As described in Starfest’s Form 8-K filed on April 2, 2002 with the Commission (Commission File No. 000-29913), the shareholders of Starfest and Concierge did approve the merger, and the merger was legally effected on March 20, 2002.
On May 5, 2004 we acquired all of the outstanding and issued shares of Planet Halo, a privately held Nevada corporation.
On June 5, 2007 Planet Halo launched its first wireless broadband network designed for subscription access to the Internet. The second such network was completed in Ventura, California during the 2007-2008 fiscal year. Planet Halo continued to operate and expand the subscriber base until encountering insurmountable competition from disruptive technologies. The wireless business was discontinued during the fiscal year ended June 30, 2011 and a transition was made to research and development activities for in-vehicle video recording devices. In January 2013 we sold all of our interest in Planet Halo through a stock redemption agreement wherein a holder of Concierge Series B, Voting, Convertible Preferred stock exchanged a portion of those shares for all of the issued and outstanding stock in Planet Halo.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Our Common Stock presently trades on the OTC Markets QBPink Exchange. The high and low bid prices, as reported by the OTC Bulletin Board,Markets, are as follows for fiscal years ended June 30, 20132014 and 2014.2015. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
| | High | | | Low | |
Calendar 2013 | | | | | | |
3rd Qtr. | | $ | 0.012 | | | $ | 0.011 | |
4th Qtr | | $ | 0.021 | | | $ | 0.013 | |
| | | | | | | | |
Calendar 2014 | | | | | | | | |
1st Qtr | | $ | 0.049 | | | $ | 0.009 | |
2nd Qtr | | $ | 0.014 | | | $ | 0.0114 | |
3rd Qtr. | | $ | 0.0146 | | | $ | 0.0085 | |
4th Qtr | | $ | 0.0099 | | | $ | 0.0025 | |
| | | | | | | | |
Calendar 2015 | | | | | | | | |
1st Qtr | | $ | 0.0068 | | | $ | 0.0029 | |
2nd Qtr | | $ | 0.0119 | | | $ | 0.0043 | |
| | High | | | Low | |
Calendar 2012 | | | | | | |
3rd Qtr. | | | 0.012 | | | | 0.011 | |
4th Qtr | | | 0.021 | | | | 0.013 | |
| | | | | | | | |
Calendar 2013 | | | | | | | | |
1st Qtr | | | 0.018 | | | | 0.010 | |
2nd Qtr | | | 0.020 | | | | 0.013 | |
3rd Qtr. | | | 0.012 | | | | 0.011 | |
4th Qtr | | | 0.021 | | | | 0.013 | |
| | | | | | | | |
Calendar 2014 | | | | | | | | |
1st Qtr | | | 0.049 | | | | 0.009 | |
2nd Qtr | | | 0.014 | | | | 0.0114 | |
Holders
On June 30, 20142015 there were approximately 350 registered holders of record of our common stock.
Dividends
We have had no retained earnings and have declared no dividends on our capital stock. Under Nevada law, a company - such as our company - can pay dividends only
| ● | from retained earnings, or |
| ● | if after the dividend is made, |
| ● | its tangible assets would equal at least 11/4 times its liabilities, and |
| ● | its current assets would at least equal its current liabilities, or |
| ● | if the average of its earnings before income taxes and before interest expenses for the last two years was less than the average of its interest expenses for the last two years, then its current assets must be equal to at least 11/4 times its current liabilities. |
The directors' strategy on dividends is to declare and pay dividends only from retained earnings and when the directors deem it prudent and in the best interests of the company to declare and pay dividends.
Penny Stock Regulations
Our common stock trades on the OTC Markets QB exchange at a price less than $5 a share and is subject to the rules governing "penny stocks."
A "penny stock" is any stock that:
| ● | sells for less than $5 a share. |
| ● | is not listed on an exchange or authorized for quotation on The Nasdaq Stock Market, and |
| ● | is not a stock of a "substantial issuer." We are not now a "substantial issuer" and cannot become one until we have net tangible assets of at least $2 million. |
There are statutes and regulations of the Securities and Exchange Commission (the "Commission") that impose a strict regimen on brokers that recommend penny stocks.
The Penny Stock Suitability Rule
Before a broker-dealer can recommend and sell a penny stock to a new customer who is not an institutional accredited investor, the broker-dealer must obtain from the customer information concerning the person's financial situation, investment experience and investment objectives. Then, the broker-dealer must "reasonably determine" (1) that transactions in penny stocks are suitable for the person and (2) that the person, or his advisor, is capable of evaluating the risks in penny stocks.
After making this determination, the broker-dealer must furnish the customer with a written statement setting forth the basis for this suitability determination. The customer must sign and date a copy of the written statement and return it to the broker-dealer.
Finally the broker-dealer must also obtain from the customer a written agreement to purchase the penny stock, identifying the stock and the number of shares to be purchased.
The above exercise delays a proposed transaction. It causes many broker-dealer firms to adopt a policy of not allowing their representatives to recommend penny stocks to their customers.
The Penny Stock Suitability Rule, described above, and the Penny Stock Disclosure Rule, described below, do not apply to the following:
| ● | transactions not recommended by the broker-dealer, |
| ● | sales to institutional accredited investors, |
| ● | transactions in which the customer is a director, officer, general partner, or direct or indirect beneficial owner of more than 5 percent of any class of equity security of the issuer of the penny stock that is the subject of the transaction, and |
| ● | transactions in penny stocks by broker-dealers whose income from penny stock activities does not exceed five percent of their total income during certain defined periods. |
The Penny Stock Disclosure Rule
Another Commission rule - the Penny stock Disclosure Rule - requires a broker-dealer, who recommends the sale of a penny stock to a customer in a transaction not exempt from the suitability rule described above, to furnish the customer with a "risk disclosure document." This document is set forth in a federal regulation and contains the following information:
| ● | A statement that penny stocks can be very risky, that investors often cannot sell a penny stock back to the dealer that sold them the stock, |
| ● | A warning that salespersons of penny stocks are not impartial advisers but are paid to sell the stock, |
| ● | The statement that federal law requires the salesperson to tell the potential investor in a penny stock - |
| ● | the "offer" and the "bid" on the stock, and |
| ● | the compensation the salesperson and his firm will receive for the trade, |
| ● | An explanation that the offer price and the bid price are the wholesale prices at which dealers are willing to sell and buy the stock from other dealers, and that in its trade with a customer the dealer may add a retail charge to these wholesale prices, |
| ● | A warning that a large spread between the bid and the offer price can make the resale of the stock very costly, |
| ● | Telephone numbers a person can call if he or she is a victim of fraud, |
| ● | to use caution when investing in penny stocks, |
| ● | to understand the risky nature of penny stocks, |
| ● | to know the brokerage firm and the salespeople with whom one is dealing, and |
| ● | to be cautious if ones salesperson leaves the firm. |
Finally, the customer must be furnished with a monthly statement including prescribed information relating to market and price information concerning the penny stocks held in the customer's account.
Effects of the Rule
The above penny stock regulatory scheme is a response by the Congress and the Commission to known abuses in the telemarketing of low-priced securities by "boiler shop" operators. The scheme imposes market impediments on the sale and trading of penny stocks. It has a limiting effect on a stockholder's ability to resell a penny stock.
Our shares likely will trade below $5 a share on the OTC Markets QB exchange and be, for some time at least, shares of a "penny stock" subject to the trading market impediments described above.
Recent Sales of Unregistered Securities; Outstanding Stock Options
Our company did not sell anysold shares of its common stock during the last three years howeverand, on February 19, 2014 we issued 53,571 unregistered shares of our common stock to a holder of a note receivable from Janus Cam as a fee in exchange for agreement to extend the maturity date. The transaction was recorded as an expense of $750 based on the market value of our stock as of the date of issue. We have also issued shares of common stock in settlement of convertible debentures as detailed in following paragraphs. The issued shares were unregistered and issued as per the following:
Date | No. of Shares | Shareholder | Type of Consideration | | Value of Consideration |
2/19/2014 | 53,571 | Lisa Powell Brown | Debt settlement | $ | 750 |
9/22/2014 | 4,346,247 | Asher Enterprises | Debt settlement | $ | 28,000 |
10/10/2014 | 5,424,000 | Asher Enterprises | Debt settlement | $ | 27,120 |
1/26/2015 | 266,666,667 | Nicholas & Melinda Gerber Living Trust | Cash | $ | 773,333 |
1/26/2015 | 133,333,333 | Schoenberger Family Trust | Cash | $ | 386,667 |
1/26/2015 | 8,270,000 | Polly Force Company, Ltd | Debt settlement | $ | 82,700 |
On February 18, 2014 the Company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $53,000. The note was convertible, at the option of the debenture holder, to restricted common shares after August 18, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price (“VWAP”) of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period had elapsed the Company could not repay the note until its maturity date on November 18, 2014 at which time the note principal and interest became due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. During the quarter ended September 30, 2014, at the election of the debenture holder, the Company converted $28,000 of the principal to equity through issuance of 4,346,247 shares of common stock. During the quarter ended December 31, 2014, at the election of the debenture holder, the Company converted
$25,000 of the principal plus $2,120 of accrued interest to equity through issuance of 5,424,000 shares of common stock. The debenture has been paid in full as of October 10, 2015 and thus no derivative expense or fair value of the embedded derivative was recorded for the fiscal year ended June 30, 2015.
On January 1, 2013 we consolidated all outstanding notes payable due a related party into one loan agreement containing certain conversion features whereby the note holder could convert the principal amount of the loan, $204,700 comprised of the sum total of the principal amounts of the individual notes, $122,000, plus $82,700 in accrued interest applicable to those notes, together with accrued interest on the principal at the rate of 4.944% per annum, into shares of our common stock at the conversion rate of $0.02 per share. The note is unsecured and becomes due and payable on January 1, 2015. The accrued interest on this $204,700 convertible debenture as of December 31, 2014 was $20,241. There was no beneficial conversion feature involved in the new note. On December 19, 2014 we entered into an amendment to the debenture that allowed for the maturity date to be extended to June 1, 2015 and provided the Company rights to settle the debenture in full, upon completion of an equity investment in excess of $1,500,000, by payment of $122,000 in cash and issuance of 8,270,000 shares of common stock valued at $0.01 per share to the debenture holder. On January 26, 2015 we exercised those rights and paid the debenture in full. The transaction resulted in a gain on the issuance of shares of $69,861 as the fair market value of a share of our common stock at December 19, 2014 was $0.004. The gain resulted for a related party, thus it was recorded in additional paid in capital account.
