
      11,754,230       11,789,016  

Less accumulated depreciation

    (1,873,506 )     (1,043,092 )
                 

Net fixed assets

  $ 9,880,724     $ 10,745,924  

 

Other assets 

 

Other assets are comprised of the following at June 30, 2017 and September 30, 2016

 

   

June 30,

   

September 30,

 
   

2017

   

2016

 

Advances - Bulova Technologies Compliance & Security

  $ 162,338     $ 85,729  

Refundable deposits

    24,619       27,486  
                 
    $ 186,957     $ 113,215  

 

Impairment of Long-Lived Assets 

 

The Company evaluates the carrying value of its long-lived assets at least annually. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted future cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell.

 

Derivative Financial Instruments 

 

The fair value of an embedded conversion option that is convertible into a variable amount of shares that include price protection reset provision features are deemed to be “down-round protection” and, therefore, do not meet the scope exception for treatment as a derivative under ASC 815 “Derivatives and Hedging”, since “down-round protection” is not an input into the calculation of the fair value of the conversion option and cannot be considered “indexed to the Company’s own stock” which is a requirement for the scope exception as outlined under ASC 815. The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

 

As a result of entering into convertible credit facilities during the nine months ended June 30, 2016, for which such instruments contained variable conversion features with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation.

 

The Black-Scholes option valuation model was used to estimate the fair value of these conversion options. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the conversion option. The Company used the following range of Black-Scholes assumptions in arriving at the fair value of this conversion as of June 30, 2017, in the amount of $300,746.

 

 

 

June 30,

 

2017

       

Expected Life in Years

0.25

to 0.75

Risk-free Interest Rates

0.89%

to 1.03%

Volatility

327.5%

to 342.3%

Dividend Yield

 

0%  

 

Discontinued Operations

 

In accordance with ASC 205-20, Presentation of Financial Statements-Discontinued Operations (“ASC 205-20”), we reported the results of Bulova Technologies Ordnance Systems LLC, formerly our government contracting segment as discontinued operations. The application of ASC 205-20 is discussed in Note 3 “Discontinued Operations”

 

Revenue Recognition

 

Commercial sales revenue is generally recognized upon the shipment of product to customers or the acceptance by customers of the product. Allowances for sales returns, rebates and discounts are recorded as a component of net sales in the period the allowances were recognized.

 

Revenue from rental payments received on equipment operating leases is recognized on a straight-line basis over the term of the lease.

 

The Company recognizes transportation related revenues on the date the shipments are delivered to the customer. Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services. Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as the Company acts as a principal with substantial risks as primary obligor.

 

Cost of Revenues

 

The costs of revenues relative to our Commercial Sales segment include direct materials and labor costs, and indirect labor associated with production and shipping costs.

 

The cost of revenues relative to our Transportation Services segment include tractor and trailer maintenance and operational costs as well as the costs associated with drivers.

 

Advertising Costs

 

The costs of advertising are expensed as incurred and are included in the Company’s operating expenses. The Company incurred advertising expenses of $7,242 for the nine months ended June 30, 2017 as compared to $21,165 for the nine months ended June 30, 2016.

 

Shipping Costs

 

The Company includes shipping costs in cost of revenues.

 

Income Taxes

 

Income tax benefits or provisions are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities were recovered or settled. Deferred tax assets were also recognized for operating losses that were available to offset future taxable income and tax credits that were available to offset future federal income taxes, less the effect of any allowances considered necessary. The Company follows the guidance provided by ASC 740, Accounting for Uncertainty in Income Taxes, for reporting uncertain tax provisions.

 

Income (Loss) per Common Share

 

Basic net loss per share excludes the impact of common stock equivalents. Diluted net income (loss) per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. As of June 30, 2017, there were 140,780,832 vested common stock warrants outstanding, which were not included in the calculation of net income per share-diluted because they were anti-dilutive due to current market prices.

 

 

Effect of Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.

 

ASU Update 2014-09 Revenue from Contracts with Customers (Topic 606) issued May 28, 2014 by FASB and IASB converged guidance on recognizing revenue in contracts with customers on an effective date after December 31, 2017 will be evaluated as to impact and implemented accordingly.

