UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





Amendment No. 2 to


FORM 10-K/A





(MARK ONE)





x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




FOR THE FISCAL YEAR ENDED JUNE 30, 2010




or




o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




FOR THE TRANSITION PERIOD FROM ______________ TO ______________





COMMISSION FILE NUMBER: 000-53153





CONSORTEUM HOLDINGS, INC.


(Exact Name of Company as Specified in Its Charter)





Nevada
_____________________(State or Other Jurisdiction of
(I.R.S. EmployerIncorporation or Organization)
Identification No.)





20 Adelaide Street East-Suite 910, Toronto, Ontario, M5C 2T6


(Address of Principal Executive Offices) (Zip Code)





Registrant's telephone number including area code:  (877) 414-2774





Securities registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to Section 12(g) of the Act:





Common stock, $0.001 par value


Title of class





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





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





Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) been subject to such filing requirements for the past 90 days. x Yes o No





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.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 o.





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 o
Accelerated filer oNon-accelerated filer (Do not check if a smaller reporting company) o
Smaller reporting company x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): o Yes x No





State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.





Computed by reference to the last sale price of the common equity on November 11, 2012 of $0.0044, the aggregate market value of voting stock held by non-affiliates is $221,870.00.





Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. There were 114,153,715 shares of the registrant's common stock outstanding as of November 12, 2010.





DOCUMENTS INCORPORATED BY REFERENCE





None.

















This Amendment No.2 to Form 10-K (“Amendment No. 2”) amends the Company's Annual Report for the fiscal year ended June 30, 2010, filed with the Securities and Exchange Commission on November 15, 2010 (the “Form 10-K”) as amended by Amendment No. 1 to Form 10-K/A as filed on November 17, 2010 (“Amendment No.1”). This Amendment does not reflect events occurring after the original filing of the Form 10-K and Amendment No. 1, and does not modify or update the disclosures therein in any way except for changes to the specific Items and accounting matters described below. Accordingly, this Amendment No. 2 should be read in conjunction with the other filings of the Company made with the Securities and Exchange Commission subsequent to the filing of the original Annual Report on Form 10-K and Amendment No. 1, including any amendments to those filings.
 
 The Company filed Amendment No. 1 to the Form 10-K because subsequent to the initial filing of the Form 10-K, the Company realized that the financial statements filed as part of the Form 10-K were filed incorrectly and were not the final financial statements.  The Company addressed the items discussed below in a Form 8-K filing made on November 16, 2010 in which the Company advised that the financial statements in the Form 10-K could not be relied on, and as amended by Amendment No. 1 to Form 8-K filing the Company filed on November 17, 2010 in which the Company summarized in detail the nature of the changes in the financial statements between the Form 10-K and Amendment No. 1 to the Form 10-K. In the Form 8-K as amended the Company listed the nature of the changes to its financial statements for the year ended June 30, 2010 and June 30, 2009.
 
 The Company has filed a second amendment to the Form 10-K in which (i)the Company’s financial statements have been labeled as “restated”, and (ii) include a note in the notes to the restated financial statements which includes the details of the differences from the Company’s financial statements previously filed as part of the Form 10-K.  In addition, the Company has filed a report of its independent registered public accounting firm that includes a reference to the restatement footnote.
  Accordingly, the Company’s disclosure in Amendment No. 2 with regard to the following matters in the Form 10-K has been altered:
 
 (i)           Certain statistical information in the Company’s MDA presentation under the headings “Liquidity and Capital Resources”, “Results of Operations”, and “Balance Sheet” have been changed to conform to the final numbers for these items in the restated financial statements.
 
 (ii)              The Company’s financial statements have been marked where required to indicate that they have been restated.
 
 (iii)          Note 19 to the Notes to Financial Statements has been added to describe in detail the cumulative changes between the Company’s financial statements filed in the Form 10-K and the Company’s financial statements filed as part of Amendment No. 1 to the Form 10-K.
 
 (iv)         Thereport of the independent registered public accounting firmhas been modified to include a reference to the restatement footnote.
 
 The Company has also amended its description of its Controls and Procedures in Item 9A to  state that there was a deficiency in this area.








TABLE OF CONTENTS





PagePART IItem 1.   Business
1Item 1A.  Risk Factors
8Item 1B.  Unresolved Staff Comments
13Item 2.   Properties
13Item 3.   Legal Proceedings
13Item 4.   (Removed and Reserved)
13PART IIItem 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
13Item 6.   Selected Financial Data
14Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations
14Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
23Item 8.   Financial Statements and Supplementary Data
23Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
23Item 9A.  Controls and Procedures
23Item 9A(T) Controls and Procedures
23Item 9B   Other Information
24PART IIIItem 10.  Directors, Executive Officers and Corporate Governance
24Item 11.  Executive Compensation
27Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
29Item 13.  Certain Relationships and Related Transactions, and Director Independence
30Item 14.  Principal Accounting Fees and Services
30Item 15.  Exhibits, Financial Statement Schedules
31SIGNATURES
32







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FORWARD LOOKING STATEMENTS.





This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. In evaluating such statements, prospective investors should review carefully various risks and uncertainties identified in this release and matters set in the Company's SEC filings. These risks and uncertainties could cause the Company's actual results to differ materially from those indicated in the forward-looking statements.  We caution that words used in this document such as "expects," "anticipates," "believes," "may," and "optimistic," as well as similar words and expressions used herein, identify and refer to statements describing events that may or may not occur in the future.





These forward-looking statements and the matters to which they refer are subject to considerable uncertainty that may cause actual results to be materially different from those described herein. There are numerous factors that could cause actual results to be different than those anticipated or predicted by us, including: (i) a deterioration in economic conditions in general; (ii) a decrease in demand for our products or services in particular; (iii) our loss of a key employee or employees; (iv) regulatory changes, including further changes in the area of credit card regulation or implementation of new regulations in furtherance of the new legislation that may have an adverse affect on the demand for our products or services; (v) increases in our operating expenses resulting from increased costs of labor and/or consulting services; (vi) our inability to exploit existing or secure additional sources of revenues or capital to fund operations; (vii) a failure to collect upon or otherwise secure the benefits of existing contractual commitments with third parties, including our customers; and (viii) other factors and risks identified in our SEC filings. This list provides examples of factors that could affect the results described by forward-looking statements contained in this Form 10-K; however, this list is not exhaustive and many other factors could impact our business and it is impossible to predict with any accuracy which factors could result in negative impacts.





These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.








Note 1:  All dollar amounts are in US Dollars.




ii





ITEM 1. BUSINESS.





In June 2009 the Company closed an exchange agreement with Consorteum, Inc., a corporation organized under the laws of the Province of Ontario ("Consorteum"), pursuant to which Consorteum became a wholly-owned subsidiary of the Company. As a result of the exchange, the Company became a holding company and the Company's business is conducted through Consorteum, its subsidiary. Accordingly, the business description below is that of Consorteum, the Company's operating subsidiary.





BUSINESS OF CONSORTEUM HOLDINGS, INC.





WHAT IS CONSORTEUM?





Consorteum Holdings, Inc. is a corporation organized under the laws of Nevada and its subsidiary Consorteum, Inc. is a corporation organized under the laws of the Province of Ontario on April 3, 2006. The corporate headquarters of Consorteum Holdings are located at 377 S. Nevada Street, Carson City, Nevada 89703 -4290 and the Company maintains an office located at Suite 550, 141 Adelaide Street West, Toronto, Ontario, M5H 3L5. The telephone number is 1-877-414-2774 and the web site is www.consorteum.com.





WHAT WE DO:





Consorteum, Inc. is a systems integrator within the Financial Services, Payment and Transaction Processing industries.





Consorteum provides systems integration of electronic transaction processing solutions to public and private sector companies initially to the following population groups or to the following industries:  First Nations of Canada, crew members on yachts and similar vessels provided by third parties under a rental arrangement, golf clubs, owners and participating courses. Our services provide customized, innovative technology solutions that create, augment and enhance customers existing financial, payment and transactional processing systems.





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PAYMENT AND TRANSACTION PROCESSING INDUSTRY OVERVIEW





Payment transaction processing (PTP) is the central component in a banking payment system that is responsible for executing, routing and monitoring payment transactions. Payment transactions in general involve payment orders in various forms and formats. Transaction processing involves updating the appropriate database records as soon as a transaction (order, payment, etc.) occurs.





