Marygold Companies, Inc. - Annual Report: 2016 (Form 10-K)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE FISCAL YEAR ENDED JUNE 30, 2016

or

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Concierge Technologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada	000-29913	95-4442384
(state of incorporation)	(Commission File Number)	(IRS Employer I.D. Number)

 

29115 Valley Center Rd. #K-206

Valley Center, CA 92082

Tel: 866.800.2978

Fax: 888.312.0124

____________________________________________________

(Address and telephone number of registrant's principal

executive offices and principal place of business)

 

Securities registered under Section 12(b) of the Exchange Act: None.

 

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]                                                                                                Accelerated filer [ ]

 

Non-accelerated filer [ ] (Do not check if a smaller reporting company)                       Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $1,207,549 based upon the price ($0.02) at which the common stock was last sold as of December 31, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, multiplied by the approximate number of shares of common stock held by persons other than executive officers, directors and five percent stockholders of the registrant without conceding that any such person is an “affiliate” of the registrant for purposes of the federal securities laws.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 67,953,870 shares of Common Stock, $0.001 par value, and 3,754,355 shares of Series B Convertible, Voting, Preferred Stock on October 11, 2016. Series B Preferred stock is convertible, under certain conditions, to 20 shares of common stock for each share of Series B Preferred stock. Each share of Series B Preferred stock votes as 20 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (3) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990). Information Statement pursuant to Section 14C filed December 10, 2010 and April 17, 2015, respectively.

 

 

TABLE OF CONTENTS

 

PART I
ITEM 1	Business	1
ITEM 2	Properties	4
ITEM 3	Legal Proceedings	4
PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters and
	Issuer Purchases of Equity Securities	5
ITEM 7	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	10
ITEM 8	Financial Statements and Supplementary Data	18
ITEM 9	Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure	56
ITEM 9A	Controls and Procedures	56
PART III
ITEM 10	Directors, Executive Officers and Corporate Governance	57
ITEM 11	Executive Compensation	62
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and
	Related Stockholder Matters	63
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	64
ITEM 14	Principal Accounting Fees and Services	66
PART IV
ITEM 15	Exhibits, Financial Statement Schedules	68

 

 

 

PART I

 

ITEM 1. BUSINESS.

 

Business Development

 

Concierge Technologies, Inc. (“Concierge” or sometimes the “Company”), was incorporated in California on August 18, 1993 as "Fanfest, Inc." On August 29, 1995 its name was changed to Starfest, Inc. (“Starfest”), and on March 20, 2002 its name was changed to “Concierge Technologies, Inc.”

 

Pursuant to a Stock Purchase Agreement (the "MAS XX Purchase Agreement") dated March 6, 2000 between MAS Capital, Inc., an Indiana corporation, the controlling shareholder of MAS Acquisition XX Corp. ("MAS XX"), an Indiana corporation, and Starfest, approximately 96.83 percent (8,250,000 shares) of the outstanding shares of common stock of MAS XX were exchanged for $100,000 and 150,000 shares of common stock of Starfest in a transaction in which Starfest became the parent corporation of MAS XX.

 

At the time of this transaction, the market price of Starfest's common stock was $1.50 bid at closing on March 7, 2000 on the OTC Bulletin Board (“OTCBB”). Accordingly, the consideration Starfest paid for the 96.83 percent interest in MAS XX was valued at $325,000. Concierge, Inc., a Nevada corporation, loaned Starfest the $100,000 cash portion of the consideration evidenced by a no-interest, demand note. Michael Huemmer, the president of Starfest, loaned to Starfest the 150,000 shares of common stock of Starfest that was the stock portion of the consideration.

 

Upon execution of the MAS XX Purchase Agreement and the subsequent delivery of $100,000 cash and 150,000 shares of Starfest common stock on March 7, 2000, to MAS Capital Inc., pursuant to Rule 12g-3(a) of the General Rules and Regulations of the Securities and Exchange Commission (the “Commission”), Starfest became the successor issuer to MAS XX for reporting purposes under the Securities and Exchange Act of 1934 (the “Act”) and elected to report under the Act effective March 7, 2000.

 

MAS XX had no business, no assets, and no liabilities at the time of the transaction. Starfest entered into the transaction solely for the purpose of becoming the successor issuer to MAS XX for reporting purposes under the 1934 Exchange Act. Prior to this transaction, Starfest was preparing to register its common stock with the Commission in order to avoid being delisted by the OTCBB. By engaging in the Rule 12g-3(a) transaction, Starfest avoided the possibility that its planned registration statement with the Commission would not be fully reviewed by the Commission's staff before an April 2000 deadline, which would result in Starfest's common stock being delisted on the OTCBB.

 

An agreement of merger was entered into between Starfest and Concierge, Inc., a Nevada corporation, on January 26, 2000. The proposed merger was submitted to the shareholders of each of Starfest and Concierge, Inc., pursuant to a Form S-4 Prospectus-Proxy Statement filed with the Commission.

 

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.

 

Pursuant to the agreement of merger between Starfest and Concierge,

 

 

 

 

 

 

Our Business

 

Concierge conducts business primarily through its wholly-owned operating subsidiaries. The operations of Concierge’s wholly-owned subsidiaries are more particularly described herein but are summarized as follows:

 

 

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.

 

On January 23, 2008 we acquired all of the outstanding and issued shares of Wireless Village, a privately held Nevada corporation based in Cleveland, Ohio. Wireless Village’s assets included computer hardware, software, domain names, existing radio site infrastructure, and expertise in designing, operating, managing and maintaining wireless and wired networks, including video security systems. Wireless Village began transitioning to the business of mobile incident reporting, or “black box” technology, for vehicles during the fiscal year ended June 30, 2010. During September 2010 Wireless Village offered three knowledgeable individuals, a product manufacturer, and an industry lobbyist an equity stake in the company in exchange for providing their services and expertise, along with a potential client list, exclusively to Wireless Village. Accordingly, on October 8, 2010, we conveyed approximately 49% of Concierge’s equity in Wireless Village, in the aggregate, to the aforementioned group. As a result the focus of Wireless Village was redirected to the business of mobile incident reporting technology and sales. A fictitious business name of 3rd Eye Cam was adopted and filed in the State of Nevada and, subsequent to a trade mark dispute settlement, that name was discontinued in favor of the fictitious name Janus Cam. The company then operated from leased offices in South San Francisco, CA.

