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

Yuenglings Ice Cream Corporation completed its acquisition of ReachOut Technology, transitioning from ice cream to cybersecurity and IT services.

Summary

• Yuenglings Ice Cream Corporation, formerly Aureus, Inc., has shifted its focus to cybersecurity and IT services by acquiring ReachOut Technology in November 2023.
• The company has divested its ice cream assets to Mid Penn Bank to cancel existing debt and ceased its Aureus Micro Markets operations.
• ReachOut Technology, founded in 2010, provides IT and cybersecurity services to small and medium-sized businesses (SMBs).
• ReachOut has grown through strategic acquisitions, focusing on MSP companies with stable customer contracts and recurring revenue.
• The company's revenue for the year ended December 31, 2023, was $3,775,142, compared to $1,140,574 in 2022, due to a full year of operations from IND and the acquisition of Red Gear.
• The cost of goods sold increased to $2,564,093 in 2023 from $724,738 in 2022, also due to the full year of IND operations and the Red Gear acquisition.
• The company incurred an intangibles impairment of $4,136,746 for IND in 2023, reducing its goodwill to $1,226,427.
• The net loss for 2023 was $22,906,015, compared to $1,341,800 in 2022, primarily due to the intangibles impairment, increased compensation, interest expense, and derivative losses.
• As of September 11, 2024, there were 349,488,710 shares of common stock outstanding.
• The company is an emerging growth company and a smaller reporting company, which allows for reduced disclosure requirements.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company has made a strategic shift and shown revenue growth, the significant net loss, goodwill impairment, and going concern issues raise concerns. The company's reliance on acquisitions and the competitive market also add to the negative sentiment.

Positives

• The company has a strong annual recurring revenue (ARR) model driven by subscription-based services.
• ReachOut Technology offers comprehensive security solutions, including 24/7 monitoring, anti-phishing training, and compliance with standards like HIPAA and CMMC.
• The company has demonstrated its capability in delivering complex IT solutions through various case studies.
• ReachOut Technology has a rapid response time for help desk calls, averaging one minute, with a focus on resolution times under 15 minutes.
• The company is targeting expansion into new market segments such as education and compliance-focused businesses.

Negatives

• The company is dependent on acquisitions for growth, which poses integration and scalability challenges.
• The company's aggressive growth strategies and high-profile leadership may overshadow operational risks or market adaptability concerns.
• The company incurred a significant net loss of $22,906,015 in 2023.
• The company recorded an intangibles impairment of $4,136,746 for IND.
• The company has a working capital deficit of $23,702,245 as of December 31, 2023.
• The company's financial statements for the period ended 12/31/23 have not been audited by an independent registered public accounting firm due to complex transactions.

Risks

• The company faces integration and scalability challenges due to its acquisition-driven growth strategy.
• There are market perception risks associated with the company's aggressive growth strategies and high-profile leadership.
• The MSP market is intensely competitive, with challenges from other MSPs and private equity firms.
• Rapid changes in technology and cybersecurity threats necessitate continual service innovation and adaptation.
• Economic fluctuations could impact the M&A landscape and influence SMB investment in IT services.
• The company has a working capital deficit and has not been profitable since inception, raising concerns about its ability to continue as a going concern.
• The company is involved in a lawsuit against the former members of Red Gear, LLC, which could impact its business.

Future Outlook

ReachOut Technology plans to expand its customer base, diversify services, and make strategic acquisitions to increase market share and revenue.

Management Comments

• Rick Jordan, CEO of ReachOut Technology, is a model of resilience, vision, and expertise in the cybersecurity and entrepreneurial arenas.
• Rick Jordan is emerging as a nationally recognized voice in business and cybersecurity.
• Kevin Harrington, a director of ReachOut Technology, is a globally acclaimed entrepreneur and a pioneer in the realms of business and direct marketing.
• Kingsley Charles, a director of ReachOut Technology, brings a rich tapestry of experience in business and financial consultancy.

Industry Context

The company's transition reflects a broader trend of businesses seeking to capitalize on the growing demand for cybersecurity and IT services, particularly among SMBs.

Comparison to Industry Standards

• The document does not provide specific financial benchmarks for comparison to industry standards.
• However, the document highlights ReachOut's focus on recurring revenue, which is a common metric for MSPs.
• The document also emphasizes ReachOut's advanced cybersecurity solutions, which are becoming increasingly important in the industry.
• The document does not provide specific comparisons to competitors such as Datto, ConnectWise, or Kaseya, which are major players in the MSP space.
• The document does not provide specific comparisons to other companies that have undergone similar transitions from other industries to technology.

Management Changes

Legal Proceedings

• ReachOut Technology Corp. filed a lawsuit against the former members of Red Gear, LLC, related to certain representations and warranties made in the Membership Interest Purchase Agreement.
• The lawsuit includes claims of fraud, post-closing misappropriation of funds, tortious interference, breach of fiduciary duty, and post-termination illegal activities in violation of the Computer Fraud and Abuse Act.
• The United States District Court for the Northern District of Illinois entered a Temporary Restraining Order against the Defendants in the above case, based on the federal Computer Fraud and Abuse Act.

Related Party Transactions

• The company has various related party transactions, including loans from officers and affiliated companies.
• The company has issued notes to former owners of acquired companies.
• The company has committed to purchasing universal life insurance for officers of acquired companies.
• The company has entered into an employment agreement with the former principle of ReachOut IND.

Stakeholder Impact

• Shareholders face dilution due to the issuance of new shares for acquisitions and financing.
• Employees may experience changes due to the restructuring and integration of acquired companies.
• Customers may benefit from the expanded service offerings and expertise of the combined company.
• Suppliers and creditors may be impacted by the company's financial performance and debt obligations.

Next Steps

• The company plans to complete the audit of its financial statements for the period ended 12/31/23.
• The company intends to expand its customer base, diversify services, and make strategic acquisitions.
• The company will continue to invest in research and development to enhance its service offerings.
• The company will target expansion into new market segments such as education and compliance-focused businesses.

Key Dates

Keywords

cybersecurity, IT services, managed service provider, MSP, SMB, acquisitions, recurring revenue, cloud services, compliance, ransomware, financial reporting, reverse merger