Transaction processing systems update constantly. At any given moment, someone may need an inventory balance, an account balance or the total current value of a financial portfolio. Also called "online transaction processing" (OLTP), the OLTP market is a demanding one, often requiring 24 x 7 operation and the most reliable computers and networks. Together, payment transaction processing and transaction processing is referred to as "Processing".





The Processing industry in North America and across the globe is made up of a number of organizations and infrastructures that process credit card, debit card and healthcare transactions as well as authorize these transactions for settlement of monies or information between two or more organizations. “Processors”, as they are traditionally known, have the capability of moving transactions in a digitized format to multiple settlement destinations. They traditionally contract to the banking industry (examples include Chase, Paymentech and its affiliation with Chase Bank in the US and Scotiabank in Canada; Moneris to BMO and RBC in Canada, HSBC and Barclays International). Processors can either be small, privately owned companies or larger, publicly traded companies, yet they are all `association members' of MasterCard or Visa, which means they can supply merchant discount rates (MDR) to their clients.





In North America, there are three major Processors: Chase Paymentech, First Data and Global Payments. These three Processors are quickly becoming worldwide processors as they move into the European and Asian marketplaces via acquisition and partnership. Processors in North America process in excess of 75 billion electronic payment transactions annually (6.25 billion per month, or 312,500,000 transactions every business day).





There are also regional Processors in the North American market that provide the same key services as the three major processors mentioned above. Regional Processors have found ways of offering additional services that the majors cannot market because of scale and time factors.





The Processing industry worldwide does not typically possess all the core competencies to provide and manage all the elements of an end-to-end, turnkey solution. With the development and introduction of the new chip card EMV (the acronym for Europay, Mastercard and VISA)standards and the increased adoption of new card types such as prepaid credit cards, stored value cards and loyalty cards, the Processors simply don't have the infrastructure or software in place to process transactions originating from the use of the newer card types. As a result, they look to others to supply the technologies needed to process these types of transactions.





CARD INDUSTRY OVERVIEW





The concept of using a card as a form of payment dates back to the late 1880's. The first card used in the United States was a fuel card in the 1920's that evolved over the years from paper and metal, to plastic. Large merchants issued the cards to their frequent customers and eventually started accepting other merchants' cards. Currently, the payment card industry encompasses debit, credit, stored value and prepaid cards. Our emphasis is on prepaid cards as described below.





HOW IS OUR BUSINESS ORGANIZED?





The following comments apply to the business model of Consorteum, which includes the company operations in Consorteum Holdings Inc., Consorteum Inc. and My Golf Rewards Canada Ltd. Consorteum owns 75% of My Golf Rewards Inc.





The majority of Consorteum's initiatives use the `Prepaid Card' as the cornerstone. A Prepaid Card is similar to a traditional credit card except it is pre-loaded with funds belonging to the cardholder, which he can then use wherever the payment card is accepted, including on the internet and abroad. There is usually no credit involved since the only money available to spend is the money the cardholder, or another source on instruction from the cardholder, such as an employer or a governmental agency, deposits to the card.





The Prepaid Card industry allows its customers to gain the desired convenience they may not otherwise be afforded where day to day banking needs are concerned. As a system integrator, Consorteum has the ability to leverage its relationships with multiple suppliers in order to address the specific requirements of these day to day banking needs. Consorteum will initially target four key markets and will develop and implement financial services, stored value / prepaid cards, payment, and transaction processing solutions for these key areas:


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1.
The Unbanked/Underbanked





2.
Check Cashing





3.
Loyalty Programs





4.
Payroll /Benefit





1. THE UNBANKED/UNDERBANKED





The unbanked/underbanked population includes individuals who receive government benefits, benefits payments, payroll checks, and other types of payments, but currently have minimal or no banking relationship.





Traditionally, banks have not focused on the unbanked/underbanked customer base due to increased costs and risks. It is very expensive to service customers via a branch teller, especially when that customer is carrying a zero balance. Banks charge an average of $8 - $15 per month for a zero balance checking account, an obvious deterrent for those who more often than not would carry a zero balance. In addition, the unbanked/underbanked usually do not qualify for credit cards and mortgages so banks have little opportunity to turn them into profitable customers.





Due to increased credit requirements and security measures at banks, often the only alternative for the unbanked/underbanked is to use expensive check cashing outlets whose fees average 2% - 5% to cash a single paycheck. Many immigrant workers transfer funds each pay period to support relatives in foreign countries via check cashing outlets or wire transfers. Fees can amount to $60 per transfer, another major obstacle for the unbanked.





Two-thirds of existing check cashing customers (the 'underbanked') have bank accounts but seek more convenient financial services. The remaining customers (the 'unbanked') have been ignored by mainstream financial institutions and seek alternatives to provide them with basic financial services.





One potential market for our services in this area is the growing Hispanic population in the United States. According to the July 1, 2008 U.S. Census statistics, approximately 46.9 million people, which represents approximately 15% of the total United States population of 307 million, are Hispanic, making them the country's largest minority group. Approximately 73.7% of full time, year round Hispanic workers earn less than $35,000 per year. This is usually an indicator for consumers with little or no banking relationship who may rely on alternative providers for their financial service needs. Approximately sixty-seven percent of Hispanics in the U.S. are originally from Mexico, with the second largest group (14.3%) originating from Central and South America. In 2008, over $67.5 billion was transferred from the U.S. to Latin America and the Caribbean, and that same year, $25.1 billion went to Mexico alone.





2. CHECK CASHING





In 2006 there were an estimated 13,000 check-cashing outlets ("CCOs") in the United States cashing more than $80 billion worth of checks annually. Some 80 to 90 percent of these are payroll checks with an average size of $500 to $600. The balance is largely government benefits (social assistance, social security etc.), income-tax refunds, expense checks, medical benefits checks, insurance checks, and personal checks. CCOs do not require that a customer have a bank account to cash a check.





According to a 2007 Federal Reserve Board's Survey of Consumer Finances, over 10% of families in the United States do not keep a checking account. The survey also indicated that the majority of these consumers are unbanked by choice. A disproportionate number of the unbanked are ethnic minorities. These unbanked millions often must rely on alternative ways to carry out basic financial transactions, such as cashing payroll checks and paying bills. Currently, the average unbanked individual spends 10 percent of their net income on alternative financial services.





These check cashing services are provided primarily to lower and middle-income working individuals who are typically blue and white-collar workers involved in retail and service industries such as restaurants, hotels, auto repair, landscaping, daycare and line manufacturing. Many of these customers are also younger than the general population, regularly in need of financial services after normal banking hours, or living from "paycheck to paycheck".





According to Financial Service Centers of America (FISCA), an industry trade group representing CCOs and payday lenders, CCOs, through 13,000 locations nationwide, conduct more than 350 million transactions each year, providing an estimated $106 billion in various products and services to an estimated 30 million customers. These transactions include more than $58.3 billion in check cashing transactions, $17.6 billion in money orders sold, $8.3 billion in wire remittances, $13.2 billion in payday advances, and $5.4 billon in sales of pre-paid stored-value cards.


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3. LOYALTY PROGRAMS





Loyalty programs are marketing programs designed to enhance brand loyalty by cultivating an ongoing relationship between a marketer and his customer. Successful loyalty programs encourage the consumer to buy frequently, to increase the amount spent each time, and to concentrate all or most of their related purchases on that brand. In addition, they provide access to valuable demographic and purchasing information that can be leveraged to shape future campaigns. In 2006, loyalty programs were a $10 billion industry overall with over 1.3 billion members - four times the total United States population - across 2250 separate loyalty programs.





Most loyalty programs offer perks for membership in a club or program and reward purchases. Rewards may be based on the dollar value of purchases made or on the frequency of purchases. The most well known consumer loyalty programs are airline frequent-flyer programs that offer discounts against future travel called reward miles. Most large supermarket chains now have frequent-buyer clubs that offer no coupon discounts as well as newsletters and affiliate discounts.





Loyalty program marketing tactics can include regular communication with customers such as reminder mailings, private credit cards, cross-sell and up-sell offers, satisfaction and opinion surveys, and collection of information for member databases. Loyalty programs may offer a discount on future purchases based on frequency of purchase, without regard to the dollar value of the purchase (these are also called frequent user programs). By offering frequency-based incentives, the marketer hopes to capture and maintain market share. Frequent user discount programs tend to increase spending because consumers will deliberately inconvenience themselves or buy more often than they need to earn the awards and status.





