10-K: Yuenglings Ice Cream Corp. Transforms into Cybersecurity Firm Following ReachOut Acquisition

Yuenglings Ice Cream Corporation completed its acquisition of ReachOut Technology, a cybersecurity and IT services provider, marking a significant shift in the company's business focus.

Summary

• Yuenglings Ice Cream Corporation, formerly Aureus, Inc., has transitioned from a mineral exploration company to a cybersecurity and IT services provider through the acquisition of ReachOut Technology in November 2023.
• The company has assigned its ice cream assets to Mid Penn Bank in exchange for the cancellation of bank debt and ceased its Aureus Micro Markets operations.
• ReachOut Technology, founded in 2010, aims to become the first nationwide brand in the cybersecurity and IT service provider sector for small to medium-sized businesses (SMBs).
• The company's strategy includes market expansion, strategic acquisitions of MSP firms, and targeting new market segments such as education and government compliance.
• Yuenglings Ice Cream Corp. reported a net loss of $424,031 for the year ended October 31, 2023, compared to a net loss of $481,352 in the previous year.
• The company's revenue was $20 for the year ended October 31, 2023, compared to $0 in the previous year, with a significant write-down of inventory due to expired goods.
• The company had approximately 60 full-time employees as of the report date.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the strategic shift to cybersecurity is positive, the current financial performance is weak, and there are significant risks and uncertainties. The sentiment is neutral to slightly negative.

Positives

• The acquisition of ReachOut Technology provides a clear strategic direction for the company in the growing cybersecurity and IT services market.
• The company has a strong leadership team with experience in business operations, acquisitions, and integration.
• ReachOut has a robust Annual Recurring Revenue (ARR) model, which provides stable and predictable cash flows.
• The company is targeting high-growth market segments, including education and companies requiring compliance with government regulations.
• The company has a strong media presence through its CEO, Rick Jordan.

Negatives

• The company reported a net loss of $424,031 for the year ended October 31, 2023.
• The company's revenue was minimal at $20 for the year ended October 31, 2023.
• There was a significant write-down of inventory of $56,190 due to expired goods.
• The company has a history of losses and negative cash flows from operations, raising concerns about its ability to continue as a going concern.
• The company's disclosure controls and procedures were deemed not effective as of October 31, 2023.

Risks

• The company faces intense competition in the cybersecurity and IT services industry.
• The company needs to attract additional capital to finance its working capital requirements and investments in plant, property, and equipment.
• The company's ability to generate revenues and achieve profitability is uncertain.
• The company's internal control over financial reporting was deemed not effective.
• The company's net operating loss carryforwards will be fully impaired due to the change in control.

Future Outlook

The company aims to revolutionize the cybersecurity and IT service provider landscape for SMBs, with the goal of creating the first nationwide brand in its sector. The company plans to expand its customer base, make strategic acquisitions, and target new market segments.

Management Comments

• ReachOut is on a relentless pursuit to revolutionize the Cybersecurity & IT Service Provider landscape for SMBs, with the goal of creating the first nationwide brand in its sector.
• We are not your typical MSP. We are a transformative force in cybersecurity and IT services, dedicated to serving SMBs with unparalleled excellence.
• Our mission at ReachOut is succinct yet profound: Cybersecurity for All.

Industry Context

The company's transition to cybersecurity and IT services aligns with the growing demand for these services among SMBs. The market is competitive, but ReachOut's focus on a nationwide brand and its innovative approach could provide a competitive edge. The company is also targeting specific sectors such as education and government compliance, which are experiencing increased demand for cybersecurity solutions.

Comparison to Industry Standards

• The company's revenue of $20 is significantly below industry standards for a company of its size, indicating a complete shift in business model.
• The net loss of $424,031 is not unusual for a company undergoing a major transition, but it highlights the need for improved financial performance.
• The company's focus on a recurring revenue model is consistent with industry best practices for MSPs.
• The company's strategic acquisition approach is a common growth strategy in the MSP sector, with companies like Accenture and Cognizant using acquisitions to expand their market share.
• The company's emphasis on cybersecurity compliance aligns with the increasing regulatory requirements in the industry, similar to companies like CrowdStrike and Palo Alto Networks.

Management Changes

Legal Proceedings

• An individual has asserted that the Company owes approximately $500,000 for a promissory note issued by a company that was never owned by the public company nor its subsidiary. Legal counsel has reviewed the claim and found no relationship to this debt nor any assumptions of the debt by the Company.

Related Party Transactions

• In June 2022, Everett Dickson advanced the Company $6,000 for a general operating expense, which was repaid the following month.
• During the year ended October 31, 2022, a $5,500 payment was mistakenly made to a company controlled by Everett Dickson, which is to be repaid.
• Pickle Jar advanced the Company $22,000 on September 1, 2023, with the amount due to the Company from Pickle Jar offset against this new advance leaving a note payable to Pickle Jar of $16,500.
• On August 17, 2023, Everett Dickson paid $1,910 to a consultant of the Company, considered a loan advance.
• On September 1, 2023, Everett Dickson directly paid $13,500 to Diagonal Lending LLC on behalf of the Company, considered a loan advance.
• On September 1, 2023, Everett Dickson deposited $2,000 into the Company's bank accounts to fund payments, considered a loan advance.
• As of October 31, 2023, the note balance due to Everett Dickson is $17,410, due upon demand and does not bear interest.
• On January 14, 2023, the Company granted 30 million restricted common shares to Robert C. Bohorad, which were later returned on September 15, 2023.
• During the year ended October 31, 2023 and 2022, the Company paid Robert C. Bohorad, President and CEO, $7,000 and $22,000 for compensation, respectively.
• During the year ended October 31, 2023, Mr. Bohorad forgave $53,000 of accrued compensation.
• On October 30, 2023, the Company awarded Mr. Bohorad 3,000,000 shares of restricted common stock for services.

Stakeholder Impact

• Shareholders will experience a significant change in the company's business model and may see a change in the value of their investment.
• Employees will be integrated into the ReachOut Technology team and may experience changes in their roles and responsibilities.
• Customers of Yuenglings Ice Cream will no longer be served by the company, while new customers of ReachOut Technology will be served.
• Suppliers of Yuenglings Ice Cream will no longer have a business relationship with the company, while new suppliers of ReachOut Technology may be engaged.
• Creditors of Yuenglings Ice Cream will be impacted by the assignment of assets to Mid Penn Bank and the cancellation of debt.

Next Steps

• The company will focus on integrating ReachOut Technology and expanding its cybersecurity and IT services business.
• The company will continue to pursue strategic acquisitions to grow its market share.
• The company will work to improve its financial performance and achieve profitability.
• The company will address the identified material weaknesses in its internal control over financial reporting.

Key Dates

Keywords

cybersecurity, IT services, Managed Service Provider, MSP, SMB, acquisition, reverse merger, ReachOut Technology, Yuenglings Ice Cream, financial results