 

ASU Update 2014-15 Presentation of Financial Statements-Going Concern (Sub Topic 205-40) issued August 27, 2014 by FASB defines managements responsibility to evaluate whether there is a substantial doubt about an organizations ability to continue as a going concern. The additional disclosure required is effective after December 31, 2016 and will be evaluated as to impact and implemented accordingly.

 

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Cost. The guidance requires an entity to present debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement. ASU 2015-03 is effective for reporting periods beginning after December 15, 2015 including interim periods within those annual periods.

 

In July 2015, the FASB issued ASU 2015-11, Inventory, which simplifies the measurement principle of inventories valued under the First-In, First-Out ("FIFO") or weighted average methods from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-1 1 is effective for reporting periods beginning after December 15, 2016 including interim periods within those annual periods. We do not expect the standard to have a material impact on our Consolidated Financial Statements.

 

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires that defe1Ted tax assets and liabilities be classified as non-current on the consolidated balance sheet. ASU 2015-17 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. Upon adoption, ASU 2015-17 may be applied either prospectively or retrospectively. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, to improve financial reporting about leasing transactions. This ASU will require organizations that lease assets ("lessees") to recognize a lease liability and a right-of-use asset on its balance sheet for all leases with terms of more than twelve months. A lease liability is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset represents the lessee's right to use, or control use of, a specified asset for the lease term. The amendments in this ASU simplify the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. This ASU leaves the accounting for the organizations that own the assets leased to the lessee ("lessor") largely unchanged except for targeted improvements to align it with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

 

The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the potential impact of ASU 2016-02 on its Consolidated Financial Statements.

 

Going Concern Matters

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has sustained substantial losses. These factors, among others, raise substantial doubt that the Company may not be able to continue as a going concern for a reasonable period of time.

 

The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

 

 

3. Discontinued Operations

 

In October of 2012, Bulova Technologies Ordnance Systems LLC sold substantially all of its assets to an unrelated party, and discontinued operations. As a result of the decision to sell these assets, the Company has identified the assets and liabilities of Ordnance as pertaining to discontinued operations at June 30, 2017 and September 30, 2016 and has segregated its operating results and presented them separately as a discontinued operation for all periods presented.

 

On March 29, 2017, the Company entered into a Member Purchase Agreement, to sell all of the membership interests of this wholly-owned subsidiary. The buyer is an independent third party and has no prior relationship to the Company and / or its officers. The Company recognized a gain on the deconsolidation of this subsidiary within the accounting for this discontinued operation as of March 31, 2017.

 

Summarized operating results for discontinued operations is as follows:

 

   

Three Months Ended June 30,

   

Nine Months Ended June 30,

 
   

2017

   

2016

   

2017

   

2016

 
                                 

Revenue

  $ -     $ -     $ -     $ -  

Cost of Sales

    -       -       -       -  

Gross profit

    -       -       -       -  

Operating expenses and interest

    -       (22,409 )     (33,385 )     (492,971 )

Other income (expense)

    -       -       -       -  

Income (loss) from operations

    -       (22,409 )     (33,385 )     (492,971 )

Gain on deconsolidation of subsidiary

    -       -       10,796,400       -  

Income tax benefit

    -       -       -       -  

Income (loss) from discontinued operations, net of tax

  $ -     $ (22,409 )   $ 10,763,015     $ (492,971 )

 

The income (loss) from discontinued operations above do not include any income tax effect as the Company was not in a taxable position due its continued losses and a full valuation allowance

 

Summary of assets and liabilities of discontinued operations is as follows:

 

   

June 30,

   

September 30,

 
   

2017

   

2016

 
                 

Cash

  $ -     $ -  

Accounts receivable

    -       -  

Inventory

    -       -  

Other current assets

    -       -  

Total current assets from discontinued operations

    -       -  

Property plant and equipment - net

    -       -  

Other assets

    -       -  

Total assets from discontinued operations

  $ -     $ -  
                 
                 

Accounts payable and accrued expenses

  $ -     $ 462  

Current portion of long-term debt

    -       1,111,500  

Provision for loss on disposal of business segment

    -       -  

Total current liabilities from discontinued operations

    -       1,111,962  

Deferred revenue - contract dispute

    -       10,800,000  

Total liabilities from discontinued operations

  $ -     $ 11,911,962  

 

 