Loyalty Programs often target the individual consumer and can be customized to target specific industries or merchants. Programs can offer rewards directly to consumers or business to business incentives to drive sales.





4. PAYROLL /BENEFIT





Debit and Credit is overtaking cash in transaction volume, generating large volumes of transaction fees, allowing branded, prepaid Consumer Financial Services such as payroll and benefits cards to be successful. It is estimated that in 2006 there were 7 million payroll cards in circulation in the United States. The number of United States payroll cards is expected to increase to 17.5 million in 2010. Research done by the Aite Group projects spending through use of payroll cards will soar to $27.1 billion by 2009. Payroll and benefits cards provide employees and benefits recipients (many of whom are ‘unbanked’ or ‘underbanked’) with immediate access to their payroll or benefits payments. Cardholders can use their card at an ATM (Automatic Teller Machine), pay for purchases at the point-of-sale or pay bills online. Payroll and benefits cards are welcome everywhere credit cards are accepted worldwide, including Internet and mail order/telephone order (MOTO) merchants. Cardholders receive monthly statements and can obtain account information online, at ATMs, or by calling a toll-free number for customer service.





Upon enrolment into the payroll or benefits program, the participant will receive a personalized, re-loadable prepaid payroll or benefits card. Each pay period, the participant's funds are automatically deposited into their individual card account by their program administrator. Cardholders use their cards to obtain cash and pay for purchases as they would with a traditional credit card. Corporate employers can offer the payroll cards to any or all of their employees.





Unbanked consumers are the primary target audience, particularly part-time and temporary employees and employees without checking accounts, those who do not wish to use their checking accounts for direct deposit, and consumers who receive recurring benefits payments. Convenience-minded employees, with or without checking accounts, who elect to have a portion of their paycheck deposited onto a payroll card for budgeting purposes are also targets.





WHAT ARE OUR CURRENT PROJECTS?





During the last fiscal year, the company underwent a restructuring and as part of this process focused on two primary initiatives as described below. This decision was the result of limited financial resources and an in-depth examination of certain business models which did not appear to meet the Company’s financial hurdles. Furthermore, the current business climate dictated a renewed focus on the key profitable operations and markets.





FIRST NATIONS –FEATHER PROGRAM (The Feather program)





This new initiative was previously known as First Nations Financial Services in last year’s annual report on Form 10-K.





Consorteum has entered into an exclusive contract with People’s Trust Card Services to provide for the deployment of a suite of financial services to First Nations (FN) people and merchants. First Nations are Canada's indigenous population. We will act as the systems integrator to deliver the necessary components that will allow FN Financial to provide products and services to First Nation Bands. These services may include but are not limited to, Point of Sale (POS), Merchant Discount Rates (MDR), Automated Teller Machines (ATM), Stored Value, Payroll or Benefit Cards and Insurance. Consorteum will contract to third parties the provision of the hardware and software necessary to fulfill its obligations under the terms of the contract.


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The deployment will occur in stages. Initially, Consorteum  launched a pilot in the first quarter of Fiscal 2011 to provide the Card program to a First Nation band located in New Brunswick. This initiative has been expanded and now includes 70 – 80 cards. Consorteum plans to launch  the Card Program to a further group or groups of First Nation's bands across Canada commencing in the third quarter of 2011. In the second phase, 15,000 Feather Benefits cards will be rolled out to the same select bands. The Company estimates that by the end of 2011, up to 100,000 benefits cards may be required. The Feather Program will be used to load government social assistance payments for First Nations People across Canada. This process will replace the current cumbersome manual check process. It is anticipated that in the first full year we will conclude agreements with approximately 25 First Nations bands.





We estimate we will require two full time employees for the initial contractual obligation to manage the third party providers, deployment, sales and marketing support for the Feather project. We estimate our first year costs associated with this project will be approximately $450,000. These costs do not include the purchase and installation of the hardware or the creation of the requisite software.





Consorteum will receive an ongoing revenue share based on its contract with People ‘s Trust from fees charged to the cardholder for usage. Within the contract there is additional provision for revenue share from every future product and service provided. The term of the contract between People’s Trust and Consorteum is for an initial period of five years and renewable for two year intervals thereafter.





MY GOLF REWARDS.





This program is operated through My Golf Rewards Canada Inc., which is a company incorporated in the Province of Ontario, to focus on customer retention through loyalty initiatives built specifically to target the international golf industry. Consorteum owns 75% of My Golf Rewards, and ILS, its joint venture partner, owns the remaining 25%. Part of the initial financing was used to acquire a loyalty engine technology license from FideliSoft, Inc., a Montreal, Quebec based loyalty and software provider. Under our license, the software also can be used for loyalty programs in different consumer and business sectors.





Currently, Consorteum is in negotiations with Fidelisoft to procure a license for an extended period which licence will require payment of an annual fee and transactional fees. These financial discussions on the payment terms are on – going at this time, but both parties are committed to moving forward with the program. Fidelisoft is committed to provide the software for the up-coming trade shows, which are integral to the launch of the program.





My Golf Rewards membership cards are distributed to interested golfers via participating golf courses. Golfers who apply for membership receive a My Golf Rewards loyalty card. The reward funds on this card continue to re-populate with ongoing use and redemption. The distinctive appeal of the card is that its value is based on rewarding golfers for repeat spending. As such, members are encouraged to use the card continually (rather than discard it after initial use).





As part of this initiative, ILS, our joint venture partner, provided the design of the program and the technical support. ILS and Consorteum are jointly responsible for ongoing development of new functionality enhancement. ILS is responsible for all direct golf course sales, marketing, customer service and terminal installations.





As a participant in My Golf Rewards, Consorteum will oversee and have final say over all operational aspects of the program. This includes providing executive management of the company, project management, technology partner management, support, and provisioning of the initial launch terminals, and loyalty card purchasing.





Phase 1 of the rollout will consist of two areas of focus: the first will be concentrated on 50 (minimum) courses to build brand awareness. To help with the adoption of the program, Consorteum will provide terminals (approximately $450 per terminal, for 20 terminals, a cost of $9,000) and cards (already purchased) to participating golf courses at no cost. Once the My Golf Rewards program has established itself within the industry, Consorteum will charge any new golf course an administration and set up fee to become part of the program. To enable customers to receive points throughout the golf courses facilities (pro shop, bar area, food and beverage cart) Consorteum anticipates the average golf course will require two or three terminals per location.





Although we anticipated launching this program for Fiscal 2010, the launch did not occur  due to limited financial resources. It is now scheduled to launch for the 2011 golf season.





As part of the Fiscal 2011 plan,we are in discussions with a partner with the objective of developing a co-branded program, with a known name in the golf industry. This partner will share the costs of the launch if discussions result in an agreement.





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Consorteum will be required to finance the following as part of its obligations to the joint venture: program manager, marketing collateral, software license, POS terminals, hosted database servers, ongoing course promotions team and technical support. We expect that program execution for stage 1, (focused on the period November 2010 – April 2011) will target a minimum of  50 locations and 50,000 golfers, and will have a budgeted cost of $250,000. The inititative will focus in Ontario and Quebec initially  In addition we have an annual licensing fee to Fidelisoft for the loyalty platform, together with a share of the transactional fees, payable either as a lump sum or in conjunction with transactional fees. These discussions are on-going with respect to the payment terms.





My Golf Rewards charges the golf course a transaction fee each time the card is used. In addition My Golf Rewards charges a percentage fee of the total dollar points issued each time and a percentage fee of the dollar redemption amount.





BLUE SEA MANNING – CRUISE SHIP INITIATIVE





In addition to the two main programs, Consorteum is currently piloting a multi currency card program with Blue Sea Manning, a company that supplies personnel for private sail boats and yachts. The objective of the pilot is to ultimately provide this program the larger cruise line industry. This pilot was commenced in March 2010 and is still in the testing stage.





OUR SALES AND MARKETING STRATEGY





Consorteum has a two stage approach to sales and marketing, Direct (Consorteum managed and run programs) and Indirect (third party client managed and run programs).





Our methodology for deployment and/or initiation of a program is based on the existence of a qualified business problem, an identified solution, and a real client need. Consorteum evaluates the revenue potential, cost effectiveness, and profitability before proceeding.