 

During the fiscal year ended June 30, 2013, Concierge, through a stock exchange agreement, acquired all of the shares owned by the minority shareholders of Wireless Village in exchange for shares of Concierge Series B, Voting, Convertible Preferred stock. As of June 30, 2014, Wireless Village was a wholly owned subsidiary of Concierge and its only operating subsidiary.

 

During the fiscal year ended June 30, 2015, we entered into a Stock Redemption Agreement (the “SRA”) wherein we agreed to sell all of the issued and outstanding shares in Wireless Village to the executive management team of Wireless Village in exchange for the redemption of 68,000,000 shares of Concierge’s common stock held by the buyers plus a forgiveness of intercompany debt totaling $344,052 owed to us by Wireless Village. As a further condition of the SRA a certain segment of the Wireless Village business was to be retained by Concierge through a non-exclusive distribution agreement. The transaction closed on May 7, 2015.

 

On May 26, 2015, a new wholly-owned subsidiary named Kahnalytics, Inc. (“Kahnalytics”), was established in the State of California for the purpose of taking on the segment of the business retained in the spinoff of Janus Cam and to direct resources towards the further development of data processing capabilities intended for risk management used by vehicle insurance companies.

 

On August 11, 2015, we acquired all of the issued and outstanding stock in Gourmet Foods, Ltd., a New Zealand corporation (“Gourmet Foods”) located in Tauranga, who is a commercial-scale manufacturer of New Zealand meat pies under the brand names “Ponsonby Pies” and “Pat’s Pantry”. Gourmet Foods distributes its products through major grocery store chains, convenience stores, small restaurants and gasoline station markets. The purchase price of $1,753,428 was paid in cash.

 

On June 2, 2016, we acquired all of the issued and outstanding stock in Brigadier Security Systems, a Canadian corporation (“Brigadier”) located in Saskatoon, Saskatchewan. Brigadier sells and installs alarm monitoring and security systems to commercial and residential customers under brand names “Brigadier Security Systems” and “Elite Security” throughout the province of Saskatchewan with offices in Saskatoon and Regina. The all-cash purchase price was $1,540,830.

 

Competition. Our potential competitors include larger, better financed companies that offer products similar to ours. In particular, our foreign subsidiaries face stiff competition with respect to their product and service offerings. Many of our competitors have substantially greater financial, technical, and human resources than we do, as well as greater experience in the discovery and development of products and the commercialization of those products. Our competitors’ products may be more effective, or more effectively marketed and sold, than any products we may commercialize and may render our products obsolete or non-competitive before we can recover the expenses of their commercialization. Our larger competitors also enjoy a much wider and entrenched market share making it particularly difficult for us to penetrate certain market segments and even if penetrated, might make it difficult to maintain. We anticipate that we will face intense and increasing competition as new products and new competitors enter the market. However, with respect to the market share we currently enjoy, we believe that our core customers will remain loyal. We will continue to strive to capture additional customers through organic growth and a focus on quality. 

Governmental Approval of Principal Products. No governmental approval is required in the U.S. for Concierge's products.

 

Government Regulations. There are no governmental regulations in the U.S. that apply to Concierge's sale of subscriptions to its Kahnalytics live-streaming data services, and no specific license or approvals are required, with the exception of adoption by local industry associations or municipalities on a case-by-case basis of the devices meeting suitability for purpose standards.

 

Dependence on Major Customers and Suppliers. Concierge, through Kahnalytics as a licensed user of a proprietary software application, is dependent on the continued support of this online platform and the adherence to the license contract terms between Kahnalytics and the foreign-based licensor. Kahnalytics is also largely dependent on its single-source sales channel to continue to expand its dealer network of resellers who, in turn, activate subscribers to the Kahnalytics service. Hardware sold by Kahnalytics is currently supplied by one source, however in the event this source proves to be inadequate there are other alternative sources of equal or comparable devices as needed by Kahnalytics. During the fiscal year ended June 30, 2015 Kahnalytics had just one customer accounting for 100% of its sales. Correspondingly, Kahnalytics had only two suppliers of the hardware it sold with the larger of the suppliers accounting for 92% of the cost of goods sold for fiscal year ended June 30, 2015. Sales of these products were discontinued during the current fiscal year.

 

Concierge, through Brigadier Security Systems, is dependent upon its contractual relationship with the alarm monitoring company who purchases the monitoring contracts and provides monitoring services to Brigadier’s customers. In the event this contract is terminated Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the two largest customers totaled 55% of the total revenues for the one-month period ended June 30, 2016, and accounted for approximately 38.6% of accounts receivable as of the balance sheet date of June 30, 2016.

 

 

Concierge, through Gourmet Foods, has three major customer groups comprising the gross revenues to Gourmet Foods; 1) grocery, 2) gasoline convenience stores, 3) independent retailers. The grocery and food industry is dominated by several large chain operations, which are customers of Gourmet Foods, and there are no long term guarantees that these major customers will continue to purchase products from Gourmet Foods, however the relationships have been in place for sufficient time to give management reasonable confidence in their continuing business. For the 11-month period ending and balance sheet date of June 30, 2016, our largest customer in the grocery industry, who operates through a number independently branded stores, accounted for approximately 14% of our gross sales revenues and 34% of our accounts receivable. The second largest in the grocery industry accounted for approximately 10% of our gross revenues and 12% of our accounts receivable. In the gasoline convenience store market we supply two major accounts. The largest is a marketing consortium of gasoline dealers accounting for approximately 44% of our gross sales revenues and 24% of our accounts receivable. The second largest are independent operators accounting for approximately 13% of gross sales and 17% of accounts receivable. The third category of independent retailers accounted for the balance of our gross sales revenue however the group is fragmented and no one customer accounts for a significant portion of our revenues. Gourmet Foods is not dependent upon any one major supplier as many alternative sources are available in the local market place should the need arise.

 

Seasonality. There should be no seasonal aspect to Concierge’s business.

 

Research and Development. Concierge expended no significant amount of money on research and development during fiscal year ending June 30, 2016.

 

Environmental Controls. Concierge is subject to no environmental controls or restrictions that require the outlay of capital or the obtaining of a permit in order to engage in business in the US. In New Zealand, Gourmet Foods is subject to local regulations as are usual and customary for those in the food processing, manufacturing and distribution business.