Our company sold the following shares of its Series B Convertible, Voting, Preferred Stock during the last three years without registering the shares. Each share of Series B Convertible, Voting, Preferred Stock is convertible into 20 shares of common stock and carries a vote equal to 20 shares of common stock in all matters brought before the shareholders for vote.
Date | | No. of Shares | | Shareholder | | Type of Consideration | | Value of Consideration | No. of Shares | Shareholder | Type of Consideration | | Value of Consideration |
| | | | | | | | | |
9/8/12 | | 560,000 | | Gonzalez & Kim | | Cash and Debt Forgiveness | | $112,000 | 560,000 | Gonzalez & Kim | Cash and Debt settlement | $ | 112,000 |
1/26/2015 | | 21,634,332 | Nicholas & Melinda Living Trust | Cash | $ | 1,226,667 |
1/26/2015 | | 10,817,167 | Schoenberger Family Trust | Cash | $ | 613,333 |
On February 18, 2014Our Company issued the company entered into a seriesfollowing shares of agreements, including a convertible debenture, that resultedcommon stock pursuant to certain conversion rights contained in a fundingour preferred stock. The shares of $53,000. The note is convertible, atpreferred stock redeemed in the option of the debenture holder, to unregistered common shares after August 18, 2014 at a conversion price calculated on a prescribed discountwere cancelled resulting in no net effect to the trailing 10-day volume weighted average market pricenumber of ourvoting shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on November 18, 2014 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. However, as the debenture holder has no right to convert their debt to equity prior to August 19, 2014, hence, if, as of August 19, 2014, the debenture is not repaid, Company will account for the embedded derivative as of that date.outstanding.
Date | No. of Shares Converted | Type of Shares | Shareholder | Common Stock Issued |
10/22/2014 | 2,203,182 | Series B Pref | Peter Park | 44,063,640 |
10/22/2014 | 2,203,182 | Series B Pref | Nelson Choi | 44,063,640 |
6/4/2015 | 206,186 | Series A Pref | Jan Carter | 1,030,930 |
On March 28, 2014 the company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $32,500. The note is convertible, at the option of the debenture holder, to unregistered common shares after September 22, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on December 28, 2014 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. However, as the debenture holder has no right to convert their debt to equity prior to September 22, 2014 hence, if, after September 22, 2014, the debenture is not repaid, the Company will account for the embedded derivative as of that date.
On April 25, 2014 the company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $32,500. The note is convertible, at the option of the debenture holder, to unregistered common shares after October 26, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on January 28, 2015 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. However, as the debenture holder has no right to convert their debt to equity prior to October 26, 2014 hence, if, after October 26, 2014, the debenture is not repaid, the Company will account for the embedded derivative as of that date.
All of the above sales were made pursuant to the exemption from registration provided by the Commission’s Regulation D, Rule 506. All purchasers were either accredited investors or, if not, were provided copies of the company’s recent filings with the Commission including financial statements meeting the requirements of the Commission’s Item 310 of Regulation S-B. All purchasers were provided the opportunity to ask questions of Concierge’s management.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Some of the information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report includes forward-looking statements based on our current management’s expectations. There can be no assurance that actual results, outcomes or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, among others, our limited operating history, unpredictability of future operating results, competitive pressures and the other potential risks and uncertainties.
The following discussion and analysis should be read in conjunction with the financial statements and the accompanying notes thereto and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere. See "Financial Statements."
The Company, through Planet Halo and Wireless Village, had been selling subscriptions to its wireless Internet access service in various increments, including daily, weekly, monthly and yearly since 2007. During the fiscal year ending June 30, 2011, we completed the transition away from this business and refocused our efforts, through our majority owned subsidiary Wireless Village now called Janus Cam, on the sale and distribution of mobile video surveillance systems, generically known as “drive cams”. Planet Halo, a wholly owned subsidiary, had been involved with product research and development since July 2011 and as a result had insignificant revenues for the years ending June 30, 2013 and 2012. Planet Halo had been accumulating debt through loans where proceeds were used for further product development and research. On January 31, 2013 the Company executed a stock redemption agreement whereby we sold the corporation in a stock-for-stock transaction to a shareholder in Concierge Technologies. As of June 30, 2014 Janus Cam iswas our only subsidiary. Planet Halo operations are accounted for through January 31, 2013 as discontinued operations and have been eliminated from the Consolidated Balance Sheet for the year ending June 30, 2013 for comparison purposes.
Since September 2010, Janus Cam has brought expertise in mobile digital camera deployment into the company by partnering with several industry professionals and a manufacturer of camera and DVR products. In order to gain this expertise we conveyed approximately 49% of our equity ownership in Janus Cam to these professionals. On January 31, 2013 we effectuated an agreement to buy out the minority stakeholders in a stock exchange transaction whereby the shareholders of the non-controlling interest exchanged their shares in Janus Cam for shares in Concierge Technologies. AsOn May 7, 2015 we sold Janus Cam to two shareholders (who were also the executive management at Janus Cam and directors and of the Company) through a result, there is no income attributedStock Redemption Agreement wherein the Company redeemed 68,000,000 shares of common stock and in turn forgave intercompany debt owned by Janus Cam to non-controlling interests on the Consolidated Statements of OperationsCompany. Janus Cam operations for year ending June 30, 2014.
the period July 1, 2014 through May 7, 2015 are accounted
for on the Consolidated Statements of Operations as discontinued operations and have been eliminated from the Consolidated Balance Sheet for the year ending June 30, 2014 for comparison purposes.
Discontinued operations for Janus Cam for the period July 1, 2014 through May 7, 2015 resulted in net sales of $1,780,548 as compared to the prior year ended June 30, 2014 of $2,268,127. The cost of goods sold for the period July 1, 2014 through May 7, 2015 was $1,121,169 and $1,318,657 for the year ended June 30, 2014. Gross profit for the comparison periods July 1, 2014 through May 7, 2015 and the year ended June 30, 2014 were $659,379 (37%) and $949,470 (42%) respectively, a decline of approximately 5% in gross profit. Janus Cam recorded $520,406 in general and administrative expenses for an operating income of $138,973 for the period July 1, 2014 through May 7, 2015 as compared to general and administrative expenses of $1,145,967 resulting in an operating loss of $196,497 for the year ended June 30, 2014. In addition to hardware sales, Janus Cam had other income of $5,739 comprised of recovered shipping expenses and incurred $5,106 in interest expense for a combined total of $633 in other income for the period July 1, 2014 through May 7, 2015. The net income for period July 1, 2014 through May 7, 2015, including $800 as an income tax provision, was $138,806.
For the year ended June 30, 2014, in addition to revenues from hardware sales, Janus Cam also recorded a total of $58,701 in other income comprised of $13,487 in recovered shipping expenses, $44,649 in downwards adjusted sales tax liability and corrections to inventory valuation and accrued expenses totaling $745. Janus Cam incurred $4,892 in interest expense and accrued $800 as a state income provision resulting in a net loss of $143,488 for the year ended June 30, 2014.
Management attributes the Janus Cam income for the period July 1, 2014 through May 7, 2015 to a temporary classification of Janus Cam executive compensation totaling $167,443 as notes receivable in lieu of administrative expense. This classification was due to a suspension of salaries as the parties negotiated the terms of the Stock Redemption Agreement resulting in the divestiture of Janus Cam by Concierge Technologies on May 7, 2015.
On May 26, 2015 the Company established a new wholly owned subsidiary domiciled in the state of California and named Kahnalytics, Inc. Kahnalytics took over the business of selling cameras, installation and support services to the insurance industry, a business segment formerly addressed by Janus Cam, but then retained by Concierge Technologies as part of the Stock Redemption Agreement.
Kahnalytics purchases hardware, including cabling, connectors, hard drives, wireless transceivers, cameras, and various other hardware items, and installation services for configuration priorsale to release to end users. Thesespecific insurance companies, and ultimately for installation into insured’s vehicles. The hardware items are either listed in inventory if held beyond the close of the current accounting period, or summarized as “cost of goods sold” when sold with resulting revenues recorded as hardware sales.sold. Inventory orders which have been paid for, or partially paid for, in advance of receipt are classified as Advance to Suppliers. Generally, hardware is sold to customers who arrange for their ownrequire delivery and installation of the product in their vehicles. In some instances, installation services were supplied along with the sale of the new camera, or other product, which may include pre-programming of functions prior to shipment. The charges for services such as these are recorded as support servicesincluded in the bundled, installed, sales price reflected on sales invoices and are usually insignificant when compared toaccounts receivable. The total net revenues with totals
for the years ending June 30, 2014 and 2013 as $8,743and $1,228 respectively. These revenues are combined with hardware sales for Janus Cam which,Kahnalytics for the years ended June 30, 2014,2015 were up 2.4% to $2,259,385$95,057 as compared to the year ending June 30, 20132014 where hardware sales were recorded as $2,206,528. Combined hardware and support revenues were $2,268,127 and $2,207,756 for the years ending June 30, 2014 and June 30, 2013 respectively, an increase of 2.7%. Management attributes the increase in revenues during the current year when comparedzero.
Prior to the prior year’s revenuesformation of Kahnalytics, Concierge Technologies briefly assumed the business of supplying cameras and installation services to a specific customer in the same fashion as indicative of the timing of customer orders and trade show appearances rather than an increase in overall sales performance. In addition tolater taken on by Kahnalytics. Total revenues from hardware sales and support services, income not included in the net revenue total but listed as other income totaled $58,701 for the years ending June 30, 2014 and $11,557 for 2012. Other income is comprised of recovered shipping expenses charged to Janus Cam customers of $11,557Concierge Technologies for the year ended June 30, 2013 and2015 were $128,508 with no sales revenues recorded for the year ended June 30, 2014 other income of $13,437 is attributed to recovered shipping expenses, a difference of $1,8802014. Total combined sales revenues for Kahnalytics and generally in line withConcierge Technologies were $223,565 for the difference in sales volume. The remaining balance in other income, $45,264, is attributed to a downward adjustment of calculated California sales tax liability of $44,649, a correction connected to the liabilities recorded in the sale of Planet Halo of $1,100, credit card balance adjustments of $2,100, a decrease in the cost of goods sold of $12,080 and a downwards adjustment in inventory of $14,715. Accounts receivable, net allowance for doubtful accounts of $25,186, atyear ended June 30, 20142015 and zero for the year ended June 30, 2013 were recorded at $159,047and $113,386 respectively, an increase of $45,661 or 40%. The receipt of payment in relation to the period ending, not an increase in general in account receivable aging, resulted in the lower accounts receivable. The overall aging of accounts or the risk of collection has not been affected.2014.