Direct Sales and Marketing:





Once a defined opportunity has been identified, Consorteum will create our own sales and marketing strategy. Depending on the program being launched and availability of funding, the following areas could be included in the marketing plan: publication media, web media, direct person-to-person promotions, printed collateral, sponsored sporting events, retail store promotions, email, direct mail, radio or TV. The combination of plans utilized will depend upon our research concerning the most effective allocation strategies, supplemented by our experiences based on programs actually launched and developed.





Indirect Sales and Marketing:





Our contracted clients are third party companies looking to resell our products or services to their customers, or who have contracted Consorteum to integrate a payment or transaction processing solution for them. A majority of our third party clients are either referred to us from existing industry partners or from our own direct sales efforts.





We also have the ability to provide our third party clients with industry focused sales and marketing advice. Although Consorteum does not directly shape the marketing plans of our clients, we do provide marketing expertise to help maximize their promotional efforts to increase adoption of services.





OUR PRODUCTS





We expect to create and distribute cards with a variety of functions and features that will depend upon the program to which they are addressed. A general description of various kinds of cards is set forth below; however, we do not currently have initiatives supporting all these varieties in place. Our ability to create different card types will depend upon a combination of client interest and initiatives and available funding sources.





LOYALTY CARDS:





The Loyalty card enables the identification between the consumer and the loyalty provider. The card identifies the consumer accumulating points, or enables the recipient to redeem points for pre-selected award. The card also enables the loyalty/marketing provider to track the activity of their consumers spending habits and redemption activity.





RE-LOADABLE PREPAID CARD:





Re-loadable prepaid cards are designed for people looking for multiple use functionality from their card. Many retailers offer re-loadable cards as a convenient way for their repeat spend customers to pay for products and services, while maintaining brand loyalty. Based on the specific program, these types of cards can be re-loaded at selected retail locations, on-line or at the bank.





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PAYROLL CARDS:





Each employee is issued his/her own stored value payroll card. The employer posts funds electronically to the employee's personal card via standard direct deposit processes or by flat file to a secured website interface. Once funds are loaded, the employee has immediate access to his payroll funds no matter where he may be.





Employees can purchase goods and services at those locations that accept any major credit cards (including online and phone purchases) or withdraw cash at most ATMs. Stored value cards are safer than cash, reduce risk for purchases made online or over the phone and provide peace of mind for people on the go.





Payroll cards are ideal for temporary workers, students, or those who work remotely, as well as those who desire flexibility.





MERCHANT DISCOUNT RATES:





Merchant Discount Rates are fees charged to a merchant in order to accept payment from any of the major credit card companies. Consorteum has established relationships with several large processors to purchase transaction processing at a competitive rate and offer these services to our clients.





HOW ARE WE PAID FOR OUR SERVICES?





Each of our programs has a different method of collecting fees for the service. The amount of fees we receive varies with each program and the specific solution being offered. In some cases the transaction fee charged is set in the markets in which we are doing business.





In general, we receive a portion of the transaction and monthly fees generated by the end user's card activity. In most cases we do not receive these revenues directly from the cardholders, as we generally do not have the direct relationship with them. We receive a percentage of the sums charged to the cardholder by the issuing bank for the retention, maintenance, user fees and other expenses associated with cardholder ownership. We receive our allocated percentages of these collected fees each month from the issuing bank together with a statement calculating our fees. Various kinds of fees associated by type of card are described below; however, our participation in one or more of the kinds of fees associated with each card, as well as the percentage of sharing of revenues, will differ from client to client based upon our actual contract.





Card Programs: Most of the card programs are consumer based billing. This means the cardholder pays service fees for different functions of the card. These fees could include Monthly Service fees, ATM fees, Balance inquiry fees, POS fees and others.





Loyalty Program: Fees for the loyalty programs are traditionally paid for by the retailer promoting the service. These could include administration fees, per transaction fees, reward issuing fees and reward redemption fees.





Merchant Discount Fees: The payment Processor charges the retail merchant a percentage of the transaction value for processing a specific card payment (VISA, MC, Debit). The processor pays Consorteum a percentage of net revenues generated from the fee charged to the merchant. We have and will continue to have card acceptance agreements with some banks under which fees are set.





WHAT REGULATIONS WILL OUR BUSINESS BE SUBJECT TO?





Due to the financial services focus of our business, Consorteum may be required to directly or indirectly conform to banking and Processing industry regulations. Our issuing bank and transaction Processing partners must comply with all federal and state/provincial banking regulations (e.g., FDIC's "Regulation E" of the Electronic Funds Transfer Act) in addition to card association (for example, Visa, MasterCard, American Express, Discover) rules and regulations (for example, PCI Security Standards Council for payment account data security). Consorteum, as part of doing business with these partners, may have to comply with certain rules and regulations and/or ensure our other business partners and clients properly collect, store, disseminate, and comply with certain portions of these rules and regulations on our issuing bank and Processing partners' behalf (for example, KYC "Know Your Customer"). Consorteum currently has no financial or licensing obligation to meet these compliance regulations. These regulations do change over time and vary from country to country.





The new post paid credit card regulations in the United States do not have a direct impact on the company as they are consumer based protection regulations. Consorteum does not currently issue post paid credit cards to consumers (all our prepaid cards are issued by issuing bank partners and are not part of the new interest percentage consumer regulation). As a result, we do not need to change our current business model.





7


WHAT INTELLECTUAL PROPERTY DO WE OWN OR LICENSE?





Currently, we do not own any intellectual property that is subject to protection under U.S. or Canadian patent, trademark or copyright law. We have a license to use certain programming in connection with the MyGolf Rewards project.





Presently we have not design our own software programs for processing transactions. We do not believe that we will devote our efforts to creating any form of programming or other intellectual property that can be the subject of a patent application or other form of "strong" intellectual property protection.





We seek to maintain certain intellectual property as trade secrets or proprietary information. The secrecy of this information could be compromised by third parties, or intentionally or accidentally disclosed to others by our employees, which may cause us to lose any competitive advantage we enjoy from maintaining these trade secrets. We will, however, require all employees to sign non disclosure and confidentiality agreements and take other steps to protect our corporate assets prudently.





WHO IS OUR COMPETITION?





Competition for the various products and services that Consorteum supplies to its clients are generally supplied by a number of different sources. The major financial institutions around the globe could supply a partial or complete array of products that will be in direct competition with Consorteum. The large Processors such as Chase Paymentech, First Data and Global Payments also supply parts of the Consorteum solutions but generally do not offer a complete end-to-end solution. The individual card associations such as MasterCard, Visa and Discover can offer card programs such as prepaid credit cards and gift cards direct to their card users. There are also companies that supply stored value card programs, such as Incomm and eFunds; and there are also a number of loyalty and rewards program suppliers.





EMPLOYEES AND CONSULTANTS





As of the date of this report, Consorteum currently operates with a total of seven (7) consultants to the group as a whole. Three of the consultants are focused on the My Golf Rewards program, and the balance focused on the First Nations initiative and corporate matters.





As a result of the restructuring of the Company affairs, all existing management contracts were terminated by mutual agreement with the parties effective June 30, 2010. These changes in management contracts were undertaken in light of the financial position of the Company and in order to better position the Company to raise additional debt and equity in the markets. Furthermore as set out in the financial statements, significant liabilities existing as at June 30, 2010 were forgiven by these parties, (refer to note 11 to the consolidated financial statements).





The company is currently looking to secure new funds through a combination of debt and equity, and is expecting to negotiate new management contracts in fiscal 2011 once funding is secure and profitable operations has been achieved.





Management Services Agreements. There are no current management contracts as of the date of this report.





ITEM 1A   RISK FACTORS





The following risk factors apply to the Company, its business, the industry in which it operates and the common stock and market in which it trades. They should be read carefully by anyone with an interest in our Company who should consider the information together with the other material in this Report. Some of the statements in "Risk Factors" are forward looking statements.





RISKS RELATED TO OUR BUSINESS OPERATIONS





THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN UNLESS WE RAISE SUBSTANTIAL AMOUNTS OF DEBT OR CAPITAL.





