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 February 3, 2015, our board of directors adopted the 2015 Omnibus Equity Incentive Plan.
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”).
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 condensed 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 condensed 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.
Revenue decreased to $36,332 for the six months ended January 31, 2016, compared to $51,010 for the six months ended January 31, 2015. The decline is largely due to reduced prices on our RWB Vodka product.
Cost of goods sold decreased to $30,582 for the six months ended January 31, 2016, compared to $37,967 for the comparable period in 2015. The decline is due to lower manufacturing costs.
Gross profit decreased to $5,750 for the six months ended January 31, 2016, compared to $13,043 for the six months ended January 31, 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 $173,858 and $261,293 for the six months ended January 31, 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 of $520,463 and $464,563 for the six months ended January 31, 2016 and 2015, respectively. The increase was due to higher expenditure on professional fees and payroll expenses.
Interest Expense
Interest expense increased from $290,068 for the six months ended January 31, 2015 to $545,735 for the six months ended January 31, 2016. Interest expense for the six months ended January 31, 2016 included amortization of discount on convertible notes payable in the amount of $428,483, compared to $231,487 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 $1,234,306 for the six months ended January 31, 2016 as compared to $1,002,881 for the comparable period of 2015. The increase in the net loss was primarily the result of increased interest expense.
Three months ended January 31, 2016 compared to the three months ended January 31, 2015.
Revenue
Revenue decreased to $22,031 for the three months ended January 31, 2016, compared to $26,170 for the three months ended January 31, 2015 as we earned less revenue per bottle of RWB Vodka. This was partially offset by an increase in our sales volume.
Cost of Goods Sold
Cost of Goods Sold decreased to $19,297 for the three months ended January 31, 2016, compared to $20,286 for the comparable period in 2015. This is due to lower manufacturing costs for our RWB Vodka product.
Gross Profit
Revenue decreased to $2,734 for the six months ended January 31, 2016, compared to $5,884 for the three months ended January 31, 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 $51,626 and $134,002 for the three months ended January 31, 2016 and 2015, respectively. We have reduced our sales and promotional expenditures as we target more effective promotional methods.
General and Administrative Expenses
We recognized general and administrative expenses of $252,199 and $251,418 for the three months ended January 31, 2016 and 2015, respectively. The decline is due to slightly lower professional fees.
Interest Expense
Interest expense increased from $215,799 for the three months ended January 31, 2015 to $241,615 for the three months ended January 31, 2016. Interest expense for the three months ended January 31, 2016 included amortization of discount on convertible notes payable in the amount of $176,421, compared to $183,092 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.
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Net Loss
We incurred a net loss of $542,706 for the three months ended January 31, 2016 as compared to $595,335 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 January 31, 2016, we had cash on hand of $12,380. The company has negative working capital of $1,162,801 . Net cash used in operating activities for the six months ended January 31, 2016 was $696,475. 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 January 31, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of January 31, 2016. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of January 31, 2016, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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| As of January 31, 2016, we did not maintain effective controls over the control environment. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
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| As of January 31, 2016, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
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Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
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Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to have a material effect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
This item is not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered equity securities during the six months ended January 31, 2016.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We have not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable to the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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3.1
| Articles of Incorporation for the State of Nevada (1)
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3.2
| Bylaws for the State of Nevada (1)
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14
| Code of Ethics (1)
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21
| Subsidiaries of the Registrant (2)
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31.1
| Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (2)
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32.1
| Section 1350 Certification of principal executive officer and principal financial accounting officer. (2)
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101
| XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (3),(4)
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(1)
| Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on February 2, 2016
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(2)
| Filed or furnished herewith
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(3)
| In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”
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(4)
| To be submitted by amendment
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| Aristocrat Group Corp.
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Date: March 16, 2016
| BY: /s/ Chris Less
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| Chris Less
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| Interim Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Financial and Accounting Officer and Sole Director
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