Overall, consolidated net revenues, includingexcluding other income of $2,326,828$5,086, for the year ending June 30, 20142015 were up $107,515 from $2,219,313 (after deducting adjustments to sales tax$223,565 and interest from other income)zero for the year endingended June 30, 2013, an increase of 4.8%.2014. Cost of revenues for the year ending June 30, 2015 and 2014 were $188,325 and 2013 were $1,318,657and $1,237,813zero respectively, representing a decrease in gross profit percentage of approximately 2%. Management attributes the decline in gross profit margin to the transition to a new product necessitating the discounted liquidation of then-existing inventory.16%
The companyCompany incurred a loss from continuing operations (before provisions for income taxes), for the year ended June 30, 20142015 of $319,019$204,216 as compared to a loss of $189,322$176,332 for the year ended June 30, 2013. After giving consideration2014. Our net loss from continuing operations has increased by $27,884. Management attributes the increased loss to income tax of $800, the transaction costs incurred to raise equity capital coupled with loan interest on borrowed funds and convertible debenture costs. The net lossincome on a consolidated basis for the year ended June 30, 20142015 was $319,819 as compared to net income,$14,191, after giving consideration to income tax of $22,763, income from discontinued operations (including gain on disposal of our subsidiary) of $275,686, and$218,407, as compared to net loss, attributed to non-controlling interest of $31,375,$319,820, for the year ended June 30, 2013 of $94,976. Our net loss from continuing operations has increased by $107,734 to $319,819 over the current year when compared2014.
On May 28, 2015 we signed agreements related to the previous year where net loss from continuing operations was $212,085,acquisition of Gourmet Foods, Ltd., a privately held company located in Tauranga, New Zealand and placed a cash deposit of NZ$250,000 towards the purchase. The deposit is reflected on our Consolidated Balance Sheet as $182,931 in US currency. The acquisition will be completed in cash. Gourmet Foods is a recognized manufacturer and distributor of baked pies, including income tax provision. Management attributes the increased loss to heightenedmeat pies, desserts and other assorted bakery products, in New Zealand. The company has annual revenues in excess of NZ$5.5 million and employs a staff expenses, including hiring of additional employees, new employee agreements and the related benefit costs, lower profit margins to liquidate discontinued product and the cost45 persons. The acquisition of new product development coupled with loan interestGourmet Foods, Ltd. closed on borrowed funds.
August 11, 2015. See Note 14 on Subsequent Events.
Plan of Operation for the Next Twelve Months
Our plan of operation for the next twelve months is to expand the sales and marketing effortdevelopment of Janus CamKahnalytics through implementation of distribution channelssoftware development and addition of new products, including a branding and promotion of a proprietaryrecurring revenue product offering. Additionally, we intendWe have finalized the acquisition of Gourmet Foods Ltd. of Tauranga, New Zealand which is expected to approach the consumer electronics market with a lower-cost versionbring in significant revenues to replace and exceed those of the in-vehicle recording device. For the coming year we intenddivested subsidiary Janus Cam. We are also continuing to focus on sourcing new technologies and/or devices synergistic to the business of Janus Cam, including the consumer market, and the industry of fleet management in general.search for profitable, mature, companies who can be acquired at reasonable prices. By these initiatives we hope to:
● | continue to gain market share in the field of mobile incident reporting |
● | increase our gross revenues and realize net operating profits, |
● | lower our operating costs by unburdening certain selling expenses to third party distributors, |
● | source and retain staff experienced in the field of software development and application of database report writing functions, |
● | have sufficient cash reserves to pay down accrued expenses |
● | attract partners in related fields of software development to participate in consolidated product bundling and service offerings involving our cameramobile incident reporting and statistical analysis. |
● | grow the market share of Gourmet Foods both in New Zealand and abroad |
Liquidity
In years prior to 2011, our primary source of operating capital has been funding sourced through insiders or shareholders under the terms of unsecured promissory notes. We havehad been able, through operating revenues, to remain current on all debt service and vendor payables for the twothree years hence. However, sufficient funds havehad been unavailable to eliminate aging note payables accrued from years prior and repayment of convertible debts incurred during the currentprevious year. Accordingly, the Company accepted an equity-based infusion of capital totaling $3 million and retired a significant portion of our outstanding debt, including all convertible debentures, trade payables and notes due to officers and directors.
Management believes that, through execution of our current business plan, the Company will be able to continue to pay its financial obligations and to begin reduction ofavoid increases in its accrued liabilities in the coming fiscal year.
During the currentprior fiscal yearyears Concierge has begun to receivereceived a management fee from Janus Camits subsidiaries for the cost of financial reporting, audits and corporate governance. A portion of this fee is paid to the Wallen Group, a California general partnership controlled by David Neibert, our CEO,CFO, for consulting services directed towards the administration of the Company. The management staff at Janus Cam, including two of our directors, are paid in accordance with employment contracts on a salaried basis. Other outside directors are not compensated for their efforts. The management fees charged to Janus Cam by Concierge are equal to estimates of the costs to be incurred relevant to maintaining our public reporting status and to operate the business of Concierge. Because Concierge has no other sources of income beyond the management fees there is no expectation of profits apart from those of Janus Camits subsidiaries on a consolidated basis for the coming fiscal year.
Off-Balance Sheet Arrangements
As of September 30, 2014,2015, our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have
| ● | an obligation under a guarantee contract, |
| ● | a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets, |
| ● | an obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to, us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging, or research and development services with, us. |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the company appear as follows:
Report of Independent Registered Public Accounting Firm | | 1315 |
Consolidated Balance Sheets, as of June 30, 20142015 and 20132014 | | 1416 |
Consolidated Statements of Operations, Years Endedfor the years ended June 30, 20142015 and 20132014 | | 1517 |
Statements of Changes in Stockholders’ Deficit,Equity (Deficit), for the years ended June 30, 20142015 and 20132014 | | 1618 |
Consolidated Statements of Cash Flows, Yearsfor the years Ended June 30, 20142015 and 20132014 | | 1719 |
Notes to Consolidated Financial Statements | | 1820 |
REPORT OF INDEPENDENT AUDITORS’ REPORTREGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Concierge Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Concierge Technologies, Inc. and its subsidiaries (the "Company") as of June 30, 20142015 and 2013,2014, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended June 30, 2014.2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Concierge Technologies, Inc. and its subsidiaries as of June 30, 20142015 and 2013,2014, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 20142015 in conformity with accounting principles generally accepted in the United States of America.
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred cumulative losses of $4,893,709.$6,349,570. These factors along with those discussed in Note 4 to the financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.uncertainty
/S/ Kabani & Company, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Los Angeles, California
September 30, 2014
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | June 30, 2014 | | | June 30, 2013 | |
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash & cash equivalents | | $ | 20,454 | | | $ | 39,444 | |
Accounts receivable, net allowance for doubtful accounts of $25,186 | | | 159,047 | | | | 113,386 | |
Due from related party | | | 12,084 | | | | 11,084 | |
Inventory, net | | | 474,034 | | | | 190,281 | |
Other current assets | | | 2,285 | | | | 4,900 | |
Total current assets | | | 667,904 | | | | 359,095 | |
| | | | | | | | |
Security deposits | | | 11,222 | | | | 11,222 | |
Property and equipment, net | | | 12,456 | | | | 14,978 | |
Total assets | | $ | 691,582 | | | $ | 385,295 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | |
| | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 953,578 | | | $ | 522,773 | |
Advance from customers | | | 6,753 | | | | 202 | |
Notes payable - related parties | | | 48,000 | | | | 28,000 | |
Notes payable | | | 50,000 | | | | - | |
Convertible Debenture, net | | | 118,000 | | | | - | |
Related party convertible debenture, net | | | 204,700 | | | | - | |
Total current liabilities | | | 1,381,031 | | | | 550,975 | |
| | | | | | | | |
NON-CURRENT LIABILITIES: | | | | | | | | |
Related party convertible debenture, net | | | - | | | | 204,700 | |
Total long term liabilities | | | - | | | | 204,700 | |
| | | | | | | | |
Total liabilities | | | 1,381,031 | | | | 755,675 | |
| | | | | | | | |
STOCKHOLDERS' DEFICIT | | | | | | | | |
Preferred stock, 50,000,000 authorized par $0.001 | | | | | | | | |
Series A: 206,186 shares issued and outstanding at June 30, 2014 and 2013 | | | 206 | | | | 206 | |
Series B: 9,498,409 shares issued and outstanding at at June 30, 2014 and 2013 | | | 9,498 | | | | 9,498 | |
Common stock, $0.001 par value; 900,000,000 shares authorized; 240,337,841 shares issued and outstanding at at June 30, 2014 and 240,284,270 as of June 30, 2013 | | | 240,339 | | | | 240,285 | |
Additional paid-in capital | | | 3,954,217 | | | | 3,953,521 | |
Accumulated deficit | | | (4,893,709 | ) | | | (4,573,889 | ) |
Total | | | (689,449 | ) | | | (370,380 | ) |