In its report dated November 14, 2010, the independent registered public accounting firm for Consorteum stated that the financial statements for the years ended June 30, 2010 and 2009 and for the period from inception (November 7, 2005) to June 30, 2010, were prepared assuming that Consorteum would continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of cash flow constraints, an accumulated deficit of $4,622,628 at June 30, 2010 and recurring losses from operations. We continue to experience losses.





Our ability to continue as a going concern is subject to the ability to generate a profit from new activities and/or obtain necessary funding from outside sources, including additional funds from the sale of the Company's securities or loans from financial institutions/individuals where possible. The continued operating losses and stockholders' deficit increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful, or that these funds will be available at the times or in the amounts





8


In order to improve the working capital position, the on-going cash flow requirements, and the ability to raise new financing, all management contracts were terminated as of June 30, 2010. In addition significant liabilities existing at that date have been forgiven (refer to note 11 of the Consolidated financial statements) and other liabilities will be converted to share capital in Fiscal 2011.





WE HAVE A LIMITED OPERATING HISTORY





Although we were incorporated in 2006, we are a development stage company. We have a limited operating history and will likely encounter the risks and difficulties frequently encountered by early stage companies. Such risks include, without limitation, the following:





·
amount and timing of operating costs and capital expenditures in relation to expansion of our business, operations, and infrastructure;


·
time line to develop, test, coordinate, market and sell our card programs and processing procedures;


·
negotiation and implementation of strategic alliances or similar arrangements with companies with sufficient resources to support our programs and processing transactions;


·
need for acceptance of products;


·
ability to anticipate and adapt to a competitive market and rapid technological developments;


·
dependence upon key personnel.





We cannot be certain our strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.





WE HAVE LIMITED SALES, MARKETING, AND DISTRIBUTION CAPABILITIES. WE WILL BE REQUIRED TO EITHER DEVELOP SUCH CAPABILITIES OR TO OUTSOURCE THESE ACTIVITIES TO THIRD PARTIES.





We currently have limited sales, marketing and distribution capabilities. In order to succeed, we will be required to either develop such capabilities or to outsource these activities to third parties. We can provide no assurance that third parties will be interested in acting as our outsourced sales, marketing, and distribution arms on a timely basis, on commercially reasonable terms, or at all. If we are unable to establish sales, marketing, or distribution capabilities either by developing our own organization or by entering into agreements with others, we may be unable to successfully sell any products that we are able to begin to commercialize, which would have a material adverse effect upon our business, prospects, financial condition, and results of operations. Further, in the event that we are required to outsource these functions on disadvantageous terms, we may be required to pay a relatively large portion of our net revenue to these organizations, which would have a material adverse effect upon our business, prospects, financial condition, and results of operations.





RISKS RELATING TO THE CREDIT CARD AND TRANSACTION PROCESSING INDUSTRY





THE LEVEL OF TRANSACTIONS GENERATED BY OUR DIFFERENT CARD PROGRAMS IS SUBJECT TO SUBSTANTIAL SEASONAL VARIATION WHICH MAY CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE MATERIALLY.





Our experience is that the level of transactions is subject to seasonal variation. Transaction levels have consistently been higher in the last quarter of the year due to increased use of our prepaid credit card programs during the holiday season. Transaction levels are greater for our loyalty and reward programs during the second and third quarter of the year. The level of transactions drops in the first quarter, during which transaction levels are generally the lowest we experience during the year. As a result of these seasonal variations, our quarterly operating results, which depend in part on the number and value of the transactions processed, may fluctuate materially.





THE STABILITY AND GROWTH OF MULTIPLE TYPES OF CARD PROGRAMS DEPENDS ON MAINTAINING AGREEMENTS WITH SPONSORSHIP BANKS, SOFTWARE PROVIDERS AND PROCESSORS.





All of our supplier agreements such as those with banks, processing companies and software companies, have expiration dates. Although our suppliers are generally obligated to renew our agreements, they may have the option not to do so. Therefore, one or more of our critical suppliers such as a bank or processing company may terminate its contract at expiration. Although we would have notice of any such decision, we may not be able to replace the relationship in a timely manner or on favorable economic terms or at all. The requirement to replace any critical supplier relationship would also generate additional costs in the replacement process. The inability to maintain or replace these agreements could have a material adverse effect on our business, and financial condition or results of operations.





WE DO NOT CONTROL THE TRANSACTION FEES FOR SOME OF OUR PROGRAMS IN THE MARKETS WHERE THEY OPERATE. THE INTERCHANGE FEES CHARGED AND SHARED ARE ESTABLISHED BY THE SPONSORING PROCESSORS OR FINANCIAL INSTITUTIONS.


9








The amount of fees we receive per transaction is set in the markets in which we do business. We have and will continue to have card acceptance agreements with some banks under which fees are set. Also, we derive a portion of our revenues from "interchange fees" that are set by processors, financial institutions and the major card associations. We are not in a position to influence these fees. A significant decrease in the interchange fee could adversely affect our revenues.





WE ARE DEPENDENT UPON ELECTRONIC FINANCIAL TRANSACTION PROCESSORS OR THE CARD ISSUING INSTITUTION TO PROVIDE ASSISTANCE IN OBTAINING SETTLEMENT OF FUNDS RELATING TO INTERCHANGE REVENUE AS WELL AS OTHER TRANSACTIONS FEES AGREED UPON.





We have agreements in place related to transaction based fee revenues on credit and debit cards issued by banks. We also have in place arrangements for the settlement of these types of transactions, but in some cases we do not have a direct relationship with the card-issuing bank and we rely for settlement on the regulation rules that are administered by card associations (such as Visa or MasterCard and others). These contracts are typically terminable by a bank or processing company on 90 days notice. We have arrangements in place with our processing partners or card sponsoring institution to collect our fees via revenue splits at point of origin. The termination of a contract with any one of these parties could result in the loss of revenues.





A LACK OF BUSINESS OPPORTUNITIES OR FINANCIAL RESOURCES MAY IMPEDE OUR ABILITY TO EXPAND AT DESIRED LEVELS, AND OUR FAILURE TO EXPAND OPERATIONS COULD HAVE AN ADVERSE IMPACT ON ITS FINANCIAL CONDITION.





Our plans and opportunities will be focused on card issuing, transaction processing and providing financial services to our varied client base. The expansion and development of our business will depend on various factors including the following:





·
The demand for our card products, transaction processing and financial services product by the current markets.





·
The ability to form the appropriate relationships and obtain necessary approvals for the installation of our card programs.





·
The ability to install a transaction processing solution in an efficient and timely manner.





·
The ability to issue a sufficient numbers of cards which relate to loyalty, rebate, reward, prepaid and other card programs.





·
The availability of financing for the expansion of our business through partnerships, acquisition and hiring of additional personnel.





·
The increased acceptance of our card products in our target markets.





·
The increase of transaction fees revenue we receive.





·
The deployment of larger numbers of the different card types by us, and our different distribution channels





·
The continued use of our card product by cardholders.





We expect that transaction levels on a newly created card program in a developing market will not increase significantly. We will work to improve the levels of usage of the card products by acquiring high-quality clients and eliminating less-developed potential markets and adding new transactions types that are compatible with our different products. However, we may not be successful in materially increasing transaction levels through these measures.





OUR LOSS OF CURRENT RELATIONSHIPS WITH PROCESSORS, CARD PLANS AND FINANCIAL INSTITUTIONS WILL HAVE A MATERIAL ADVERSE EFFECT ON FUTURE REVENUES AND PROSPECTS.





Our revenue will be derived primarily from fees paid by users of our card products, by fees shared between us and the processors and also by the interchange revenues shared with the major card plan providers. Therefore, our future success will be dependent on our ability to increase the transaction and fee revenues that are created which are greater than our expenses. There can be no assurances that our efforts to achieve this in the beginning will be successful.





10


WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH THE LEADING SERVICE PROVIDERS WHO ARE MORE ESTABLISHED AND BETTER CAPITALIZED THAN US.





We experience significant competition from banks, non-bank providers of card programs, major processors as well as multiple card program suppliers. Many of our competitors have materially greater financial resources than us and can therefore implement ever changing technological developments to meet the level of convenience that consumers demand. No assurance can be given that we will be able to compete successfully with our more established and better-capitalized


competitors.