 

Patents, Trademarks, Copyrights and Intellectual Property. Concierge has trademarked its Personal Communications Attendant. It has no patents on the product. Gourmet Foods, Ponsonby Pies and Pat’s Pantry are all registered trademarks of Gourmet Foods, Ltd.

 

Number of Employees. On June 30, 2016, we employed no persons full time and relied solely on independent sales personnel, commissioned agents, contracted service providers and consultants to perform additional support and administrative functions in the US. Gourmet Foods employs approximately 45 persons in New Zealand and Brigadier employs approximately 19 persons in Canada.

 

 

ITEM 2. PROPERTIES.

 

We own no plants or real property.

 

Facilities

 

Our administration offices are housed by our Chief Financial Officer, David Neibert, whose mailing address is 29115 Valley Center Rd., K-206, Valley Center, CA 92082. The Company pays no rent and has no lease obligations. Our wholly-owned subsidiary, Brigadier, rents facilities in Saskatoon and Regina, Canada. Our wholly-owned subsidiary, Gourmet Foods, rents facilities in Tauranga, New Zealand. We believe that the facilities described herein are adequate for our current and immediately foreseeable operating needs. 

 

ITEM 3. LEGAL PROCEEDINGS.

 

On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd. (“Brookside”) against, jointly and severally, our company, Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus interest and legal fees. Concierge did not defend against the complaint by Brookside, which alleged that Brookside was entitled to a refund of its investment as a result of a breach of contract. Brookside had entered into a subscription agreement with Concierge, Inc. that called for, among other things, the pending merger between Starfest and Concierge, Inc. to be completed within 180 days of the investment. The merger was not completed within 180 days and Brookside sought a refund of its investment, which Concierge was unable to provide.

 

As of May 6, 2012, the judgment had lapsed and there is no further effect. Although the judgment is no longer enforceable against Concierge, and Concierge is no longer domiciled in the state of jurisdiction where the judgment was entered, the amount of $135,000 continues to be listed among the accrued expenses of the company.

 

PART II

 

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 QB Exchange. The high and low bid prices, as reported by OTC Markets, are as follows for fiscal years ended June 30, 2015 and 2016. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The prices are adjusted for the 1:10 reverse stock split effectuated on December 15, 2015.

 

	High	Low
Calendar 2014
3rd Qtr.	$0.146	$0.085
4th Qtr	$0.099	$0.025
Calendar 2015
1st Qtr	$0.068	$0.029
2nd Qtr	$0.119	$0.043
3rd Qtr.	$0.095	$0.03
4th Qtr	$0.089	$0.02
Calendar 2016
1st Qtr	$0.10	$0.02
2nd Qtr	$0.04	$0.02

 

 

Holders

 

On June 30, 2016, there were approximately 353 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

 

 

Our strategy on dividends is to declare and pay dividends only from retained earnings and only when our Board of Directors deems 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 therefore is subject to the rules governing "penny stocks."

 

A "penny stock" is any stock that:

 

There are statutes and regulations of 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:

 

 

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:

 

 

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 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

 

The following sets forth certain information concerning securities which were sold or issued by us without the registration of the securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements within the past three years:

 

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 an agreement to extend the maturity date of the note receivable. 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 the 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, we 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 we 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 we 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. We identified embedded derivatives related to the convertible debenture. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that we 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, we 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 we 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 was 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 became 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 us with 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.

 

 

We sold the following shares of our 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
9/8/12	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

 

We issued the following shares of common stock pursuant to certain conversion rights contained in our preferred stock. The shares of preferred stock issued in the conversion were cancelled resulting in no net effect to the number of voting shares 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

 

All of the above unregistered 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 our 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 our management.

 

 

 

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 dba/Janus Cam, on the sale and distribution of mobile video surveillance systems, generically known as “drive cams”. During the fiscal year ended June 30, 2013, we sold Planet Halo to a shareholder through a stock redemption agreement and we acquired all of the minority owned shares of Wireless Village through a stock-for-stock exchange. Having Wireless Village as a wholly-owned subsidiary for 2 years produced operating losses and we elected to raise additional working capital through equity as well as change our strategic focus. Accordingly, during the fiscal year ended June 30, 2015, we raised $3 million in cash, sold Wireless Village to its executive management team through a stock redemption agreement, established Kahnalytics as our wholly-owned subsidiary in order to carry on certain profitable aspects of the former Wireless Village line of business, acquired Gourmet Foods, and acquired Brigadier. The acquisition of Gourmet Foods was completed on August 11, 2015, and the acquisition of Brigadier on June 2, 2016, both consummated as cash transactions. As of June 30, 2016, our financial statements are representative of the operating results of these three wholly-owned subsidiaries.

 

Kahnalytics

 

On May 26, 2015, we established a new wholly-owned subsidiary domiciled in the state of California and named Kahnalytics, Inc. (“Kahnalytics”). 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 as part of the Stock Redemption Agreement.

 

During the period July 1, 2015, through October 1, 2015, Kahnalytics purchased cameras, various other hardware items, and installation services for sale to specific 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. 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 require delivery and installation of the product in their vehicles. The charges for services such as these are included in the bundled, installed, sales price reflected on sales invoices and accounts receivable. The revenues for Kahnalytics for the years ended June 30, 2016, for camera and related sales were $120,430 as compared to the year ending June 30, 2015, where sales were $95,057. During October 2015 Kahnalytics moved away from the camera sales segment and refocused its business towards the capture of live-steaming data from vehicle camera devices. As a result, the remaining inventory of cameras and SD cards were deemed discontinued products and their combined value (being lower of cost or market) was impaired by $48,330.