4. Business Combination – Variable Interest Entity and Intangibles

 

BT-Twiss Transport, LLC

 

As discussed in Note 1, on January 28, 2016, the Company, through its joint venture entity, BT-Twiss Transport LLC, closed on the acquisition of 100% of the outstanding stock of Twiss Transport, Inc., Twiss Logistics, Inc., and Twiss Cold Storage, Inc. in a transaction accounted for as a variable interest entity. The determination to include a variable interest entity in the consolidated financial statements of the Company is based on an evaluation of the benefits and obligations associated with the Company’s active role in the entity’s design and involvement in its ongoing activities. More specifically, was the determination that the Company is established as the primary beneficiary based on possessing both of the following:

 

 

Power to direct the activities of the VIE that most significantly impact the entity’s economic performance through an operating agreement entrusting full operational control and assets to the Company.

 

 

An exposure to absorb losses of the entity that could potentially be significant to the VIE through the provision of approximately $4.6 million dollars of financing to complete the acquisition through convertible debt.

 

Accordingly, the results of BT-Twiss Transport LLC are included in the accompanying consolidated financial statements only from the acquisition date through June 30, 2017. The recorded cost of this acquisition was based upon the fair value of the Company’s acquired based on an independent valuation. An intangible asset for goodwill has been recorded in the amount of $4,789,772. Generally accepted accounting principles do not allow the amortization of goodwill, but instead require an annual evaluation of the amount for impairment.

 

The total purchase price of the three companies was calculated as follows:

 

Cash consideration

  $ 5,166,155  

Convertible promissory note

    4,666,155  

3,000,000 restricted common shares

    157,500  

Warrants to purchase 500,000 common shares

    26,250  
         

Total purchase price

  $ 10,016,060  

 

Goodwill is calculated by comparing the total purchase price to the fair values of assets acquired and liabilities assumed in connection with this acquisition by the Company’s joint venture, as follows:

 

Total Purchase Price

  $ 10,016,060  
         

Fair Value of Assets and Liabilities

       

Cash

  $ 196,229  

Accounts receivable

    1,671,342  

Inventory

    50,000  

Prepaid expenses and other assets

    216,905  

Property and equipment

    11,001,267  

Other assets

    23,648  

Less current liabilities assumed

    (1,326,652 )

Less long-term debt assumed

    (6,606,451 )
      5,226,288  
         

Calculated Goodwill

  $ 4,789,772  

 

5.  Contract Dispute - Discontinued Operations

 

At September 30, 2016, and through March 29, 2017, the Company included in liabilities of discontinued operations the amount of $10,800,000 relative to a contract performance dispute of its then wholly owned subsidiary, Bulova Technologies Ordnance Systems LLC, with the US Government. This amount represented deferred revenue arising from the percentage of completion accounting applied to a contract that was terminated prior to its completion. Ordnance asserted various claims in this dispute and, consequently, carried this amount as long term pending resolution of the counter claims. On March 29, 2017, the Company sold 100% of its ownership interest in Ordnance, and recognized a gain on the deconsolidation of this subsidiary. Consequently, Bulova Technologies Ordnance Systems LLC is no longer included in the consolidated financial statements of the Company.

 

 

6. Long Term Debt

 

Long term debt consisted of the following at:

 

   

June 30, 2017

   

September 30, 2016

 
                 

Note payable to Keehan Trust Funding, LLC as amended on February 16, 2016 in the amount of $1,600,000. This note is secured by the assignment of potential proceeds from a claim against a terminated government contract with a value in excess of $4,700,000.

    1,051,500       1,111,500  
                 

Note payable to Ford Credit dated October 1, 2014 in the amount of $32,929 payable in 48 monthly installments of $744, secured by a vehicle

    -       17,187  
                 

Capital lease obligation dated July 16, 2015, bearing interest at 8%, payable at 3,355 monthly with a final payment due June 16, 2020, secured by equipment.

    108,027       131,495  
                 

Various notes payable to EIN CAP in various amounts with no stipulated interest rate, and various maturity dates, unsecured, totaling $142,100 net of discount of $32,375 and $102,335 net of discount of $29,975 respectively.