RISKS RELATED TO OUR SHARES





IN RECENT YEARS, THE STOCK MARKET IN GENERAL HAS EXPERIENCED PERIODIC PRICE AND VOLUME FLUCTUATIONS. THIS VOLATILITY HAS HAD A SIGNIFICANT EFFECT ON THE MARKET PRICE OF SECURITIES ISSUED BY MANY COMPANIES FOR REASONS OFTEN UNRELATED TO THEIR OPERATING PERFORMANCE. THESE BROAD MARKET FLUCTUATIONS MAY ADVERSELY AFFECT OUR STOCK PRICE, REGARDLESS OF OUR OPERATING RESULTS. THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY.





The price of our common stock is quoted on the OTCBB and constantly changes. We expect that the market price of the common stock will continue to fluctuate. These fluctuations may result from a variety of factors, many of which are beyond our control. These factors include:





·
quarterly variations in our financial results;





·
operating results that vary from the expectations of management, securities analysts and investors;





·
changes in expectations as to our business, prospects, financial condition, and results of operations;





·
announcements by us or our competitors of material developments;





·
the operating and securities price performance of other companies that investors believe are comparable to us;





·
future sales of our equity or equity-related securities;





·
changes in general conditions in our industry and in the economy, the financial markets and the domestic or international political situation;





·
departures of key personnel;





·
regulatory and intellectual property considerations;





·
volume and dollar amount of sales; and





·
number of shareholders.





FUTURE SALES OF COMMON STOCK OR THE ISSUANCE OF SECURITIES SENIOR TO OUR COMMON STOCK OR CONVERTIBLE INTO, OR EXCHANGEABLE OR EXERCISABLE FOR, OUR COMMON STOCK COULD MATERIALLY ADVERSELY AFFECT THE TRADING PRICE OF THE COMMON STOCK, AND OUR ABILITY TO RAISE FUNDS IN NEW EQUITY OFFERINGS.





Future sales of substantial amounts of our common stock or other equity-related securities in the public market or privately, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital through future offerings of equity or other equity-related securities. We can make no prediction as to the effect, if any, that future sales of shares of common stock or equity-related securities, or the availability of shares of common stock for future sale, will have on the trading price of our common stock. There are currently 50,425,090 unrestricted shares of our common stock available for sale.





OUR COMMON STOCK IS SUBJECT TO THE PENNY STOCK REGULATIONS THAT IMPOSE RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK. AS A CONSEQUENCE, THE ABILITY OF OUR STOCKHOLDERS TO SELL SHARES OF OUR COMMON STOCK COULD BE IMPAIRED.


11





The Securities and Exchange Commission (the "Commission") has adopted regulations that generally define a "penny stock" to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share subject to certain exceptions that are not applicable to our company at present. Our common stock is subject to the penny stock rules that impose additional sales practice requirements on broker-dealers who sell these securities to persons other than established customers and accredited investors. The regulations require that prior to any transaction involving a penny stock, a risk disclosure schedule must be delivered to the buyer explaining the penny stock market and its risks. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase, and must have received the purchaser's written consent to the transaction prior to sale. As such the market liquidity for the common stock will be limited to the ability of broker-dealers to sell it in compliance with the above-mentioned disclosure requirements.





You should be aware that, according to the Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:





·
control of the market for the security by one or a few broker-dealers;





·
"boiler room" practices involving high-pressure sales tactics;





·
manipulation of prices through prearranged matching of purchases and sales;





·
the release of misleading information;





·
excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and





·
dumping of securities by broker-dealers after prices have been manipulated to a desired level, which hurts the price of the stock and causes investors to suffer loss.





We are aware of the abuses that have occurred in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, we will strive within the confines of practical limitations to prevent such abuses with respect to our common stock.





FAILURE TO REMAIN CURRENT IN REPORTING REQUIREMENTS COULD RESULT IN REMOVAL  FROM THE OVER THE COUNTER BULLETIN BOARD.





Companies trading on the Over the Counter Bulletin Board ("OTCBB"), such as the Company, must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTCBB. If the Company fails to remain current in its reporting requirements, the Company could be delisted from the Bulletin


Board.





In addition, the Financial Industry Regulatory Authority ("FINRA"), which supervises the OTCBB, has adopted a change to its Eligibility Rule, in a filing with the SEC. The change makes those OTCBB issuers that are cited for filing delinquency in their Form 10-K/Form 10-Q three times in a 24-month period and those OTCBB issuers removed for failure to file such reports two times in a 24-month period ineligible for quotation on the OTCBB for a period of one year. Under this rule, a company filing with the extension time set forth in a Notice of Late Filing (Form 12b-25) is not considered late. This rule does not apply to a company's Current Reports on Form 8-K. The Company has defaulted twice within a 24 month period; thus another default will result in the Company’s removal from the OTCBB.





FAILURE TO MAINTAIN MARKET MAKERS MAY AFFECT VALUE OF OUR COMMON STOCK.





If the Company is unable to maintain FINRA member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Company will be able to maintain such market makers.





SHARES OF OUR COMMON STOCK ELIGIBLE FOR FUTURE SALE MAY AFFECT MARKET PRICE.


12


All the shares held by Consorteum Stockholders who received them in the Exchange Agreement transaction were issued in reliance on the section 4(2) exemption under the Securities Act of 1933. Such shares will not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the Securities Act of 1933. In general, under Rule 144 a person (or persons whose shares are aggregated) who has beneficially owned shares acquired in a non-public transaction for at least six months, including persons who may be deemed affiliates of the Company (as that term is defined under that rule) would be entitled to sell within any three-month period a number of shares that does not exceed 1% of the then outstanding shares of common stock, provided that certain current Company information is then publicly available. If a substantial number of the shares owned by these stockholders were sold pursuant to Rule 144 or a registered offering, the market price of the common stock at that time could be adversely affected.





WE HAVE NEVER PAID ANY CASH DIVIDENDS BECAUSE WE HAVE NEVER HAD ANY EARNINGS, AND WE WILL NOT PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.





We have never paid any cash dividends on our common stock since we began our business operations because we have never had earnings from which any such dividends could be declared. Assuming we attain earnings in the future, we do not intend to pay cash dividends. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements which we may enter into with institutional lenders or otherwise may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, and any other factors that the board of directors decides is relevant. See "Dividend Policy" and "Description of Securities - Common Stock".





ITEM 1B.  Unresolved Staff Comments.





As  a  smaller  reporting  company  we  are  not  required  to provide this information  under Regulation  S-K.








ITEM 2.  Properties.





Consorteum has no leased space at the current time. The lease on office space at Suite 202, 2900 John Street, Markham expired May 14, 2010, and the Company currently occupies at Suite 550, 141 Adelaide Street West, Toronto, Ontario, M5H 3L5 on a  rent free basis.





ITEM 3.  Legal Proceedings.




In 2010  the Royal Bank of Canada commenced an action in Toronto, Canada  against the Company’s subsidiary, Consorteum, Inc.  to recover the amounts due under our bank indebtedness totaling $128,488. The Company is working with the bank to establish a payment plan. The Company has engaged counsel on this matter. Two stockholders guaranteed the bank indebtedness, and the Royal Bank of Canada has joined these two individuals as defendants in the legal proceedings and is looking to these parties as part of the recovery process.
 
 In 2010,  a former consultant commenced an action for unpaid invoices totaling approximately $92,000 related to services provided to the Company’s subsidiary, Consorteum, Inc. The Company has filed a defense and intends to counter claim against the consultant for damages. The Company believes that the action is without merit.





ITEM 4.  (Removed and Reserved.)








ITEM 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.





The Company's shares of common stock are traded on the Over the Counter Bulletin Board under the symbol "CSRH.OB" The following information is for the Company under its current trading symbol CSRH which it received at the time of the closing of the exchange agreement with Consorteum, Inc. in June 2009. There was no trading activity for the Company under the symbol CSRH for any quarterly period before the quarter ended June 30, 2009. Prior thereto, the Company's symbol was IMPL.OB for the quarters ended December 31, 2008 and March 31, 2009 and WLNT.OB for the quarter ended September 30, 2008, during which time periods there was no trading activity.





The range of closing bid prices shown below is as reported by the Over the Counter Bulletin Board. The quotations shown reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.