 

 

By obtaining an exclusive software license and partnering with a camera importer/distributor as a channel-to-market, Kahnalytics began the business of hosting a web-based server that subscribers could access to view their camera video files, vehicle location, speed and event triggers in real time. The system was ready to launch by June 2016. To facilitate the sales process and entice customers to the online subscription service, Kahnalytics implemented a hardware subsidy program and offered a wireless data plan that was resold to subscribers of the service, called the Kahnalytics Fleet Management Service or “FMS”. Two types of services were offered, 1) a FMS basic subscription plan where subscribers provided their own wireless connection to the FMS and 2) a FMS data plan where subscribers were provided hardware needed to connect wirelessly to the Internet and also charged a monthly fee for the air time usage. Kahnalytics also charged a subsidized price of $50 per each wireless hardware device used in creating the wireless connection. For the year ended June 30, 2016, the total revenues from FMS related hardware sales was $2,250. Kahnalytics purchases data plans from a network reseller and, in turn, resells that plan to its subscribers. For the year ended June 30, 2016, sales of FMS basic subscriptions were $480 and FMS data plans were $0. There were no FMS related subscription or hardware sales for the year ended June 30, 2015. Hardware sales of cameras and SD cards for the year ended June 30, 2016, were $117,700 as compared to $95,057 for the year ended June 30, 2015. Other income for the year ended June 30, 2016, was $81 and comprised of adjustments to sales tax liability as compared to $0 for the year ended June 30, 2015. Accounts receivable as of June 30, 2016, were $2,640 as compared to $95,417 as of June 30, 2015. The difference is attributed to the discontinuation of most hardware sales during the current fiscal year and the focus on subscription services instead, which results in less gross revenues overall rather than any significant change in the aging of accounts receivable. Net loss after the impairment of inventory of $48,330 and provision for income tax of $800 was $60,612 as compared to a net loss for the year ended June 30, 2015 of $10,332.

 

Gourmet Foods

 

Gourmet Foods Limited (“Gourmet Foods”), was organized in its current form in 2005 (previously known as Pats Pantry Ltd. (“Pats Pantry”)). Pats Pantry was founded in 1966 to produce and sell wholesale bakery products, meat pies and patisserie cakes and slices, in New Zealand. Gourmet Foods, located in Tauranga, New Zealand, sells substantially all of its goods to supermarkets and service station chains with stores located throughout New Zealand. Gourmet Foods also has a large number of smaller independent lunch bars, cafes and corner dairies among the customer list, however they comprise a relatively insignificant dollar volume in comparison to the primary accounts of large distributors and retailers. We purchased all of the issued and outstanding shares of Gourmet Foods effective as of August 1, 2015, even though the transaction did not officially close until August 11, 2015.

 

An independent evaluation of the assets of Gourmet Foods was commissioned as was an audit of their last two fiscal years ended March 31st. It was ascertained that Gourmet Foods had experienced a net loss over the fiscal year ended March 31, 2015, of $9,558. Contributing to the loss were several factors that current management does not expect to reoccur which included an effort to export product to Korea and an ill-suited sales effort involving the addition of field sales representatives and their associated expenses including company provided vehicles. Since the acquisition date of August 11, 2015, Gourmet Foods has initiated several strategies designed to improve profitability through a more efficient and automated production process and sales growth initiatives that involve an outreach to areas currently underserved by Gourmet Foods. To assist with the purchase of new machinery and cover interim working capital needs, we extended an interest-free intercompany loan of NZ$250,000 translated to US$158,948 as of the date of transfer.

 

 

The accompanying financial statements include the operations of Gourmet Foods for the period August 1, 2015, through June 30, 2016. Because we did not acquire Gourmet Foods until the current fiscal year there is no comparison data supplied in the accompanying Condensed Consolidated Statements of Operations for Gourmet Foods for the periods ended June 30, 2015, nor are the assets and liabilities of Gourmet Foods included in the Condensed Consolidated Balance Sheets as of June 30, 2015.

 

Gourmet Foods operates exclusively in New Zealand and thus the New Zealand dollar is its functional currency. In order to consolidate our reporting currency, the US dollar, with that of Gourmet Foods we record foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation. The translation of New Zealand currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Gains and losses resulting from the foreign currency translations are included in Other Comprehensive Income (Loss) found on the Condensed Consolidated Statements of Operations and Comprehensive Income and are listed as a gain of $103,736 for the year ended June 30, 2016.

 

Net revenues for the eleven-month period August 1, 2015, through June 30, 2016 were $3,756,402. Cost of goods sold for the eleven-month period ending June 30, 2016, was $2,500,075 resulting in a gross profit of $1,256,327 or approximately 33% gross margin. General and administrative expenses for the eleven-month period were $967,180 resulting in a net income before other income and expenses and income tax of $289,147. The depreciation expense for Gourmet Foods over the eleven-month period ending June 30, 2016, was $225,810. The income tax provision of $80,892, the interest income of $3,842 and other income of $2,370 resulted in a net income of $214,467. Accounts receivable as of June 30, 2016 were $285,673.

 

Brigadier Security Systems

 

Brigadier Security Systems (“Brigadier”) was founded in 1985 and through internal growth and acquisitions the core business of Brigadier began in 1998. Today Brigadier is one of the largest SecurTek dealers in Saskatchewan with offices in both major urban areas of Regina (under the fictitious business name of “Elite Security”) and Saskatoon. Brigadier is also a Honeywell Certified Access Control Distributor, Kantech Global Dealer and UTC Interlogix Security Pro dealer and the largest independent security contractor in the province. Brigadier provides comprehensive security solutions including access control, camera monitoring, motion detection, and intrusion alarms to home and business owners as well as government offices, schools and public buildings. Brigadier typically sells hardware to customers and a full time monitoring of the premises. The contract for monitoring the premise is then conveyed to a third party telecom in exchange for an upfront payment and recurring residuals based on subscriber contracts.

 

 

The accompanying financial statements include the operations of Brigadier for the period June 1, 2016, through June 30, 2016. Because we did not acquire Brigadier until the current fiscal year there is no comparison data supplied in the accompanying Condensed Consolidated Statements of Operations for Brigadier for the periods ended June 30, 2015, nor are the assets and liabilities of Brigadier included in the Condensed Consolidated Balance Sheets as of June 30, 2015.

 

 Brigadier operates exclusively in Canada and thus the Canadian dollar is its functional currency. In order to consolidate our reporting currency, the US dollar, with that of Brigadier we record foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation. The translation of Canadian currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Gains and losses resulting from the foreign currency translations are included in Other Comprehensive Income (Loss) found on the Condensed Consolidated Statements of Operations and Comprehensive Income and are listed as a gain of $5,098 for the year ended June 30, 2016.

 

Brigadier purchases various component parts and accessories anticipated to be required in near-term installations of systems pursuant to sales forecasts. These parts are listed in inventory until sold, which is determined by a sales contract, delivery of the product, and a reasonable expectation of payment under typical terms of sale are in evidence. Inventories are valued at the lower of cost (determined on a FIFO basis) or market. Inventories include product cost, inbound freight and warehousing costs. We compare the cost of inventories with the market value and an allowance is made for writing down the inventories to their market value, if lower. As of June 30, 2016, an allowance for obsolete inventory value in the amount of $14,282 was recorded in general and administrative expense.