    109,725       72,360  
                 

Various notes payable to Complete Business Solutions in various amounts, with no stipulated interest rate, and various maturity dates, unsecured, totaling $3,724,202 net of discount of $776,868 and $1,173,521 net of discount of $185,046 respectively

    2,947,334       988,475  
                 

Various notes payable to Yellowstone Capital in various amounts with no stipulated interest rate, and various maturity dates, unsecured, totaling $641,945 net of discount of $174,338 and $212,382 net of discount of $66,944 respectively/

    467,607       145,438  
                 

Note payable to Sunshine Bank dated January 28, 2016 as a revolving credit line, bearing interest at Prime plus 1%, with a maturity of January 31, 2021, secured by the assets of BT Twiss Transport LLC.

    2,000,000       1,163,853  
                 

Note payable to Sunshine Bank dated January 28, 2016 in the amount of $2,000,000, bearing interest at 4.75%, with a maturity date of January 31, 2021, net of unamortized loan costs of $31,813 and $38,472 respectively, secured by the assets of BT-Twiss Transport, LLC.

    1,639,045       1,820,594  
                 

Various notes payable to Power Up Lending Group, LTD in various amounts, with no stipulated interest rate, and various maturity dates, unsecured, totaling $328,361 net of discount of $67,455 and $454,752 net of discount of $89,601 respectively

    260,906       365,151  
                 

Financing agreements for the purchase of insurance through Bank Direct payable in monthly installments

    302,577       21,500  
                 

Note payable to Sunshine Bank dated September 30, 2016 as a revolving credit line, bearing interest at Prime plus 1%, with a maturity of January 31, 2021, secured by the assets of Twiss Transport, Inc. net of unamortized loan costs of $46,095 and $54,769 respectively.

    4,630,607       6,408,431  
                 

Various equipment financing contracts for Transport Tractors and Trailers, with various terms and interest rates, secured by equipment

    2,018,116       409,820  
                 

Various capital lease obligations for Transport Tractors, with various payment terms, secured by equipment

    802,135       1,087,613  
                 

Various notes payable to Ace Funding in various amounts, with no stipulated interest rate, and various maturity dates, unsecured, totaling $400,250 net of discount of $114,593.

    285,657       -  
                 

Note payable to RAM Capital, with no stipulated interest rate, unsecured, totaling $185,658 net of discount of $57,644.

    128,014       -  
                 

Note payable to Caymus Funding, Inc., with no stipulated interest rate, unsecured, totaling $209,000 net of discount of $31,910.

    177,090       -  
                 

Note payable to New Era Lending, LLC, with no stipulated interest rate, unsecured, totaling $326,250 net of discount of $101,250.

    225,000       -  
                 

Two promissory notes payable to LiftForward, Inc., each in the amount of $510,000, each payable in twenty-four monthly installments of $25,997.23, with a maturity date of January 28, 2019, net of unamortized loan costs of $40,771

    798,989       -  
                 

Convertible promissory note payable to Power Up Lending Group LTD, bearing interest at 8% per annum, with a maturity date of October 28, 2017, in the amount of $53,000 net of discount of $17,666.

    35,334       -  
                 

Convertible promissory note payable to Power Up Lending Group LTD, bearing interest at 12% per annum, with a maturity date of October 28, 2017. In the amount of $78,590, net of discount of $69,858.

    8,732       -  
                 

Note payable to Fast Advance Funding with no stipulated interest rate, unsecured, totaling $327,500 net of discount of $77,500.

    250,000       -  
                 

Note payable to Nexgen Capital LLC with no stipulated interest rate, unsecured, totaling $122,080 net of discount of $35,920.

    86,160       -  
                 

Note payable to Queen Funding LLC with no stipulated interest rate, unsecured, totaling $274,641 net of discount of $80,802.

    193,839       -  
                 

Note payable to Allianz with no stipulated interest rate, unsecured.