Total liabilities and Stockholders' deficit | | $ | 691,582 | | | $ | 385,295 | |
The accompanying notes are an integral part of these consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | For the Years Ended | |
| | June 30 | |
| | 2014 | | | 2013 | |
Net revenue | | $ | 2,268,127 | | | $ | 2,207,756 | |
| | | | | | | | |
Cost of revenue | | | 1,318,657 | | | | 1,237,813 | |
| | | | | | | | |
Gross profit | | | 949,471 | | | | 969,943 | |
| | | | | | | | |
Operating expense | | | | | | | | |
| | | | | | | | |
General & administrative expense | | | 1,307,571 | | | | 1,147,556 | |
| | | | | | | | |
Operating Loss | | | (358,100 | ) | | | (177,612 | ) |
| | | | | | | | |
Other income (expense) | | | | | | | | |
Other income | | | 58,701 | | | | 11,557 | |
Interest expense | | | (19,620 | ) | | | (13,827 | ) |
Beneficial conversion feature expense | | | - | | | | (9,439 | ) |
Total other income (expense) | | | 39,081 | | | | (11,709 | ) |
| | | | | | | | |
Loss from continuing operations before income taxes | | | (319,019 | ) | | | (189,322 | ) |
| | | | | | | | |
Provision of income taxes | | | 800 | | | | 22,763 | |
| | | | | | | | |
Loss from Continuing Operations | | | (319,819 | ) | | | (212,085 | ) |
| | | | | | | | |
Income (Loss) from Discontinued Operations : | | | | | | | | |
Income from Discontinued Operations (including Gain on disposal of subsidiary) | | | - | | | | 340,743 | |
Loss from discontinued subsidiary | | | - | | | | (65,057 | ) |
Income (Loss) from Discontinued Operations | | | - | | | | 275,686 | |
| | | | | | | | |
Net Income (Loss) | | | (319,819 | ) | | | 63,601 | |
| | | | | | | | |
Loss attributable to Non-controlling interest | | | - | | | | (31,375 | ) |
| | | | | | | | |
Net Income (Loss) attributable to Concierge Technologies | | $ | (319,819 | ) | | $ | 94,976 | |
| | | | | | | | |
Weighted average shares of common stock * | | | | | | | | |
Basic & Diluted | | | 240,337,841 | | | | 236,861,198 | |
Diluted | | | 240,337,841 | | | | 237,391,751 | |
| | | | | | | | |
Net loss per common share - continuing operations | | | | | | | | |
Basic & Diluted | | $ | (0.001 | ) | | $ | (0.001 | ) |
Diluted | | $ | (0.001 | ) | | $ | (0.001 | ) |
| | | | | | | | |
Net loss per common share - discontinued operations | | | | | | | | |
Basic & Diluted | | $ | 0.001 | | | $ | (0.000 | ) |
Diluted | | $ | 0.001 | | | $ | (0.000 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
October 6, 2015
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN DEFICIT
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
| | Preferred Stock (Series A) | | | Preferred Stock (Series B) | | | Common Stock | | | | | | | | | Total | |
| | Number of | | | Par | | | Number of | | | Par | | | Number of | | | Par | | | Additional | | | Accumulated | | | Concierges' | |
| | Shares | | | Value | | | Shares | | | Value | | | Shares | | | Value | | | Paid In Capital | | | Deficit | | | Deficit | |
Balance at July 1, 2012 | | | 206,186 | | | | 206 | | | | 273,333 | | | | 273 | | | | 235,617,610 | | | | 235,618 | | | | 3,805,357 | | | | (4,668,865 | ) | | | (627,411 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Series B preferred shares issued in settlement of debenture | | | - | | | | - | | | | 560,000 | | | | 560 | | | | - | | | | - | | | | 111,440 | | | | - | | | | 112,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Forgiveness of related party loans | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 75,450 | | | | - | | | | 75,450 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Series B preferred shares issued to acquire Non Controlling Interest | | | - | | | | - | | | | 10,000,000 | | | | 10,000 | | | | - | | | | - | | | | 228,988 | | | | - | | | | 238,988 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Series B preferred shares converted to common stock | | | - | | | | - | | | | (233,333 | ) | | | (233 | ) | | | 4,666,666 | | | | 4,667 | | | | (4,434 | ) | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Series B preferred shares cancelled in lieu of sale of subsidiary | | | - | | | | - | | | | (1,101,591 | ) | | | (1,102 | ) | | | - | | | | - | | | | (263,280 | ) | | | - | | | | (264,382 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gain on sale of subsidiary | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 340,744 | | | | 340,744 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income from continuing operations for the year ended June 30, 2013 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (245,768 | ) | | | (245,768 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2013 | | | 206,186 | | | $ | 206 | | | | 9,498,409 | | | $ | 9,498 | | | | 240,284,276 | | | $ | 240,285 | | | $ | 3,953,521 | | | $ | (4,573,889 | ) | | $ | (370,380 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock issued for loan commitment fee | | | | | | | | | | | | | | | | | | | 53,571 | | | | 54 | | | | 696 | | | | | | | | 750 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss for the year ended June 30, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (319,819 | ) | | | (319,819 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2014 | | | 206,186 | | | | 206 | | | | 9,498,409 | | | | 9,498 | | | | 240,337,847 | | | | 240,339 | | | | 3,954,217 | | | | (4,893,709 | ) | | | (689,449 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
| | | | | | |
| | As of June 30, 2015 | | | As of June 30, 2014 | |
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash & cash equivalents | | $ | 1,970,062 | | | $ | 15,730 | |
Accounts receivable | | | 95,417 | | | | - | |
Inventory | | | 85,849 | | | | - | |
Current assets of subsidiary disposed | | | - | | | | 652,175 | |
Total current assets | | | 2,151,328 | | | | 667,904 | |
| | | | | | | | |
Deposit | | | 182,931 | | | | - | |
Non-current assets of subsidiary disposed | | | - | | | | 23,678 | |
Total assets | | $ | 2,334,259 | | | $ | 691,582 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 269,501 | | | $ | 276,208 | |
Notes payable - related parties | | | 8,500 | | | | 38,000 | |
Notes payable | | | 8,500 | | | | - | |
Convertible Debenture, net | | | - | | | | 118,000 | |
Related party convertible debenture, net | | | - | | | | 204,700 | |
Current liablities of subsidiary disposed | | | - | | | | 744,123 | |
Total liabilities | | | 286,501 | | | | 1,381,031 | |
| | | | | | | | |
COMMITMENT & CONTINGENCY | | | | | | | | |
| | | | | | | | |
STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | | |
Preferred stock, 50,000,000 authorized par $0.001 | | | | | | | | |
Series A: zero issued and outstanding at June 30, 2015 and 206,186 shares at June 30, 2014 | | | - | | | | 206 | |
Series B: 37,543,544 issued and outstanding at June 30, 2015 and 9,498,409 at June 30, 2014 | | | 37,543 | | | | 9,498 | |
Common stock, $0.001 par value; 900,000,000 shares authorized; 679,536,298 shares issued and outstanding at at June 30, 2015 and 240,337,841 as of June 30, 2014 | | | 679,537 | | | | 240,339 | |
Additional paid-in capital | | | 7,680,248 | | | | 3,954,217 | |
Accumulated deficit | | | (6,349,570 | ) | | | (4,893,709 | ) |
Total Stockholders' equity (deficit) | | | 2,047,758 | | | | (689,449 | ) |
Total liabilities and Stockholders' equity (deficit) | | $ | 2,334,259 | | | $ | 691,582 | |
| | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2014 AND 2013
| | For the years ended June 30, | |
| | 2014 | | | 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
Net Income (Loss) | | $ | (319,819 | ) | | $ | 94,976 | |
Adjustments to reconcile net income (loss) to net cash used in operating activities | | | | | | | | |
Gain on disposal of subsidiary | | | - | | | | (340,743 | ) |
Non-controlling interest | | | - | | | | (31,375 | ) |
Depreciation | | | 7,582 | | | | 4,607 | |
Allowance for bad debt | | | - | | | | 12,700 | |
Beneficial conversion feature expense | | | - | | | | 9,439 | |
Amortization of debt issuance cost | | | - | | | | 1,888 | |
Share based compensation | | | 750 | | | | - | |
(Increase) decrease in current assets: | | | | | | | | |
Accounts receivable | | | (45,661 | ) | | | 138,223 | |
Advance to supplier | | | - | | | | (4,900 | ) |
Inventory | | | (283,753 | ) | | | (152,839 | ) |
Other current assets | | | 2,615 | | | | - | |
Increase (decrease) in current liabilities: | | | | | | | | |
Accounts payable & accrued expenses | | | 430,805 | | | | 165,974 | |
Accounts payable - related parties | | | - | | | | (1,612 | ) |
Advances from customers | | | 6,551 | | | | (9,048 | ) |
Net cash used in operating activities - continuing operations | | | (200,931 | ) | | | (112,710 | ) |
Net cash used in operating activities | | | (200,931 | ) | | | (112,710 | ) |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Purchase of equipment | | | (5,060 | ) | | | (12,786 | ) |
Due from related party | | | (1,000 | ) | | | (1,000 | ) |
Net cash used in investing activities - continuing operations | | | (6,060 | ) | | | (13,786 | ) |
Net cash used in investing activities | | | (6,060 | ) | | | (13,786 | ) |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Proceeds from related party notes payable | | | 20,000 | | | | - | |
Proceeds from notes payable & debentures | | | 168,000 | | | | - | |
Net cash provided by financing activities - continuing operations | | | 188,000 | | | | - | |
Net cash provided by financing activities - discontinued operations | | | - | | | | 63,918 | |
Net cash provided by financing activities | | | 188,000 | | | | 63,918 | |
| | | | | | | | |
NET DECREASE IN CASH & CASH EQUIVALENTS | | | (18,990 | ) | | | (62,579 | ) |
| | | | | | | | |
CASH & CASH EQUIVALENTS, BEGINNING BALANCE | | | 39,444 | | | | 102,022 | |
| | | | | | | | |
CASH & CASH EQUIVALENTS, ENDING BALANCE | | $ | 20,454 | | | $ | 39,444 | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest paid | | $ | 4,301 | | | $ | - | |
Income taxes paid | | $ | 6,800 | | | $ | - | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | | | |
Series B preferred shares converted to common shares | | $ | - | | | $ | 4,667 | |
Series B preferred shares issued for debt and accrued interest | | $ | - | | | $ | 112,000 | |
Convertible debenture converted from notes payable and accrued interest | | $ | - | | | $ | 204,700 | |
Forgiveness of accounts payable - related parties | | $ | - | | | $ | 75,450 | |
Common Stock issued as loan fee | | $ | 750 | | | | | |
| | | | | | | | |
Series B preferred shares issued to acquire non-controlling interest in subsidiary | | $ | - | | | $ | 2,400,000 | |
Series B preferred shares cancelled in lieu of sale of subsidiary | | $ | - | | | $ | 264,382 | |