13





Per Share Common Stock Bid Prices by Quarter


For the Fiscal Year Ended on June 30, 2010





HIGH
LOWQuarter Ended September 30, 2009
$ 0.650
$ 0.150Quarter Ended  December 31, 2009
$ 0.230
$ 0.015Quarter Ended March 31, 2010
$ 0.075
$ 0.008Quarter Ended June 30, 2010
$ 0.010
$ 0.002





Holders of common equity





As of November 12, 2010, the Company had approximately 228 record holders of its common stock. The number of record holders was determined from the records of the transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers and registered clearing agencies.





Dividend information





The Company has not declared or paid a cash dividend to stockholders since it was organized. The board of directors presently intends to retain any earnings to finance operations and does not expect to authorize cash dividends in the foreseeable future. Any payment of cash dividends in the future will depend upon earnings, capital requirements and other factors.





Equity securities sold without registration





There were no sales of unregistered securities during the fiscal year ended June 30, 2010  that have not been previously disclosed by the Company in a Quarterly  Report  on  Form  10-Q.








ITEM 6. Selected Financial Data.





As  a  smaller  reporting  company  we  are  not  required  to provide this information  under  Item  301  of  Regulation  S-K.





ITEM 7. Managements' Discussion and Analysis of Financial Condition and Results of Operations





EXECUTIVE LEVEL OVERVIEW





Consorteum, Inc. (hereafter "the Company") was incorporated under the laws of the Province of Ontario on April 3, 2006. On June 15, 2009, the Company became a wholly-owned subsidiary of Consorteum Holdings, Inc., a Nevada corporation ("CHI" or the "Parent"), as a result of the closing under an agreement and plan of exchange pursuant to which all of the Company stockholders exchanged all of their issued and outstanding shares of the Company for an equivalent number of shares of common stock of CHI. As a result of the exchange agreement closing, the Company will function as the operating company and CHI will be a holding company.





The Company will focus on providing leading edge solutions to financial institutions, healthcare, government, associations, and private sector companies for electronic transaction processing and systems integration. The Company's services provide customized, innovative technology solutions that create, augment and enhance customers' existing systems. These enhancements and programs are aimed to serve underserved markets and provide equal opportunity for financial services to a greater audience. The Company works with a multitude of global technology partners that enable the Company to create customized solutions for each of its clients across a broad spectrum of industries.





Until the closing of the exchange agreement, the Company relied on financing from sales of its common stock to related parties and private lending arrangements with individual investors. Management believes the Company's changed status as a subsidiary of a public company will make it easier to attain working capital stability, allowing the company to grow and meet its operational forecast. As of the filing date of this Report, the Company continues to seek an estimated $2,500,000 of operating capital in order to successfully implement the first phases of the various contracts described in Item 1 above entitled "The Business" in this Report.  To the extent that the Company receives less than the amount sought or receives it over time instead of one payment, management will be required to select which initiatives to deploy, which best generate best return of investment revenues and will have to defer other projects until receipt of additional funding.





14


In September 2010, the Company terminated the agreement with RoseBank Capital, who had intended to raise (on a best-efforts basis) upwards of $500,000 for the My Golf Rewards program.





The Company has no engagements with investment groups but is currently in negotiations under non-disclosure agreements with several potential investors interested in funding the Company. These parties are interested in providing the working capital for the company programs; however, the amount, terms and conditions of any such investment are still to be determined, and there can be no assurance that any such negotiations will result in a closing for all of the funds needed or be concluded successfully at all.





On November 2, 2010 the Company issued its $300,000 convertible secured promissory note bearing interest at 12% per annum to a private investor. As of the filing date of this Report, the Company has received $200,000, with the final $100,000 due and payable in approximately two weeks time. These funds will be used for general working capital. Interest only is payable quarterly in arrears, with all remaining interest and principal due and payable on November 2, 2011.  At the option of the investor, all or part of the principal  may be paid by cancelling the amount sought to be converted through  the issuance of shares of the Company’s common stock at a discount of thirty-five percent (35%) from the average of the bid and ask price of the common stock for the ten days preceding the date selected for conversion.  In the event that the shares of the Company trade at a price above $0.10 for a period of twenty (20)  consecutive trading days, the Company may require the lender to convert the principal amount of the loan into shares of common stock at a conversion price equal to 35% below the 20 day average bid and asked prices.  The Company also issued the lender 7,500,000 restricted shares of the Company as part of the transaction. The collateral to secure the promissory note has not yet been specified.





Consorteum had several contracts in place that were scheduled to begin in the second quarter of 2010, but these contracts have been voided by mutual agreement, without payment of any consideration as the business model did not meet the Company hurdle rates. It is anticipated that Consorteum will earn the majority of its revenue in the near future from debit and credit card transaction fees.





The financial results of 2009 and 2010 are reflective of an early stage company that has pilot projects only in place but no active programs. Results for the current year have been impacted by the limited financial resources available.





ANNUAL BUSINESS UPDATES





During the current fiscal year, the Company had been focused on initiating new agreements and commencing pilot projects intended to demonstrate the efficacy of the business model. The lack of working capital funds has challenged this process and at the end of the fiscal year, the Company was forced to restructure its affairs. The outcome of that process included the decision to reduce the number of business opportunities, the termination of all management contracts, and the arrangement with officers, employees and suppliers to forgive certain indebtedness as at June 30, 2010.





Management intends to continue in Fiscal 2011 this process of reducing or eliminating the remaining liabilities and to continue to raise additional working capital to meet the demands of the new product offering.





Some of the more important activities in the year include the following:




On July 7, 2009, the Company announced a joint venture with ILS (Innovative Loyalty Solutions) which will be implemented through a new company named “My Golf Rewards.”, a majority owned subsidiary of Consorteum Holdings, Inc.




My Golf Rewards will acquire a license for a new technology platform that will allow the company to provide loyalty and retention programs targeted towards the North American Golf Industry. Loyalty programs today are becoming an essential part of most businesses to help drive new revenues and increase customer retention.




My Golf Rewards will attain its revenues based on compensation from each participating golf course in the program. Fees are charged on every transaction processed, plus a percentage of the total sale or redemption amount. Currently there are over 15,000 golf course facilities in the United States and 2,000 plus in Canada.




On July 14, 2010, the Company announced the launch of My Golf Rewards, to be operated through a majority owned subsidiary of Consorteum Holdings, Inc., and has entered into an agreement with Fidelisoft Inc. to provide innovative technology solutions.




My Golf Rewards has established a relationship with Montreal-based firm Fidelisoft Inc. to offer a loyalty, rewards and retention program to the North American Golfing industry benefiting from Fidelisoft’s innovative and robust technology.






15





On September 22, 2009, the company announced an agreement with 8760 Systems, a new Merchant Discount Rate program that further enhances its list of financial services available to current and future clients. The addition of generating new revenues from debit and credit card transaction processing will ensure long-term revenue growth and incremental residual income. Consorteum will continue to expand its portfolio of financial services, which will further grow the revenues of the company, ensuring increased shareholder value. Processors in North America process in excess of 75 billion electronic payment transactions annually.





On October 20, 2009 the Company announced that Consorteum will work with Tactical Connections to provide their clients with new and enhanced solutions to drive consumer spending and customer loyalty. Through the partnership, the Company will provide manufacturer’s mail-in rebate gift cards with association branding, loyalty and rewards programs, stored value cards and other value added services.





On January 12, 2010, the Board approved the issuance of 500,000 stock options to a private investor as a bonus for a loan advanced to the Company. In addition, the Board approved the issuance of 50,000 stock options to an individual as a finder's compensation fee.





After review of the golf program and financial results, the Company decided to increase its ownership stake in My Golf Rewards Canada Inc. Consorteum is also in dialogue with an international group for expansion of the My Golf Rewards program. On January 13, 2010, the Company increased its ownership stake in My Golf Rewards Canada Inc, from 49% to 75%.





On January 16, 2010, the Company signed a 50/50 joint venture agreement with John Bernard, a First Nation representative to create a First Nations financial services company providing financial products. The services will include benefit cards, payroll cards, prepaid services, merchant discount rates, and point of sale solutions. The Company is in the first stage of deployment and will be launching its first benefits card program within the next 45 days.  This joint venture was cancelled without penalty by mutual agreement later in January 2010.





On January 18, 2010, the Company signed an agreement with NXSystems Inc. which enables the Company as agent to offer its clients global card issuance, multiple currency settlement, global electronic payments, e-wallets, and a variety of other financial products and services. The Company is currently working with NXSystems on several new projects including payment processing, ACH and EFT invoice settlement and international payroll. Additional new contract will be forthcoming.