 

The net sales for the one-month period ending June 30, 2016, were $348,553 with cost of goods sold recorded as $124,931 resulting in a gross profit of $223,622 and gross margin of 64%. General and administrative expenses for the one-month period were $179,959 providing net operating income before income tax provision and interest expense of $43,663, or 13%. The depreciation expense for Brigadier for the one-month period was $560, income tax provision at June 30, 2016, was $14,330, interest expense (net) was $17 and allowance for obsolete inventory was $14,282 resulting in a net profit of $29,316. Accounts receivable at June 30, 2016, were $550,907.

 

Concierge Technologies

The primary expenses of Concierge are comprised of professional fees paid to auditors, transaction costs incurred for fund raising and acquisitions, accrued interest on borrowed funds and consulting fees paid to our advisors. For the year ended June 30, 2016, Concierge had no commercial operations apart from those of its subsidiaries. Revenues from operations during the year ended June 30, 2016, were zero as compared to $160,094 for the year ended June 30, 2015. Overall, consolidated net revenues for the year ending June 30, 2016, were $4,225,385 and $223,565 for the year ended June 30, 2015. Cost of revenues for the year ending June 30, 2016, and 2015 were $2,746,132 and $188,325 respectively, representing a gross profit percentage of approximately 35% for the year ended June 30, 2016, as compared to the year ended June 30, 2015 of 15%. Operating costs include general and administrative expense of $1,411,047 and inventory impairment of $48,330 resulting in an operating income of $19,876 for the year ended June 30, 2016 as compared to a loss of $131,690 for the year ended June 30, 2015

 

We realized a net income before provision of income taxes, after other income $2,880 and interest expense of $8,686, and comprehensive income for the year ended June 30, 2016, of $14,070 as compared to a net loss before taxes of $204,216 for the year ended June 30, 2015. We attribute the increased income to the inclusion of acquired subsidiaries Brigadier and Gourmet Foods as well as disposal of non-revenue producing subsidiaries present during the fiscal year ended June 30, 2015. The net loss after income tax provision of $96,022 on a consolidated basis for the year ended June 30, 2016 was $81,952 as compared to an income of $14,191 for the year ended June 30, 2015.

 

Comprehensive Loss, after giving consideration to foreign currency translation losses for the year ended June 30, 2016, was $111,455 as compared to income of $14,191 for the year ending June 30, 2015, where no foreign currency translation was required.

 

Plan of Operation for the Next Twelve Months

 

Our plan of operation for the next twelve months is to expand the development of Kahnalytics through implementation of software development and addition of new products, including a branding and promotion of a recurring revenue product offering. Additionally, we are expecting moderate growth in Brigadier through focused management initiatives and consolidation within the security industry. Similarly, we expect Gourmet Foods to be operating more efficiently under current management and continue to increase market share through additional product offerings and channels to market. Our mission is to continue with our acquisition strategy by identifying and acquiring profitable, mature, companies of a diverse nature and with in-place management to produce increasing revenue streams. By these initiatives we hope to:

 

 

Liquidity

 

During the current fiscal year we have invested approximately $3.5 million in cash towards purchasing and assimilating Gourmet Foods and Brigadier into our group of companies. We have continued to pursue business opportunities with Kahnalytics and intend to grow that opportunity by implementation of a software development project in the coming months that is envisioned to produce a significant recurring revenue stream when finalized. We forecast Gourmet Foods and Brigadier to continue to produce a profit during the coming fiscal year and the realization of those profits by Concierge may be augmented by a resurgence of the New Zealand and Canadian currencies against the U.S. dollar during the coming fiscal year. While we intend to maintain and improve our revenue stream from wholly owned subsidiaries Kahnalytics, Brigadier and Gourmet Foods, we are also looking to expand our business to include other synergistic partners and pursue possible licensing agreements for product distribution on a global scale. Provided our subsidiaries continue to operate as they are presently, and are projected to operate, we have sufficient capital to pay our general and administrative expenses for the coming fiscal year and to adequately pursue our long term business objectives.

 

We believe that, through execution of our current business plan, we will be able to continue to pay our financial obligations and to avoid increases in its accrued liabilities in the coming fiscal year.

 

Off-Balance Sheet Arrangements

 

As of October 3, 2016, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have:

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Our financial statements appear as follows:

 

Report of Independent Registered Public Accounting Firm	19
Consolidated Balance Sheets, as of June 30, 2016 and 2015	21
Consolidated Statements of Operations and Comprehensive Income (Loss), for the years ended June 30, 2016 and 2015	22
Statements of Changes in Stockholders’ Equity (Deficit), for the years ended June 30, 2016 and 2015	23
Consolidated Statements of Cash Flows, for the years Ended June 30, 2016 and 2015	24
Notes to Consolidated Financial Statements	25

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors

Concierge Technologies, Inc.

 

We have audited the accompanying consolidated balance sheets of Concierge Technologies, Inc. and its subsidiaries (the "Company") as of June 30, 2016 and 2015, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2016. 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 did not audit the financial statements of Brigadier Security Systems (2000) Limited, a wholly-owned subsidiary, which statements reflect total assets of 20% of consolidated total assets as of June 30, 2016 and total revenues of 8% of consolidated total revenues for the one year period ended June 30, 2016. Those statements were audited by another auditor, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Brigadier Security Systems (2000) Limited, is based solely on the report of the other auditor.

 

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 and the report of the other auditor provide a reasonable basis for our opinion.

 

In our opinion, based on our audits and the report of the other auditor, the consolidated 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, 2016 and 2015, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2016 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 accumulated losses of $6,430,722. 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

 

/S/ Kabani & Company, Inc.