The accompanying notes are an integral part of these consolidated financial statements.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
| | | | | | |
| | For the Years Ended | |
| | June 30 | |
| | 2015 | | | 2014 | |
Net revenue | | $ | 223,565 | | | $ | - | |
| | | | | | | | |
Cost of revenue | | | 188,325 | | | | - | |
| | | | | | | | |
Gross profit | | | 35,240 | | | | - | |
| | | | | | | | |
Operating expense | | | | | | | | |
General & administrative expense | | | 166,930 | | | | 161,604 | |
Operating Loss | | | (131,690 | ) | | | (161,604 | ) |
| | | | | | | | |
Other income (expense) | | | | | | | | |
Other income | | | 5,086 | | | | - | |
Interest expense | | | (77,611 | ) | | | (14,728 | ) |
Total other expense | | | (72,525 | ) | | | (14,728 | ) |
| | | | | | | | |
Loss from continuing operations before income taxes | | | (204,216 | ) | | | (176,332 | ) |
| | | | | | | | |
Provision of income taxes | | | - | | | | - | |
| | | | | | | | |
Loss from Continuing Operations | | | (204,216 | ) | | | (176,332 | ) |
| | | | | | | | |
Income (Loss) from Discontinued Operations | | | | | | | | |
Gain on disposal of subsidiary | | | 109,600 | | | | - | |
Income from discontinued operations | | | 108,807 | | | | (143,488 | ) |
Income (Loss) from Discontinued Operations | | | 218,407 | | | | (143,488 | ) |
| | | | | | | | |
Net Income (Loss) | | $ | 14,191 | | | $ | (319,820 | ) |
| | | | | | | | |
Weighted average shares of common stock * | | | | | | | | |
Basic | | | 472,293,364 | | | | 240,337,841 | |
Diluted | | | 849,749,735 | | | | 240,337,841 | |
| | | | | | | | |
Net loss per common share - continuing operations | | | | | | | | |
Basic & Diluted | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | |
Net loss per common share - Discontinued operations | | | | | | | | |
Basic | | $ | 0.00 | | | $ | (0.00 | ) |
Diluted | | $ | 0.00 | | | $ | (0.00 | ) |
| | | | | | | | |
Net loss per common share | | | | | | | | |
Basic | | $ | 0.00 | | | $ | (0.00 | ) |
Diluted | | $ | 0.00 | | | $ | (0.00 | ) |
| | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | | | | | |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES |
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock (Series A) | | | Preferred Stock (Series B) | | | Common Stock | | | | | | | | | Total Concierges' Deficit | |
| | Number of Shares | | | Par Value | | | Number of Shares | | | Par Value | | | Number of Shares | | | Par Value | | | Additional Paid In Capital | | | Accumulated Deficit | | | |
| | | | | | | | | | | | | | | | | | |
Balance at June 30, 2013 | | | 206,186 | | | $ | 206 | | | | 9,498,409 | | | $ | 9,498 | | | | 240,284,276 | | | $ | 240,284 | | | $ | 3,953,521 | | | $ | (4,573,889 | ) | | $ | (370,379 | ) |
Common stock issued for loan commitment fee | | | - | | | | - | | | | - | | | | - | | | | 53,571 | | | | 54 | | | | 696 | | | | | | | | 750 | |
Net loss for the year ended June 30, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (319,819 | ) | | | (319,819 | ) |
Balance at June 30, 2014 | | | 206,186 | | | | 206 | | | | 9,498,409 | | | | 9,498 | | | | 240,337,847 | | | | 240,338 | | | | 3,954,217 | | | | (4,893,708 | ) | | | (689,448 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuance of Common Stock in settlement of convertible debenture | | | - | | | | - | | | | - | | | | - | | | | 18,040,247 | | | | 18,040 | | | | 140,021 | | | | - | | | | 158,061 | |
Beneficial conversion feature liability on debt issuance | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 67,571 | | | | - | | | | 67,571 | |
Issuance of Common Stock for cash | | | - | | | | - | | | | - | | | | - | | | | 400,000,000 | | | | 400,000 | | | | 760,000 | | | | - | | | | 1,160,000 | |
Issuance of series B Preferred Stock for cash | | | - | | | | - | | | | 32,451,499 | | | | 32,451 | | | | - | | | | - | | | | 1,807,548 | | | | - | | | | 1,840,000 | |
Benefical conversion feature for issuance of series B Preferred Stock | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,470,053 | | | | (1,470,053 | ) | | | - | |
Cancellation of Common Stock as consideration for disposal of subsidiary | | | - | | | | - | | | | - | | | | - | | | | (68,000,000 | ) | | | (68,000 | ) | | | (434,616 | ) | | | - | | | | (502,616 | ) |
Conversion of series A Preferred Stock to Common Stock | | | (206,186 | ) | | | (206 | ) | | | - | | | | - | | | | 1,030,930 | | | | 1,031 | | | | (825 | ) | | | - | | | | - | |
Conversion of series B Preferred Stock to Common Stock | | | - | | | | - | | | | (4,406,363 | ) | | | (4,406 | ) | | | 88,127,280 | | | | 88,127 | | | | (83,721 | ) | | | - | | | | (0 | ) |
Net income for the year ended June 30, 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,191 | | | | 14,191 | |
Balance at June 30, 2015 | | | - | | | $ | - | | | | 37,543,545 | | | $ | 37,543 | | | | 679,536,304 | | | $ | 679,537 | | | $ | 7,680,248 | | | $ | (6,349,570 | ) | | $ | 2,047,758 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
FOR THE YEARS ENDED JUNE 30, 2015 AND 2014 | |
| | | | | | |
| | For the years ended June 30, | |
| | 2015 | | | 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
Net income (loss) | | $ | 14,191 | | | $ | (319,820 | ) |
(Income) / Loss from discontinued operations | | | (108,807 | ) | | | - | |
Adjustments to reconcile net income (loss) to net cash used in operating activities | | | | | | | | |
Gain on disposal of subsidiary | | | (109,600 | ) | | | - | |
Amortization of debt issuance cost | | | 67,571 | | | | - | |
Share based compensation | | | - | | | | 750 | |
(Increase) decrease in current assets: | | | | | | | | |
Accounts receivable | | | (95,417 | ) | | | - | |
Inventory | | | (85,849 | ) | | | - | |
Other current assets | | | (182,931 | ) | | | - | |
Increase (decrease) in current liabilities: | | | | | | | | |
Accounts payable & accrued expenses | | | 16,275 | | | | 10,948 | |
Advances from customers | | | - | | | | - | |
Cash used in operating activities - continuing operations | | | (484,567 | ) | | | (308,122 | ) |
Cash provided by operating activities - discontinued operations | | | - | | | | 107,191 | |
Net cash used in operating activities | | | (484,567 | ) | | | (200,931 | ) |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Payment of cash to subsidiary disposed as part of sale agreement | | | (353,100 | ) | | | - | |
Cash used in investing activities - continuing operations | | | (353,100 | ) | | | - | |
Cash used in investing activities - discontinued operations | | | - | | | | (10,783 | ) |
Net cash used in investing activities | | | (353,100 | ) | | | (10,783 | ) |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Proceeds from related party debts | | | - | | | | 10,000 | |
Repayments of related party debts | | | (29,500 | ) | | | - | |
Proceeds from notes payable & debentures | | | 43,500 | | | | 118,000 | |
Repayments of notes payable & debentures | | | (222,000 | ) | | | - | |
Proceeds from sale of common shares | | | 1,160,000 | | | | - | |
Proceeds from sale of preferred shares | | | 1,840,000 | | | | - | |
Cash provided by financing activities - continuing operations | | | 2,792,000 | | | | 128,000 | |
Cash provided by financing activities - discontinued operations | | | - | | | | 60,000 | |
Net cash provided by financing activities | | | 2,792,000 | | | | 188,000 | |
| | | | | | | | |
NET INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS | | | 1,954,332 | | | | (23,714 | ) |
| | | | | | | | |
CASH & CASH EQUIVALENTS, BEGINNING BALANCE | | | 15,730 | | | | 39,444 | |
| | | | | | | | |
CASH & CASH EQUIVALENTS, ENDING BALANCE | | $ | 1,970,062 | | | $ | 15,730 | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest - continuing operations | | $ | 7,984 | | | $ | 4,301 | |
Interest - discontinued operations | | $ | 4,103 | | | $ | - | |
Income taxes - discontinued operations | | $ | 35,538 | | | $ | 6,800 | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | |
Beneficial conversion feature for issuance of Series B Preferred Stock | | $ | 1,470,053 | | | $ | - | |
Cancellation of common stock in connection with disposal of subsidiary | | $ | (502,616 | ) | | $ | - | |
Issuance of common stock in settlement of convertible debentures & Notes & Accrued Interest | | $ | 158,061 | | | $ | - | |
Common Stock issued as loan fee | | $ | - | | | $ | 750 | |
| | | | | | | | |
The accompanying notes are an integral part of these audited consolidated financial statements. |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Concierge Technologies, Inc., (the “Company”), a Nevada corporation, was originally incorporated in California on August 18, 1993 as Fanfest, Inc. On March 20, 2002, the Company changed its name to Concierge Technologies, Inc. The Company’s principal operations include the purchase and sale of digital equipment through its wholly owned subsidiary subsidiaries Wireless Village doing business as Janus Cam (until its disposal as of May 7, 2015) and Kahnalytics, Inc.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Concierge Technologies, Inc. (parent), and its wholly owned subsidiary,subsidiaries, Kahnalytics and Wireless Village (discontinued on May 7, 2015). All significant inter-company transactions and accounts have been eliminated in consolidation. A wholly owned subsidiary of the Company, Planet Halo, was disposed during the previous year and hence has been eliminated from the accompanying Consolidated Financial Statements for the period ending June 30, 2013 for comparison purposes.
Use of Estimates
The preparation of consolidated financial statements is in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.obligations.
Concentrations of Risk
The Company maintains cash balances at a financial institution headquartered in San Diego, California. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor. The Company’s uninsured cash balance was $1,715,085 at June 30, 2015.
Major customers & suppliers
Sales to the Company’s largest customer accounted for approximately $223,565 and 100% of total net sales in the fiscal year ended June 30, 2015 and Nil for the year ended June 30, 2014. Accounts receivable at June 30, 2015 and 2014 for this customer was $95,417 and $Nil, respectively.
Purchases from the Company’s largest supplier accounted for approximately $150,621 and 74% of total net purchases in the fiscal year ended June 30, 2015 and Nil for the year ended 2014. Accounts payable at June 30, 2015 and 2014 for this supplier was $Nil and $Nil, respectively. The remaining 26% of total net purchases were from one supplier who accounted for $51,852 in fiscal year ended June 30, 2015 and $Nil for the year ended June 30, 2014. Accounts payable for this supplier at June 30, 2015 and 2014 was $18,312 and $Nil.