    6,767       -  
                 
      18,533,161       13,743,417  

Less current portion pertaining to continuing operations

    (11,531,457 )     (4,553,201 )

Less current portion pertaining to discontinued operations

    -       (1,111,500 )

Less long term portion associated with discontinued operations

    -       -  
    $ 7,001,704     $ 8,078,716  

 

 

Principal maturities of long term debt for the next five years and thereafter are as follows:

 

Period ended June 30,

       

2018

  $ 11,531,457  

2019

    2,111,107  

2020

    1,874,791  

2021

    2,463,059  

2022

    552,747  

Thereafter

    -  
    $ 18,533,161  

 

6. Notes Payable – Related Parties

 

Notes payable related parties consisted of the following at:

 

   

June 30, 2017

   

September 30, 2016

 
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to NFC III LLC bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    1,356,819       1,356,819  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to SIII Associates Limited Partnership bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    1,341,755       1,341,755  
                 

Promissory note as of September 30, 2014, exchanged on January 1, 2015 for a Convertible promissory note payable to SIII Associates Limited Partnership bearing interest at 8%. This note matures and all principal and interest is due and payable on March 31, 2020

    100,000       100,000  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to SV Associates Limited Partnership bearing interest at 8%. These notes mature and all principal and interest is due and payable on September 15, 2017 for $3,500 and the balance of $116,000 on March 31, 2020

    119,500       119,500  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to Craigmore Machinery Company bearing interest at 8%. These notes mature and all principal and interest is due and payable on September 15, 2017 for $155,000 and the balance of $403,712 on March 31, 2020

    558,712       556,212  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to Gary Shapiro bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    205,000       205,000  
                 

Promissory note payable to Craigmore DB Plan dated November 9, 2015 bearing interest at 8%. This note matures and all principal and interest is due and payable on March 31, 2020

    186,000       165,000  
                 

Promissory note as of September 30, 2014, exchanged on January 1, 2015 for a Convertible promissory note payable to Tropico Equity Partners LLC bearing interest at 8%. This note matures and all principal and interest is due and payable on March 31, 2020

    68,161       68,161  
                 

Convertible promissory note payable to Tropico Management LP bearing interest at 8%. This note matures and all principal and interest is due and payable on March 31, 2020

    10,606       10,606  
                 

Convertible promissory notes payable to SF NextGen bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    192,000       180,000  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to Banyan Capital Finance bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    23,000       23,000  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to Colleen Stacy Shapiro 2007 Trust bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    160,000       160,000  
                 

Convertible promissory note payable to Colleen Stacy Shapiro 2007 Trust bearing interest at 8%. This note matures and all principal and interest is due and payable on March 31, 2020

    20,000       20,000  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to Rachel E Shapiro Trust bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    51,500       51,500  
                 

Various promissory notes as of September 30, 2014, exchanged on January 1, 2015 for Convertible promissory notes payable to Shapiro Family D1 Trust bearing interest at 8%. These notes mature and all principal and interest is due and payable on March 31, 2020

    180,000       150,000  
                 

Promissory note as of September 30, 2014, exchanged on January 1, 2015 for a Convertible Promissory Note payable to The Shapiro Family D1 Trust dated bearing interest at 8%. This note matures and all principal and interest is due and payable on March 31,2020

    400,000       400,000  
                 

Convertible promissory note dated February 6, 2015 in the original amount of $4,000,000 bearing interest at 7%, interest payable quarterly, with a maturity date of February 5, 2021, net of discount of $465,833 and $563,333 respectively

    2,919,525       2,834,294  
                 

Convertible promissory note dated January 28, 2016 in the amount of $4,666,155 bearing interest at 5%, interest payable quarterly, convertible at $.10 per share, with a maturity date of January 28, 2020.

    4,666,155       4,666,155  
                 

Promissory note dated January 28, 2016 in the amount of $2,400,000 bearing interest at 4.24% with a maturity date of January 29, 2021, net of unamortized loan costs of $25,145 and $30,408 respectively.

    2,242,206       2,282,746  
                 

Promissory note dated February 3, 2011 in the amount of $229,755 bearing interest at 8% payable on demand

    8,720       34,423  
                 

Promissory note dated April 26, 2016 in the amount of $400,000 bearing interest 5%, with a maturity date of April 26, 2018, unsecured.

    400,000       400,000  
                 

Short term advance in the amount of $150,000, non-interest bearing, payable on demand. This advance was paid in full on October 5, 2016

    -       150,000  
                 

Promissory note dated May 12, 2017 in the amount of $630,000 bearing interest 10%, with a maturity date of May 12, 2018, unsecured.

    575,357       -  
                 
      15,785,016       15,275,171  

Less current portion pertaining to continuing operations

    848,889