Certified Public Accountants

Los Angeles, California

October 20, 2016

 

 

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
	As of June 30, 2016	As of June 30, 2015
ASSETS
CURRENT ASSETS:
Cash & cash equivalents	$1,060,184	$1,970,062
Accounts receivable, net	839,220	95,417
Inventory, net	436,541	85,849
Other current assets	24,876	-
Total current assets	2,360,821	2,151,328
Deposit	-	182,931
Property and equipment, net	1,166,693	-
Goodwill	219,256	-
Intangible Assets-Net	1,018,213	-
Total assets	$4,764,983	$2,334,259
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$997,644	$269,501
Purchase consideration payable	214,035	-
Notes payable - related parties	308,500	8,500
Notes payable	8,500	8,500
Convertible debenture - related parties, net	1,300,000	-
Total liabilities	2,828,680	286,501
COMMITMENT & CONTINGENCY
STOCKHOLDERS' EQUITY
Preferred stock, 50,000,000 authorized par $0.001
Series B: 3,754,355 issued and outstanding at June 30, 2016 and June 30, 2015	3,754	3,754
Common stock, $0.001 par value; 900,000,000 shares authorized; 67,953,870 shares issued and outstanding at at June 30, 2016 and June 30, 2015	67,954	67,954
Additional paid-in capital	8,325,620	8,325,620
Accumulated other comprehensive income (loss)	(29,503)	-
Accumulated deficit	(6,431,522)	(6,349,570)
Total Stockholders' equity	1,936,303	2,047,758
Total liabilities and Stockholders' equity	$4,764,983	$2,334,259
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
	2016	2015
Net revenue	$4,225,385	$223,565
Cost of revenue	2,746,132	188,325
Gross profit	1,479,253	35,240
Operating expense
General & administrative expense	1,411,047	166,930
Impairment of inventory value	48,330	-
Total Operating Expenses	1,459,377	166,930
Operating Income (Loss)	19,876	(131,690)
Other income (expense)
Other income	2,880	5,086
Interest expense	(8,686)	(77,611)
Total other expense	(5,806)	(72,525)
Income (Loss) from continuing operations before income taxes	14,070	(204,216)
Provision of income taxes	(96,022)	-
Loss from continuing operations	(81,952)	(204,216)
Income from Discontinued Operations
Gain on disposal of subsidiary	-	109,600
Income from discontinued operations	-	108,807
Income from Discontinued Operations	-	218,407
Net Income (Loss)	$(81,952)	$14,191
Other Comprehensive Income (Loss)
Foreign currency translation gain (loss)	(29,503)	-
Comprehensive Income (Loss)	$(111,455)	$14,191
Weighted average shares of common stock
Basic	67,953,870	47,229,336
Diluted	67,953,870	84,974,973
Net loss per common share - continuing operations
Basic & Diluted	$(0.00)	$(0.00)
Net loss per common share - Discontinued operations
Basic	$-	$0.00
Diluted	$-	$0.00
Net income 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, 2016 AND 2015
	Preferred Stock (Series A)		Preferred Stock (Series B)		Common Stock					Total
	Number of	Par	Number of	Par	Number of	Par	Additional	Accumulated	Accumulated	Concierges'
	Shares	Value	Shares	Value	Shares	Value	Paid In Capital	OCI	Deficit	Equity (Deficit)
Balance at June 30, 2014	206,186	$206	949,841	$950	24,033,785	$24,034	$4,179,070	$-	$(4,893,708)	$(689,448)
Issuance of Common Stock in settlement of convertible debenture	-	-	-	-	1,804,025	1,804	156,257		-	158,061
Beneficial conversion feature liability on debt issuance	-	-	-	-	-	-	67,571		-	67,571
Gain on debt settlement with a related party	-	-	-	-	-	-			-	-
Issuance of Common Stock for cash	-	-	-	-	40,000,000	40,000	1,120,000		-	1,160,000
Issuance of series B Preferred Stock for cash	-	-	3,245,150	3,245	-	-	1,836,755		-	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	-	-	-	-	(6,800,000)	(6,800)	(495,816)		-	(502,616)
Conversion of series A Preferred Stock to Common Stock	(206,186)	(206)	-	-	103,093	103	103		-	0
Conversion of series B Preferred Stock to Common Stock	-	-	(440,636)	(441)	8,812,728	8,813	(8,373)		-	(0)
Net income for the year ended June 30, 2015									14,191	14,191
Balance at June 30, 2015	-	0	3,754,355	3,754	67,953,630	67,954	8,325,620	-	(6,349,570)	2,047,758
Gain (Loss) on currency translation for the year ended June 30, 2016								(29,503)		(29,503)
Net loss for the year ended June 30, 2016									(81,952)	(81,952)
Balance at June 30, 2016	-	$-	3,754,355	$3,754	67,953,630	$67,954	$8,325,620	$(29,503)	$(6,431,522)	$1,936,303

 

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,
	2016	2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$(81,952)	$14,191
(Income) / Loss from discontinued operations	-	(108,807)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation	226,556	-
Amortization	27,658	-
Impairment of Inventory	48,330	-
Gain on disposal of subsidiary	-	(109,600)
Amortization of debt issuance cost	-	67,571
(Increase) decrease in current assets:
Accounts receivable	(32,863)	(95,417)
Inventory	106,393	(85,849)
Other current assets	(4,285)	-
Increase (decrease) in current liabilities:
Accounts payable & accrued expenses	160,386	16,275
Net cash provided by (used in) operating activities	450,223	(301,636)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment	(103,662)	-
Payment of cash to subsidiary disposed as part of sale agreement	-	(353,100)
Cash used in purchase of new subsidiaries net of cash acquired	(2,766,205)	(182,931)
Net cash used in investing activities	(2,869,866)	(536,031)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debts	1,600,000	-
Repayments of related party debts	-	(29,500)
Proceeds from notes payable & debentures	-	43,500
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
Net cash provided by financing activities	1,600,000	2,792,000
Effect of currency exchange rate fluctuation on cash and cash equivalents	(90,235)	-
NET INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS	(909,878)	1,954,332
CASH & CASH EQUIVALENTS, BEGINNING BALANCE	1,970,062	15,730
CASH & CASH EQUIVALENTS, ENDING BALANCE	$1,060,184	$1,970,062
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - continuing operations	$29	$7,984
Interest - discontinued operations	$-	$4,103
Income taxes - continued operations	$14,393	$-
Income taxes - discontinued operations		$35,538
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchase consideration payable	$214,035	$-
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
The accompanying notes are an integral part of these audited consolidated financial statements.

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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 subsidiaries Wireless Village doing business as Janus Cam (until its disposal as of May 7, 2015), Gourmet Foods, a manufacturer and distributor of meat pies in New Zealand, Brigadier Security Systems, a provider of security alarm installation and monitoring located in Canada, and Kahnalytics, Inc. a California corporation providing vehicle-based live streaming video and event recording to online subscribers.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of Concierge Technologies, Inc., and its wholly owned subsidiaries, Kahnalytics, Gourmet Foods, Ltd., Brigadier Security Systems and Wireless Village (discontinued on May 7, 2015). All significant intercompany accounts and transactions have been eliminated in consolidation.