Allowance for Doubtful Debts
The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends and changes in customer payment patterns. Reserves are recorded primarily on a specific identification basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determined that anno allowance of $25,186 was necessary for the yearsyear ended June 30, 2015 and 2014, and 2013.respectively. .
Inventory
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories are valued at the lower of cost (determined on a FIFO basis) or market. Inventories include product cost, inbound freight and warehousing costs. Management compares the cost of inventories with the market value and an allowance is made for writing down the inventories to their market value, if lower.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight line method over an estimated useful life of three years.
Impairment of Long-Lived Assets
Impairment of Long-Lived Assets |
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.
Fair Value of Financial Instruments
The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, and accounts payable.
The three levels are defined as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.
Revenue Recognition
Revenue is recognized on the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist,, and collectability is reasonably assured.assured.
Share-based Compensation
The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the applicable vesting period of the stock award (generally four to five years) using the straight-line method.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits or if future deductibility is uncertain.
Reclassifications
Certain 2014 balances have been reclassified to conform to the 2015 presentation
Recent Accounting Pronouncements
Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists: An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For example, an entity should not evaluate whether the deferred tax asset expires before the statute of limitations on the tax position or whether the deferred tax asset may be used prior to the unrecognized tax benefit being settled. The amendments in this Update do not require new recurring disclosures. ASU Topic No. 2013 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)." ASU 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for annual periods beginning after December 15, 2014. The Company is currently evaluating the impact of adopting ASU 2014-08 on the Company's results of operations or financial condition.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. . The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The Company is currently evaluating the impact of adopting ASU 2014-12 on the Company's results of operations or financial condition.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
In January 2015, the FASB issued Accounting Standards Update No. 2015-01, Income Statement – Extraordinary and Unusual items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (ASU 2015-01). The amendment eliminates from U.S. GAAP the concept of extraordinary items. This guidance is effective for the Company in the first quarter of fiscal 2017. Early adoption is permitted and allows the Company to apply the amendment prospectively or retrospectively. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In February 2015, FASB issued ASU No. 2015-02, (Topic 810): Amendments to the Consolidation Analysis. ASU No. 2015-02 provides amendments to respond to stakeholders’ concerns about the current accounting for consolidation of certain legal entities. Stakeholders expressed concerns that GAAP might require a reporting entity to consolidate another legal entity in situations in which the reporting entity’s contractual rights do not give it the ability to act primarily on its own behalf, the reporting entity does not hold a majority of the legal entity’s voting rights, or the reporting entity is not exposed to a majority of the legal entity’s economic benefits or obligations. ASU No. 2015-02 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
In April 2015, FASB issued ASU No. 2015-03, (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU No. 2015-03 provides guidance that will require debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU No. 2015-03 affects disclosures related to debt issuance costs but does not affect existing recognition and measurement guidance for these items. ASU No. 2015-03 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
In April 2015, FASB issued ASU No. 2015-05, (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangements. ASU No. 2015-05 provides guidance on a customer’s accounting for fees paid in a cloud computing arrangement, which includes software as a service, platform as a service, infrastructure as a service, and other similar hosting arrangements. ASU No. 2015-05 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.
NOTE 3.3 BASIC AND DILUTED NET LOSS PER SHARES
Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
Diluted net loss per share for the yearsyear ended June 30, 2014 did not reflect the effects of shares potentially issuable upon conversion of convertible notes.notes & preferred stock. These potentially issuable shares would have an anti-dilutive effect on the Company’s net loss per share in 2014. However, dilutedDiluted net income per share for the yearsyear ended June 30, 2013 was2015 reflected the effects of shares actually potentially issuable upon conversion of convertible notes.
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has an accumulated deficit of $4,893,709$6,349,570 as of June 30 2014,2015, including a net lossincome of $319,819$14,191 during the year ended June 30, 2014.30, 2015. The historical losses have adversely affected the liquidity of the Company. The current yearly operations resulted in a net lossincome that,, in part, was due to an increasegain realized on the disposal of its wholly owned subsidiary in interest payable on accrued notes, the needamount of $109,600 and income from discontinued operations of $108,807 during the year ended June 30, 2015. . Although losses are expected to liquidate obsolete product at a discount, andbe curtailed during the costcoming fiscal year due to design and launch a new product. Thethe divestiture of the wholly owned subsidiary, Wireless Village, the Company faces continuing significant business risks, which include, but are not limited to, its ability to maintain vendor and supplier relationships by making timely payments when due, continue product research and development efforts, and successfully compete for customers.
In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to increase profitability from operations, obtain financing, and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. Management devoted considerable effort from inception through the period ended June 30, 2014,30, 2015, towards (i) establishment of sales distribution channels for its products,sourcing additional working capital including the $3,000,000 equity investment completed during the quarter ended March 31, 2015, (ii) management of accrued expenses and accounts payable, (iii) divestiture of its subsidiary experiencing continuing operating losses, and (vi) initiation of the business strategies of Wireless Village, and (iv) acquisition of suitable synergistic partners for business opportunities in mobile incident reporting thatGourmet Foods, Ltd, a New Zealand company expected to generate immediate revenues.significant and sustainable revenues during the coming fiscal year.
Management believes that the above actions will allow the Company to continue operations for the next 12 months.
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extends the life of property and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred. Property and equipment are being depreciated and amortized on the straight-line basis over the following estimated useful lives
| Estimated Useful Lives |
Furniture & Office Equipment | Three Years |
Network Hardware & Software | Three Years |
Site Installation Materials | Three Years |
As of June 30, 2014 and June 30, 2013, property and equipment consisted of the following:
| | June 30, | | | June 30, | |
| | 2014 | | | 2013 | |
Furniture & Office Equipment | | $ | 15,392 | | | $ | 15,392 | |
Network Hardware & Software | | | 33,488 | | | | 28,428 | |
Site Installation Materials | | | - | | | | - | |
Total Fixed Assets | | | 48,880 | | | | 43,820 | |
Accumulated Depreciation | | | 36,425 | | | | 28,842 | |
Total Fixed Assets, Net | | $ | 12,456 | | | $ | 14,978 | |
Depreciation expense amounted to $7,582 and $4,607 for the years then ended June 30, 2014 and 2013, respectively.
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
| | June 30, 2015 | | | June 30, 2014 | |
Accounts payable | | $ | 108,860 | | | $ | 88,977 | |
Accrued judgment | | | 135,000 | | | | 135,000 | |
Accrued interest | | | 781 | | | | 27,731 | |
Accrued Expenses | | | 24,860 | | | | 24,500 | |
Total | | $ | 269,501 | | | $ | 276,208 | |
NOTE 6. RELATED PARTY TRANSACTIONS
Due from Related Party
Notes receivable to related party is comprised of two notes of $5,000 each. The principal of these notes were due and payable on or before May 1, 2012. The notes are unsecured and non-interest bearing until maturity, after which time interest is calculated at 10% per annum. Total interest due as of June 30, 2014 was $2,084.
Notes receivable to related party is comprised of two notes of $5,000 each. The principal of these notes were due and payable on or before May 1, 2012. The notes are unsecured and non-interest bearing until maturity, after which time interest is calculated at 10% per annum. Total interest due as of June 30, 2013 was $1,084.
Notes Payable - Related Parties
Current related party notes payable consist of the following:
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | June 30, 2014 | | | June 30, 2013 | | | June 30, 2015 | | | June 30, 2014 | |
Notes payable to director/shareholder, noninterest-bearing, unsecured and payable on demand(1) | | | 8,500 | | | | 8,500 | | | $ | - | | | $ | 8,500 | |
Notes payable to shareholder, interest rate of 10%, unsecured and payable on July 31, 2004 (past due) | | | 5,000 | | | | 5,000 | | | | 5,000 | | | | 5,000 | |
Notes payable to shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due) | | | 3,500 | | | | 3,500 | | | | 3,500 | | | | 3,500 | |
Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due) | | | 5,000 | | | | 5,000 | | |
Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due) | | | 5,000 | | | | 5,000 | | |
Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due) | | | 1,000 | | | | 1,000 | | |
Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 | | | | - | | | | 5,000 | |
Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 | | | | - | | | | 5,000 | |
Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 | | | | - | | | | 1,000 | |
Notes payable to director/shareholder, interest rate of 10%, unsecured and payable on demand (1) | | | 10,000 | | | | - | | | | - | | | | 10,000 | |
Notes payable to director/shareholder, interest rate of 6%, unsecured and payable on July 31, 2014 | | | 10,000 | | | | - | | |
| | | 48,000 | | | | 28,000 | | | $ | 8,500 | | | $ | 38,000 | |
On January 1, 2013 we consolidated all outstanding notes payable due a related party into one loan agreement containing certain conversion features whereby the note holder could convert the principal amount of the loan, $204,700 comprised of the sum total of the principal amounts of the individual notes, $122,000, plus $82,700 in accrued interest applicable to those notes, together with accrued interest on the principal at the rate of 4.944% per annum, into shares of our common stock at the conversion rate of $0.02 per share. The note is unsecured and becomes due and payable on January 1, 2015. The accrued interest on this $204,700 convertible debenture as of December 31, 2014 was $20,241. There was no beneficial conversion feature involved in the new note. On December 19, 2014 we entered into an amendment to the debenture that allowed for the yearsmaturity date to be extended to June 1, 2015 and provided the Company rights to settle the debenture in full, upon completion of an equity investment in excess of $1,500,000, by payment of $122,000 in cash and issuance of 8,270,000 shares of common stock valued at $0.01 per share to the debenture holder. On January 26, 2015 we exercised those rights and paid the debenture in full. The transaction resulted in a gain on the issuance of shares of $69,861. which was recorded in additional paid in capital account as the transaction was with a related party.
(1)As a result of the death of a related party noteholder, a note payable of $8,500 was reclassified as a note payable-unrelated party and has been removed from the related party notes payable disclosure listing. While the note does not contain successor rights, the Company elects to retain the liability until final disposition.
On February 13, 2015 the Company repaid the outstanding notes due to two related parties totaling $21,000 in principal and $4,000 in accrued interest. A total of $5,086 in accrued interest was forgiven by the noteholders in settlement of the debt.
