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Organization and description of business
12 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and description of business

1. Organization and description of business

 

Generation NEXT Franchise Brands, Inc. (referred to herein collectively with its subsidiaries as “we”, the “Company”, “our Company”, or “GNext”) operates as a franchisor, owner, managing member, and direct seller of unattended retail kiosks that feature cashless payment devices and remote monitoring software through its wholly-owned subsidiaries, Reis & Irvy’s, Inc. (“R&I”), 19 Degrees, Inc. and Generation Next Vending Robots, Inc. The Company uses in-house location specialists that are responsible for securing locations for its kiosks; additionally, the Company has negotiated discounts with certain of its consumable manufacturers and distributors.

 

On December 29, 2016, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Robofusion, Inc. (“RFI”), whereby the Company acquired the intellectual property assets of RFI, a developer of robotic-kiosk vending technology, primarily frozen yogurt and ice cream vending robots, using RFI’s trademarked name of Reis & Irvy’s (the “Acquisition”). The Company considered the guidance in ASC 805, Business Combinations, and determined the transaction was a purchase of an asset. As a result, the estimated fair of the assets acquired were capitalized. The intent of the purchase was to combine robotics and artificial intelligence platforms to facilitate the manufacture of an unattended robot in order to disrupt traditional frozen yogurt and ice cream retail establishments and, on a larger scale, establish ourselves as an industry leader in the emerging and fast-growing space of unattended retail. Since acquisition, we have developed a state-of-the art robotic soft serve vending robot that is a completely unique vending machine and entertainment experience. The robot accepts cash and credit cards. A proprietary software platform is utilized that allows us to readily monitor the sales of kiosks, which assists our franchisees and us in facilitating the management and maintenance of the vending robot. In order to protect the Company’s rights, several U.S. and international patents have been approved and granted. Our vending standards are UL (“Underwriters Laboratories”) (approval in process), NSF (“National Sanitation Foundation”) recognized, and National Automated Merchandising Association (“NAMA”) certified, which we believe are among the highest standards in the industry. This ensures food temperature compliance, which includes auto-contingency processes should electrical or hardware malfunction; it also ensures that ambient air stays within specified parameters at all times. Our third-party cashless payment technology provides the highest level of data and network security compliance while ensuring complete transparency. As a result, our robotic soft serve vending kiosks will contain minimal amounts of cash. All transactions are managed by third parties to facilitate financial compliance with local and national laws and regulations. Funds from all electronic transactions are collected by Reis & Irvy’s and remitted to the franchisee within ten days of the subsequent month.

 

During fiscal year 2017, we obtained the exclusive rights to sell a new frozen yogurt vending robot, branded Reis & Irvy’s. As of the date of this report, we have received approval to sell franchises in all U.S. states, other than South Dakota. Through franchise agreements or contracts, we sell robots, franchise fees, and location fees. All contracts require a deposit and contracts which include exclusive territory clauses will also contain a minimum robot and franchise fee commitment. We refer to units associated with a deposit as a “booking” and units associated with exclusive territory minimums as “commitments”. At June 30, 2019, the Company had a backlog of 866 bookings with a future revenue value of approximately $40 million and further commitments for 2,342 robots aggregating $92.3 million of future revenue.

  

The subsidiary 19 Degrees, Inc. is also the managing member of 19 Degrees Corporate Service, LLC, a robot investment fund (the “Fund”) that will allow accredited investors (i.e. franchisees and other direct purchase investors) to contribute kiosks to the Fund and receive quarterly distributions of net proceeds from operating the robots.

 

In January 2019, the Company announced the launch of 19 Degrees Corporate Service, LLC as a corporate operated Robot Investment Fund (“the Fund”). This advantages kiosk owners through the switch from active to passive income; more even distribution of revenue; faster installation of kiosks; a “no hassle” maintenance program provided by CSA Server Solutions; a nationwide on-site flavor promotion plan managed by Dannon, access to a newly designed back-office portal that will allow members of the fund to remotely access each kiosk’s sales performance in “real time” as well as a plethora of software features used to guide the fund’s performance. Member ownership units in the LLC will be issued under the registration exemption Rule 506(c) of Regulation D of the Securities Act of 1933 and will be available only to accredited investors. Under Rule 506(c), general solicitation of offerings is permitted, however, purchasers in a Rule 506(c) offering must be “accredited investors.” The SEC defines the term "accredited investor" in Rule 501(a). Generally, individuals are considered accredited investors if they have a net worth greater than $1 million (excluding their primary residence) or incomes in excess of $200,000 in the last two years with the expectation of the same in the current year (or $300,000 with a spouse).

 

On March 28, 2019, the Company entered into an Asset Purchase Agreement with Print Mates, LLC (“Print Mates”), (see Note 2 Acquisitions). The agreement provides for the purchase of all of Print Mates

rights, title, and interest to all assets of the Print Mates business, including intellectual property. The Company considered the guidance in ASC 805, Business Combinations, and determined the transaction was an asset acquisition. As a result, the estimated fair value of the assets acquired, and amount of liabilities assumed are included in the accompanying balance sheet as of March 31, 2019. Print Mates kiosks offer instant high-resolution printing of photographs from touchscreen kiosks. Print Mates kiosks are operated with a proprietary software interface that takes advantage of the kiosk’s large touch-sensitive screen, allowing customers to swipe and scroll through various menus as well as edit and crop their images before printing. The Company intends to own and operate the kiosks, collecting 100% of the revenues generated, and will sell kiosks and license software to business owners.

 

In September 2018 it was determined the assets of the Company’s wholly owned subsidiary, Fresh Healthy Vending LLC ("FHV LLC"), were insufficient to satisfy FHV LLC’s obligations to creditors. As such, on FHV LLC executed an Assignment for the Benefit of Creditors under California law, whereby all of its assets were assigned to a third-party fiduciary who will liquidate such assets and distribute the proceeds to FHV LLC’s creditors pursuant to the priorities established and permitted by law.