 

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.

 

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 in the United States was $33,026 at June 30, 2016. Cash balances in Canada are maintained at a financial institution in Saskatoon, Saskatchewan. Each account is insured up to CD$100,000 by Canada Deposit Insurance Corporation (CDIC). The Company’s uninsured cash balance in Canada was CD$123,311 (approximately US$95,190) at June 30, 2016.

Balances at financial institutions within certain foreign countries, including New Zealand where the Company maintains cash balances, are not covered by insurance. As of June 30, 2016, the Company had uninsured deposits related to cash deposits in uninsured accounts maintained within foreign entities of approximately $568,427. The Company has not experienced any losses in such accounts.

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Major customers & suppliers

 

Concierge, through Kahnalytics as a licensed user of a proprietary software application, is dependent on the continued support of this online platform and the adherence to the license contract terms between Kahnalytics and the foreign-based licensor. Kahnalytics is also largely dependent on its single-source sales channel to continue to expand its dealer network of resellers who, in turn, activate subscribers to the Kahnalytics service. Hardware sold by Kahnalytics is currently supplied by one source, however in the event this source proves to be inadequate there are other alternative sources of equal or comparable devices as needed by Kahnalytics. During the fiscal year ended June 30, 2015 Kahnalytics had just one customer accounting for 100% of its sales. Correspondingly, Kahnalytics had only two suppliers of the hardware it sold with the larger of the suppliers accounting for 92% of the cost of goods sold for fiscal year ended June 30, 2015. Sales of these products were discontinued during the current fiscal year.

 

Concierge, through Brigadier Security Systems, is dependent upon its contractual relationship with the alarm monitoring company who purchases the monitoring contracts and provides monitoring services to Brigadier’s customers. In the event this contract is terminated Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the two largest customers totaled 55% of the total revenues for the one-month period ended June 30, 2016, and accounted for approximately 38.6% of accounts receivable as of the balance sheet date of June 30, 2016.

 

Concierge, through Gourmet Foods, has three major customer groups comprising the gross revenues to Gourmet Foods; 1) grocery, 2) gasoline convenience stores, 3) independent retailers. The grocery and food industry is dominated by several large chain operations, which are customers of Gourmet Foods, and there are no long term guarantees that these major customers will continue to purchase products from Gourmet Foods, however the relationships have been in place for sufficient time to give management reasonable confidence in their continuing business. For the 11-month period ending and balance sheet date of June 30, 2016, our largest customer in the grocery industry, who operates through a number independently branded stores, accounted for approximately 14% of our gross sales revenues and 34% of our accounts receivable. The second largest in the grocery industry accounted for approximately 10% of our gross revenues and 12% of our accounts receivable. In the gasoline convenience store market we supply two major accounts. The largest is a marketing consortium of gasoline dealers accounting for approximately 44% of our gross sales revenues and 24% of our accounts receivable. The second largest are independent operators accounting for approximately 13% of gross sales and 17% of accounts receivable. The third category of independent retailers accounted for the balance of our gross sales revenue however the group is fragmented and no one customer accounts for a significant portion of our revenues. Gourmet Foods is not dependent upon any one major supplier as many alternative sources are available in the local market place should the need arise.

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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. As of June 30, 2016 and 2015, the Company had recorded allowance for doubtful accounts of $3,600 and $Nil, respectively.

 

Inventory

 

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. During the year ended June 30, 2016, the Company incurred an impairment loss of $48,330 due to valuing inventory at market which was lower than cost.

 

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 various methods over an estimated useful life of the asset.

 

Category		Estimated Useful Life
Computer Equipment & Software		3 to 5 Years
Office furniture and equipment:		3 to 5 Years
Autos		3 to 5 Years

 

Intangible Assets

Intangible assets consist of brand names, domain names, recipes, non-compete agreements and customer lists. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the discounted expected future cash flows. If the future discounted cash flows are less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Goodwill

 

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase businesses combination. Goodwill is reviewed for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. The goodwill impairment test is a two-step test. Under the first step, thefair value of the reporting unit is compared with its carrying value including goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

 

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.

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Revenue primarily consists of sale of gourmet meat pies and related bakery confections in New Zealand, security alarm system installation and monitoring in Canada and sale of mobile video recording devices and gathering of live-streaming video recording data displayed online to subscribers in the U.S.A. Revenue is accounted for net of sales taxes, sales returns, trade discounts. Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, the delivery has occurred, no other significant obligations of the Company exist, and collectability is probable. Product is considered delivered to the customer once it has been shipped and title, risk of loss and rewards of ownership have been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped.

 

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 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 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.

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.

 

Advertising Costs

 

The Company expenses the cost of advertising as incurred. Advertising costs for the years ended June 30, 2016 and 2015 were negligible.

 

Other Comprehensive Income (Loss) and Foreign Currency Translation

 

We record foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation. The accounts of Gourmet Foods, Ltd. use the New Zealand dollar as the functional currency. The accounts of Brigadier Security System use the Canadian dollar as the functional currency. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange rate throughout the period. Accumulated translation loss classified as an item of accumulated other comprehensive loss in the stockholders’ equity section of the consolidated balance sheet was $29,503 as of June 30, 2016.

 

Statement of Cash Flows

 

The Company’s cash flows from operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

 

Segment Reporting

 

The Company defines operating segments as components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. The Company allocates its resources and assesses the performance of its sales activities based on the geographic locations of its subsidiaries (see Note 20).

 

Business Combinations

 

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

 

Reclassifications

 

Certain 2015 balances have been reclassified to conform to the 2016 presentation

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

In May 2014, the (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB deferred the effective date of the new revenue standard by one year, which will make it effective for the Company in the first quarter of its fiscal year ending June 30, 2019. The Company is currently in the process of evaluating the impact of adoption of this ASU on its 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 thatcould 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 Entity’s 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 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 the Company’s 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.

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO 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.