Interest expense for all related party notes payable, including the related party convertible debenture, for the year ended June 30, 2015 amounted to $6,628 and was $12,306 for the year ended June 30, 2014 and June 30, 2013 was $10,120 and $4,991 respectively and is included in the interest expense recorded for the years ending June 30, 2014 and June 30, 2013.
(1) | On March 27, 2014 our subsidiary, Wireless Village, accepted a cash loan from an affiliate of a director in the amount of $40,000. The loan had a balance due of $10,000 as of June 30, 2014. The loan is unsecured and payable on demand. The amount of balance due, $10,000, is included in the amount listed for “Notes payable – related parties” on the Consolidated Balance Sheet as of June 30, 2014. |
Concierge Technologies.
NOTE 7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
| | June 30, 2014 | | | June 30, 2013 | |
Accounts payable | | $ | 677,563 | | | $ | 279,992 | |
Sales tax payable | | | 1,181 | | | | 44,881 | |
Accrued judgment | | | 135,000 | | | | 135,000 | |
Accrued interest | | | 35,154 | | | | 19,351 | |
Auditing | | | 24,500 | | | | 24,500 | |
Payroll Tax Liability | | | 55,453 | | | | 19,049 | |
State income tax | | | 24,727 | | | | - | |
Total | | $ | 953,578 | | | $ | 522,773 | |
Shares Issued in Connection with Financing Cost
On November 8, 2013 Janus CamWireless Village entered into a short term Note Agreement with an unaffiliated individual in the amount of $50,000, the proceeds of which were used to pay down inventory purchase costs. Interest on the Note accruesaccrued at an annualthe rate of 10% per annum and iswas payable in monthly installments with an adjusteda maturity date of January 5, 2015.February 19,
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2014 payable by Wireless Village. On February 19, 2014 the lenderunaffiliated individual agreed to extend the maturity date to June 1, 2014 and the Company agreed to pay a loan commitment fee of 1.5%, or $750. By agreement, that fee was paid by the issuance of 53,571 shares of unregistered common stock with a market value on the date of issuance of $0.014 per share. The note was subsequently extended to mature on January 5, 2015, and then again to mature on February 27, 2015 provided Concierge Technologies guaranteed the repayment on behalf of Wireless Village. A fee in the amount of 1%, or $500, was paid in cash to the noteholder by Wireless Village in exchange for the agreement to extend the maturity date. On February 13, 2015 the note was repaid in full by Concierge Technologies. The amount of the payment made by Concierge Technologies is included in the total of intercompany loan liabilities of Wireless Village and taken into consideration for the calculation of gain on the sale of Wireless Village as a forgiveness of debt.
On December 24, 2014 the Company entered into an unsecured promissory note agreement with an unaffiliated individual for the principal amount of $35,000 plus interest to accrue at the rate of 6% per annum on the unpaid principal. The note and accrued interest was due and payable on or before June 30, 2015. The proceeds of the loan were reserved in anticipation of the need to pay a convertible debenture maturing in January 2015. On January 26, 2015 the noteholder became an investor and shareholder of the Company and the amount of $35,000 due under the note agreement was repaid as a credit to the amount of funds due per the stock subscription agreement. No interest was accrued or paid on the note.
An unsecured loan in the amount of $8,500 due a former director and shareholder who is now deceased has been reclassified as a note due unrelated party. The note is interest free, not deemed assignable to successors by the Company, and held as a contingent liability until resolved.
NOTE 8. CONVERTIBLE DEBENTURES
On February 18, 2014 the Company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $53,000. The debenture is convertible, at the option of the debenture holder, to restricted common shares after August 18, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price (“VWAP”) of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on November 18, 2014 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. During the quarter ended September 30, 2014, at the election of the debenture holder, the Company converted $28,000 of the principal to equity through issuance of 4,346,247 shares of common stock. During the quarter ended December 31, 2014, at the election of the debenture holder, the Company converted $25,000 of the principal plus $2,120 of accrued interest to equity through issuance of 5,424,000 shares of common stock. The debenture has been paid in full as of June 30, 2015.
On March 28, 2014 the Company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $32,500. The note is convertible, at the option of the debenture holder, to restricted common shares after September 23, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day VWAP of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on January 2, 2015 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. As of June 30, 2015 the debenture was repaid in full with cash of $32,500 plus accrued interest of $1,995.
On April 25, 2014 the Company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $32,500. The note is convertible, at the option of the debenture holder, to unregistered common shares after October 22, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day VWAP of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on January 25, 2015 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. As of June 30, 2015 the debenture was repaid in full with cash of $32,500 plus accrued interest of $1,995.
The Company identified embedded derivatives related to all the three convertible debenture mentioned above. The embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments required that the Company record the derivatives at their fair values as of the inception date and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives was higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income. The derivatives were classified as short-term liabilities. The debentures were repaid in full with cash as of June 30, 2015 and the derivative liability was eliminated on the consolidated balance sheet at June 30, 2015.
NOTE 9. FAIR VALUE MEASUREMENT
The Company adopted the provisions of ASC 825-10 on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings, and other current assets and liabilities approximate fair value, because of their short-term maturity.
Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of June 30, 2015:
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Quoted Prices | | | | | | |
| in Active | | Significant | | | | |
| Markets for | | Other | | Significant | | |
| Identical | | Observable | | Unobservable | | |
| Instruments | | Inputs | | Inputs | | |
| Level 1 | | Level 2 | | Level 3 | Total | |
Derivative Liability | | $ | – | | | $ | – | | | $ | - | | | $ | - | |
| | | Roll-forward of Balance | | | | | | | | | | |
Derivative liability for Convertible Debentures | | | 67,571 | | | | | | | | | | |
Change in value of derivative liability during the period ended June 30, 2015 | | | -67,571 | | | | | | | | | | |
Balance, June 30, 2015 | | $ | - | | | | | | | | | | |
The Company's derivative liability was valued using pricing models, and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. These financial liabilities do not trade in liquid markets, and, as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy. The change in fair value of the derivative liability is included as a component of other income in the consolidated statements of operations. The derivative liability was calculated using the Black-Scholes option-pricing model with the following assumptions: expected lives range of less than a month; 110.48% stock price volatility; risk-free interest rate of 0.110% and no dividends during the expected term.
Income tax for the years ended June 30, 2015 and 2014 is summarized as follows:
| | 2015 | | | 2014 | |
Current tax, net | | $ | - | | | $ | - | |
Deferred (tax)/ benefit | | | (8,816 | ) | | | 37,307 | |
Change in valuation allowance | | | 8,816 | | | | (37,307 | ) |
Income tax expense | | $ | - | | | $ | - | |
Through June 30, 2014, the Company incurred net operating losses for tax purposes of approximately $4,880,000, which was decreased to $4,801,000 due to operating income for the year ended June 30, 2015 amounting to $82,000. The net operating loss carryforward for federal and state purposes may be used to reduce taxable income through the year 2035.
The gross deferred tax asset balance as of June 30, 2015 is approximately $1,904,000 after utilization of the amount of $8,800 against taxes computed on taxable income for the year ended June 30, 2015. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot be reasonably assured.
Components of the deferred tax assets are limited to the Company's net operating loss carryforwards, and are presented as follows at June 30:
| | 2015 | | | 2014 | |
Deferred tax assets (liabilities): | | | | | | |
Net operating loss carryforwards | | $ | 4,801,000 | | | $ | 4,880,000 | |
Deferred tax assets, net | | | 1,904,000 | | | | 1,913,000 | |
Valuation allowance | | | (1,904,000 | ) | | | (1,913,000 | ) |
Net deferred tax assets | | $ | - | | | $ | - | |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Differences between the benefit from income taxes and income taxes at the statutory federal income tax rate are as follows for the years ended June 30:
| | 2015 | | | 2014 | |
| | Amount | | | Rate | | | Amount | | | Rate | |
| | | | | | | | | | | | |
Tax expense (benefit) at federal statutory rate | | $ | 28,617 | | | | -35.0 | % | | $ | (29,609 | ) | | | -34.0 | % |
State taxes, net of federal benefit | | | 7,228 | | | | -8.8 | % | | | (7,698 | ) | | | 8.8 | % |
Beneficial conversion expense | | | (27,028 | ) | | | 8.4 | % | | | - | | | | 0.0 | % |
Minimum franchise tax | | | - | | | | 0.0 | % | | | - | | | | 0.0 | % |
Change in valuation allowance | | | (8,816 | ) | | | 35.4 | % | | | 37,307 | | | | 42.8 | % |
Tax expense at actual rate | | $ | - | | | | 0.0 | % | | $ | - | | | | 0.0 | % |
NOTE 9. CONVERTIBLE DEBENTURES11. COMMITMENTS AND CONTINGENCIES
Purchase Agreement Commitment
On February 18, 2014May 29, 2015 the Company and Gourmet Foods, Ltd., a New Zealand company, entered into a seriesSale and Purchase of agreements, including a convertible debenture, that resulted in a funding of $53,000. The note is convertible, atBusiness agreement. On June 23, 2015, pursuant to the optionterms of the debenture holder,agreement, the Company paid $182,931 (equal to unregistered common shares after$260,000 New Zealand dollars) to Gourmet Foods, Ltd. as a deposit against the final purchase price estimated to total $2,511,050 in New Zealand currency.
As mentioned in Note 14 Subsequent Events, the acquisition was closed on August 18, 2014 at11, 2015 and Gourmet Foods, Ltd became a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price of our shares on the date of conversion. During the initial 6 months from the datewholly owned subsidiary of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tiedCompany. Refer to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on November 18, 2014 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. However, as the debenture holder has no right to convert their debt to equity prior to August 19, 2014, hence, if, as of August 19, 2014, the debenture is not repaid, Company will accountNote 14 for the embedded derivative as of that date.
On March 28, 2014 the company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $32,500. The note is convertible, at the option of the debenture holder, to unregistered common shares after September 29, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on December 28, 2014 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. However, as the debenture holder has no right to convert their debt to equity prior to September 29, 2014 hence, if, after September 29, 2014, the debenture is not repaid, the Company will account for the embedded derivative as of that date.
NOTE 9. CONVERTIBLE DEBENTURES (CONTINUED)
On April 25, 2014 the company entered into a series of agreements, including a convertible debenture, that resulted in a funding of $32,500. The note is convertible, at the option of the debenture holder, to unregistered common shares after October 26, 2014 at a conversion price calculated on a prescribed discount to the trailing 10-day volume weighted average market price of our shares on the date of conversion. During the initial 6 months from the date of the note the Company may repay the principal plus accrued interest at the rate of 8% per annum by applying a pre-payment penalty determined on a sliding scale tied to the aging of the note. After the initial 6-month period has elapsed the Company may not repay the note until its maturity date on January 28, 2015 at which time the note principal and interest will become due and payable without pre-payment penalty. The Company identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the convertible debenture and fair value as of each subsequent balance sheet date. However, as the debenture holder has no right to convert their debt to equity prior to October 26, 2014 hence, if, after October 26, 2014, the debenture is not repaid, the Company will account for the embedded derivative as of that date.
NOTE 10. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method. During the 12 months ended June 30, 2014 and June 30, 2013 the Company did not pay any interest or income taxes apart from $4,301 in loan interest and $6,800 in state income tax paid by Wireless Village.
NOTE 11. INCOME TAXES
Income tax for the years ended June 30, 2014 and 2013 is summarized as follows:
| | 2014 | | | 2013 | |
Current tax, net | | $ | 800 | | | $ | 22,763 | |
Deferred (tax)/ benefit | | | 136,668 | | | | 77,330 | |
Change in valuation allowance | | | (136,668 | ) | | | (77,330 | ) |
Income tax expense | | $ | 800 | | | $ | 22,763 | |
Through June 30, 2013, the Company incurred net operating losses for tax purposes of approximately $4,795,953, which was increased to $5,114,971 due to operating loss for the year ended June 30, 2014 amounting to $319,019. The net operating loss carryforward for federal and state purposes may be used to reduce taxable income through the year 2034.
The gross deferred tax asset balance as of June 30, 2014 is approximately $2,012,820 after utilization of the amount of $136,668 against taxes computed on taxable income for the year ended June 30, 2014. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot be reasonably assured.
NOTE 11. INCOME TAXES (CONTINUED)
Components of the deferred tax assets are limited to the Company's net operating loss carryforwards, and are presented as follows at June 30:
| | 2014 | | | 2013 | |
Deferred tax assets (liabilities): | | | | | | |
Net operating loss carryforwards | | $ | 5,114,972 | | | $ | 4,795,953 | |
Deferred tax assets, net | | | 2,012,821 | | | | 1,876,153 | |
Valuation allowance | | | (2,012,821 | ) | | | (1,876,153 | ) |
Net deferred tax assets | | $ | - | | | $ | - | |
Differences between the benefit from income taxes and income taxes at the statutory federal income tax rate are as follows for the years ended June 30:
| | 2014 | | | 2013 | |
| | Amount | | | Rate | | | Amount | | | Rate | |
| | | | | | | | | | | | |
Tax expense (benefit) at federal statutory rate | | $ | | | | | (108,466 | ) | | $ | (64,369 | ) | | | -34.0 | % |
State taxes, net of federal benefit | | | | | | | (28,201 | ) | | | (16,736 | ) | | | -8.8 | % |
Beneficial conversion expense | | | | | | | - | | | | 3,776 | | | | 2.3 | % |
Minimum franchise tax | | | | | | | (800 | ) | | | (800 | ) | | | 0.0 | % |
Change in valuation allowance | | | | | | | 136,668 | | | | 77,330 | | | | 40.6 | % |
Tax expense at actual rate | | | | | | $ | (800 | ) | | $ | (22,763 | ) | | | 0.0 | % |
NOTE 12. COMMITMENTS AND CONTINGENCIES
Lease Commitment
During the current year the Company, through its subsidiary Wireless Village dba/Janus Cam, restructured its office leases such that it is no longer a tenant but rather a sub-tenant on a month-to-month basis for facilities located at 31 Airport Blvd. Suites G2, G3 and H. Although on a month-to-month basis, Janus Cam has agreed with the sub-landlord to assume the obligations under the lease and to pay rent directly to the landlord for the duration of the lease term, which expires in November 2014.
Upon expiration of its leases, the Company does not anticipate any difficulty in obtaining renewals or alternative space. Rent expense amounted to $38,983 and $28,784 for the years ended June 30, 2014 and 2013, respectively.
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)further details.
Litigation
On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd.Ltd. against, jointly and severally, Concierge, Inc.Inc., Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus legal fees. As of May 7, 2012, the judgment had lapsed due to the passage of time and the creditor’s failure to renew. Although a new court action would be required by the plaintiff in order to seek legal remedies, the Company has accrued the amount of $135,000 in the accompanying financial statements as accrued expenses as of June 30, 2014.30, 2015.
NOTE 12. EQUITY TRANSACTIONS
Shares issued for cash
On January 26, 2015, the Company issued, in the aggregate, 400,000,000 shares of common stock for $1,160,000 to two separate trust entities. The beneficiaries of the trusts were subsequently appointed directors on the Company’s board of directors and the Company’s Chief Executive Officer.
On January 26, 2015, the Company also issued 32,451,499 shares, in the aggregate, of Series B Voting, Convertible Preferred stock at $0.0567per share for $1,840,000 to the same entities as described in the preceding paragraph. Each share of Series B Voting, Convertible Preferred stock has twenty votes on all matters submitted to a vote of the common stockholders and is convertible into twenty shares of common stock at any time after the issuance date. The beneficial conversion feature on the Series B Voting, Convertible Preferred shares issued were valued at $1,470,053 on the issuance date and accounted for as a deemed dividend.
Common stock issued in conversion of preferred stock
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended June 30, 2015, the company issued 88,127,280 shares of common stock for two conversions totaling 4,406,363 shares of Series B Voting, Convertible Preferred stock. The Company also converted 206,186 shares of its Series A Voting, Convertible Preferred stock to 1,030,930 shares of common stock.
Shares issued for debt settlement
The Company issued a total of 18,040,247 shares of common stock for conversion of debentures (note 8).
Shares cancelled in connection with disposal of subsidiary
On May 7, 2015 completed the sale of its wholly owned subsidiary, Wireless Village, and cancelled 68,000,000 shares of common stock as consideration (Note 13). The shares were valued at the fair market price on the closing date of the transaction.
NOTE 13. DISCONTINUED OPERATIONS
On February 26, 2015, the Company entered into a Stock Redemption Agreement with two of its shareholders (the “Shareholders”) and its wholly-owned subsidiary Wireless Village, Inc. dba Janus Cam (“Janus Cam”), a Nevada corporation (the “Agreement”) whereby the Company will cancel 68,000,000 shares of the Company’s common stock held by the Shareholders in exchange for all of the outstanding shares of common stock of Wireless Village held by the Company and the forgiveness of certain “Inter-Company Debt” of $344,052 advanced to Janus Cam by the Company (the “Transaction”). On May 7, 2015, the Company completed the closing of the transaction.
Assets of the divested subsidiary consisted of the following as of May 7, 2015 and June 30, 2014:
| | May 7, 2015 | | | June 30, 2014 | |
Cash and cash equivalents | | $ | 130,052 | | | $ | 4,723 | |
Accounts receivable, net | | | 66,015 | | | | 159,047 | |
Due from related party | | | 167,443 | | | | 12,085 | |
Inventory, net | | | 190,499 | | | | 474,035 | |
Pre-Paid inventory, advance to supplier | | | 219,149 | | | | - | |
Payroll advance | | | 1,935 | | | | 2,285 | |
Current assets of subsidiary | | $ | 775,093 | | | $ | 652,175 | |
Security deposits | | | 11,222 | | | | 11,222 | |
Equipment | | | 2,483 | | | | 2,483 | |
Network/office equipment | | | 34,589 | | | | 33,488 | |
Accumulated depreciation | | | (30,820 | ) | | | (23,515 | ) |
Non-Current assets of subsidiary | | $ | 17,473 | | | $ | 23,678 | |
Total Assets of subsidiary | | $ | 792,567 | | | $ | 675,853 | |
Liabilities of the divested subsidiary consisted of the following:
| | May 7, 2015 | | | June 30, 2014 | |
Accounts payable | | $ | 285,512 | | | $ | 596,009 | |
Sales tax liability | | | 3,914 | | | | 1,181 | |
CA income tax provision | | | - | | | | 24,727 | |
Payroll taxes payable | | | 529 | | | | 55,453 | |
Total Accrued Expenses | | | 289,955 | | | | 677,370 | |
Customer advances | | | 82,475 | | | | 6,752 | |
Notes payable-related parties | | | - | | | | 10,000 | |
Notes payable | | | - | | | | 50,000 | |
Debt payable to Concierge | | | 344,052 | | | | (5,548 | ) |
Total liabilities of subsidiary | | $ | 716,482 | | | $ | 738,574 | |
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net income and gain from the sale of subsidiary
The common shares redeemed in the transaction were valued at the fair market price of $0.0089 on the date of closing resulting in $605,200 in consideration. The debt payable to Concierge amounting to $344,052 as of the closing date was forgiven. The disposal of subsidiary resulted in a gain on disposal of $109,600. The income from discontinued operations for the period July 1, 2014 through May 7, 2015 was $108,807 resulting in a total gain on the disposal of the subsidiary of $218,407.
NOTE 14. SUBSEQUENT EVENTS
The Sale and Purchase Agreement referenced in Note 11 above provided for a due diligence period for the Company to inspect relevant aspects of the business (the “Due Diligence Period”). During the Due Diligence Period, the Company and Gourmet Foods decided to restructure their Purchase and Sale Agreement as a stock purchase to facilitate a more efficient transfer of Gourmet Foods to the control of the Company.
Accordingly, on July 29, 2015, the Company, Gourmet Foods and the shareholders of Gourmet Foods Ltd. (the “Gourmet Foods Shareholders”) entered into an Agreement for Sale and Purchase of Shares (the “Share Purchase Agreement”) whereby the Company agreed to purchase 100% of the shares of Gourmet Foods from the Gourmet Foods Shareholders in exchange for the original Purchase Price of $2,511,050 NZD. In connection with the execution of the Share Purchase Agreement, the parties agreed to terminate the Sale and Purchase Agreement. The Share Purchase Agreement closed on August 11, 2015 and Gourmet Foods, Ltd became a wholly owned subsidiary of the Company.
The terms of the Share Purchase Agreement are subject to post-closing adjustments based on accounting and inventory audits of the Businesses as set forth in the Share Purchase Agreement.
The Company is in the process of having the financial statement of Gourmet Foods, Ltd audited.