 

In September 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-16, Business Combinations (Topic 805) Simplifying the Accounting for Measurement-Period Adjustments.” ASU No. 2015-06 simplifies the accounting for measurement-period adjustments attributable to an acquisition. Under prior guidance, adjustments to provisional amounts during the measurement period that arise due to new information regarding acquisition date circumstances must be made retrospectively with a corresponding adjustment to goodwill. The amended guidance requires an acquirer to record adjustments to provisional amounts made during the measurement period in the period that the adjustment is determined. The adjustments should reflect the impact on earnings of changes in depreciation, amortization, or other income effects, if any, as if the accounting hadbeen completed as of the acquisition date. Additionally, amounts recorded in the current period that would have been reflected in prior reporting periods if the adjustments had been recognized as of the acquisition date must be disclosed either on the face of the income statement or in the notes to financial statements. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2015 and early application is permitted. The impact of the guidance on our financial condition, results of operations and financial statement disclosures will depend on the level of acquisition activity performed by the Company.

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” (ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and is effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires all deferred tax assets and liabilities to be classified as non-current. 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 January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is effective beginning after December 15, 2017. 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 February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods.Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

 

In March 2016, the FASB issued Accounting Standards Update 2016-07, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting (“ASU 2016-07”). ASU 2016-07 eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. ASU 2016-07 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this standard would have on our financial condition, results of operations and cash flows.

 

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance simplifies accounting for share-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. We are currently evaluating the impact the adoption of this standard would have on our financial condition, results of operations and cash flows.

 

 

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

 

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 year ended June 30, 2016 did not reflect the effects of shares potentially issuable upon conversion of convertible notes & preferred stock. These potentially issuable shares would have an anti-dilutive effect on the Company’s net loss per share in 2016. Diluted net income per share for the year ended June 30, 2015 reflected the effects of shares actually potentially issuable upon conversion of convertible preferred stock.

 

The components of basic and diluted earnings per share were as follows:

 

	For the year ended June 30, 2016
	Net Loss	Shares	Per Share
Basic loss per share:
Net loss available to common shareholders	$(81,952)	67,953,870	$(0.00)
Effect of dilutive securities
Preferred stock Series B	-
Convertible Debt	-
Diluted loss per share	$(81,952)	67,953,870	$(0.00)

 

 

	For the year ended June 30, 2015
	Net Income	Shares	Per Share
Basic income per share:
Net income available to common shareholders	$14,191	47,229,336	$0.00
Effect of dilutive securities
Preferred stock Series B		37,745,637
Convertible Debt		-
Diluted income per share	$14,191	84,974,973	$0.00

 

 

 

 

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 $6,431,522 as of June 30 2016, including a net loss of $81,952 during the year ended June 30, 2016. The historical losses have adversely affected the liquidity of the Company. Although losses are expected to be curtailed during the coming fiscal year due to the increasing revenues of its wholly owned subsidiary Kahnalytics, along with the acquisition of revenue producing subsidiaries, 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 at Kahnalytics, and successfully compete for customers within the areas of interest for its Canadian and New Zealand held subsidiaries.

 

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 its subsidiary 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, 2016, towards (i) sourcing additional working capital including $1,600,000 debt issuance completed during the year ended June 30, 2016, (ii) management of accrued expenses and accounts payable, (iii) divestiture of non-revenue producing subsidiaries, (vi) acquisition of profit producing subsidiaries such as Gourmet Foods and Brigadier Security Systems, and (v) other business combinations between entities where we have a common controlling interest such as Wainwright Holdings.

 

Management believes that the above actions will allow the Company to continue operations for the next 12 months.

 

NOTE 5. INVENTORIES

 

Inventories consisted of the following:

 

	June 30,	June 30,
	2016	2015
Raw materials	$50,023	$-
Supplies and packing materials	77,497	-
Finished goods	357,351	85,849
	484,871	85,849
Less : Impairment of Finished Goods	(48,330)	-
Total	$436,541	$85,849

 

 

 

Property, Plant and Equipment consisted of the following as of June 30, 2016 and 2015.

	June 30, 2016	June 30, 2015
Plant and Equipment	$1,477,411	$-
Furniture & Office Equipment	119,123	12,910
Vehicles	58,850	-
Total Property and Equipment, Gross	1,655,384	12,910
Accumulated Depreciation	(488,691)	(12,910)
Total Property and Equipment, Net	$1,166,693	$-

 

For the years ended June 30, 2016 and 2015, depreciation expense totaled $226,556 and $0, respectively. 

 

 

Intangible assets consisted of the following:

 

	June 30,	June 30,
	2016	2015
Brand name	$402,123	$-
Domain name	36,913	-
Customer relationships	500,252	-
Non-compete agreement	84,982	-
Recipes	21,601	-
Total	1,045,871	-
Less : Accumulated Amortization	(27,658)	-
Net Intangibles	$1,018,213	$-

 

CUSTOMER RELATIONSHIP

 

On August 11, 2105, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired customer relationships was estimated to be $66,153 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired customer relationships was estimated to be $434,098 and is amortized over the remaining useful life of 10 years.

 

	June 30, 2016	June 30, 2015
Customer relationships	$500,252	-
Less: accumulated amortization	9,659	-
Total customer relationships, net	$490,593	-

 

 

 

BRAND NAME

 

On August 11, 2105, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired brand name was estimated to be $61,429 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired brand name was estimated to be $340,694 and is amortized over the remaining useful life of 10 years.

 

	June 30, 2016	June 30, 2015
Brand name	$402,123	-
Less: accumulated amortization	8,447	-
Total brand name, net	$393,696	-

 

DOMAIN NAME

 

On August 11, 2105, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired domain name was estimated to be $21,601 and is amortized over the remaining useful life of 5 years. On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired domain name was estimated to be $15,312 and is amortized over the remaining useful life of 5 years.

 

	June 30, 2016	June 30, 2015
Domain Name	$36,913	-
Less: accumulated amortization	4,193	-
Total brand name, net	$32,720	-

 

RECIPES

 

On August 11, 2105, the Company acquired Gourmet Foods, Ltd. The fair value on the recipes was estimated to be $21,601 and is amortized over the remaining useful life of 5 years.

 

	June 30,	June 30,
	2016	2015
Recipes	$21,601	$-
Less: accumulated amortization	3,937	-
Total Recipes, net	$17,664	-

 

NON-COMPETE AGREEMENT

 

On June 2, 2016, the Company acquired Brigadier Security Systems. The fair value on the acquired non-compete agreement was estimated to be $104,122 and is amortized over the remaining useful life of 5 years.

 

	June 30, 2016	June 30, 2015
Non-compete agreement	$84,982	-
Less: accumulated amortization	1,421	-
Total non-compete agreement, net	$83,561	-