On January 20, 2010, the Company was contracted by Blue Sea Manning Ltd. To provide consulting services for their UK based recruiting company within the private yachting industry. The Company will provide Blue Sea Manning with global  multi-currency settlement, payroll cards, expense cards and e-wallet functionality. The program is in current Beta testing and will be expanding to the entire company payroll later in the year.





On January 26, 2010 the Company approved the issuing of 10,000,000 Convertible Preferred Shares to Mr. Craig Fielding and 10,000,000 Convertible Preferred Shares to Mr. Quent Rickerby in consideration of services to the corporation at a share price of $0.001 per share.





On February 3, 2010, the Company obtained debt financing in the form of a promissory note from an unrelated company of up to $404,746. The promissory note is due within twelve months and bears interest of 15% per annum. The promissory note contains a conversion feature that allows the holder of the note to convert the note into shares of common stock of the Company at a 50% discount of the average three dip bid on the day of conversion. The holder can convert the promissory note in whole or in part with the remaining balance of the debt accruing interest in the event of a partial conversion.





On March 1, 2010 the Board, by unanimous written consent, and holders of a majority of the issued and outstanding shares of the Company's common stock approved an amendment to the Articles of Incorporation to increase the number of  authorized shares of Common Stock to Five Hundred Million (500,000,000) shares from One Hundred Million (100,000,000) shares. The increase in the authorized shares became effective upon filing the amendment with the Secretary of State of the State of Nevada in September 2010.




The Company also filed a Certificate of Designation pursuant to which the Company authorized the issuance of up to a maximum of 100,000,000 shares of its Series A Convertible Preferred Stock.  Currently there are no Series A Convertible Preferred Shares issued and outstanding.





On March 12, 2010 Richard C. Fox, P.A foreclosed on a pledge of 8,815,000 shares of common stock pledged by the Company's CEO, Craig A. Fielding, as collateral for $100,000 promissory note the Company delivered at the closing under the exchange agreement in June 2009. The Company has authorized the issuance of 8,815,000 replacement common shares to Mr. Fielding to replace his foreclosed shares.





16




On July 7, 2010 the Company announced the following organizational changes as the Company moved forward with its restructuring in 2010.   Mr. Craig Fielding, CEO of Consorteum Holdings Inc., expanded his responsibilities with operations and sales now reporting directly to him.  Mr. Bill Smethurst C.A. was appointed CFO of the company.  Mr. Peter Simpson resigned as CFO; however, he has continued to render consulting financial services  to the Company.




Ms. Caitlin Snyder became Director of Operations, with responsibility for day to day operational reporting, filing and liaison with the CFO and CEO.  Mr. Reiner Vanooteghem became Vice President of Sales and focuses on both new revenue driving initiatives and delivery and management of current project deployments. Mr Vanooteghem resigned his position as of September 30, 2010.





On September 1, 2010 the Company announced a  First Nations pilot which was designed to target the community’s administration group and provided valuable data for expansion of the program. Subject to the success of the pilot and to CSRH’s receipt of additional funding, the Company will launch a multi-location pilot rollout in the next 2–3 months. This initial deployment is the first of a suite of products and services, including point-of-sale services as well as additional banking, credit and related financial offerings, for aboriginal communities in North America.




On October 26, 2010 corporate announced that it has made significant progress in the three main areas of its business. The Company has expanded its Blue Sea Manning pilot initiative to include additional staff members, and is optimistic about the prospects of further deployments within the industry. The Company believes that in the coming months it will be able to present its results to other potential clients within the sea cruise staffing industry. The purpose of the pilot is to validate the effectiveness of the Company's card program while streamlining the payroll process and reducing current workload for the administrative staff of such companies.




The Company and management at MyGolf Rewards have worked diligently to reposition and prepare MyGolf Rewards for a 2011 launch. The Company has identified appropriate trade shows and has approached appropriate strategic partners. The Company is working on the financing required for the launch, additional international relationships and expansion into the European market. All of these initiatives will require new capital.




On July 27, 2010, the Company officially launched the initial pilot for the First Nations card in Canada, in the New Brunswick, Madawaska Maliseet community. Originally targeted at the administration staff, the card program is now being expanded to members of the community. The program is currently being promoted to specific additional pilot communities. The Company estimates that there are more than 600 locations and more than 400,000 First Nations members to whom the First Nations card may be marketed over time and with proper funding. Consorteum is in negotiations with a strategic partner to augment and fund further penetration into First Nations communities, although there can be no assurance that these negotiations will be successful.




The Company made significant changes in order to be profitable, and attempt to assure success for it primary deployments.  This led to decisions being made to not move forward with certain initiatives, either because they were not financially viable at this time, or management deemed that the time constraints placed on the team would lead to potential issues with other initiatives. These initiatives, as part of the Consorteum Financial services division, are the relationship with Transscreen, the Mobile cheque-it initiative, and the Rebate program.  These initiatives have been discontinued for the time being.







LIQUIDITY AND CAPITAL RESOURCES





In the three months and year ended June 30, 2010, the company improved its working capital position by $1,051,702 principally due to the forgiveness of accounts payable and accrued liabilities in the amount of $1,193,165 (refer to Note 13 of Notes to Consolidated Financial Statements). The working capital deficiency as at June 30, 2010 amounts to $1,982,797.





During the 2010 fiscal year the Company continued to look for additional working capital to finance its activities. The size of the working capital deficit and the existence of the significant number of management contract obligations were negatively impacting these efforts. Accordingly, management responded in two ways:





1.
Management contracts were terminated effective June 30, 2010; and





2.
Management worked with officers, employees and suppliers to request a reduction or forgiveness in the balances due.





As of June 30, 2010, Consorteum had $40,714 in total current assets, compared to total current assets of $8,773 as of June 30, 2009. The current assets as at June 30, 2010 include cash of $9,110, accounts receivable at $11,061 and deferred compensation costs of $20,543. The June 30, 2009 current assets were comprised of $185 in cash, $7,303 in accounts receivable and $1,285 in prepaid expenses.


17





There are no significant commitments for the purchase of capital assets or intangible assets, or for operating leases.





The Company may continue to face significant uncertainty relating to liquidity and intends to continue to search for additional sources of working capital, and to actively search for collaborative partners. Many of the existing contracts and initiatives require capital expenditure by Consorteum to move forward and management anticipates that delays will continue if funds are not available..





Management intends to continue in Fiscal 2011 with its proposal to suppliers and lenders to reduce the level of current liabilities which stand at $2,023,511 as at June 30, 2010. It is anticipated that certain loans payable and amounts due to stockholders will be converted to capital stock in the current fiscal year.





RESULTS OF OPERATIONS





Consorteum had revenues of $1,873 for the year ended June 30, 2010 compared to $581 for the year ended June 30, 2009. The majority of the revenue in both years was earned from a single customer.





In FY 2010, the Company recorded $1,193,165 in debt forgiveness from officers, employees and suppliers as management addressed the working capital deficiency and the significant fixed nature of the Company costs. Of this amount, $294,974 was included in the statement of operations with the balance of $898,191 included in additional paid in capital.  Management expects to continue this process in FY 2011 in an attempt to assist the process of raising additional capital.


Management and consulting fees totaled $826,031 for the year ended June 30, 2010 compared to $628,344 for the prior year, an increase of $197,687 or 31.5%.  The fees increased year over year as new management and consulting contracts were added to meet operating obligation for the pilot projects, and as the results of operations of My Golf Rewards Canada Inc. were consolidated.





General and administrative costs totaled $742,760 for the year ended June 30, 2010 compared to $413,205 for the year ended June 30, 2009, or an increase of $329,555 or 80%.  Part of this increase can be attributed to the consolidation of the operations of My Golf Rewards Canada, Inc. and an  increase in expenditures as many of the initiatives were assessed and pilot programs operated. The company experienced significant legal and professional costs as a result of new operating and financial agreements and regulatory work.





Stock option expense was recorded this year and is explained in item 11 under Executive Compensation.





Interest and financing costs amounted to $275,240  for the year ended June 30, 2010 compared to $96,892 for year ended June 30, 2009. This increase of $178,348 reflects the increased cost of borrowing given both the growing financial needs and the financial condition of the Company.





For the year ended June 30, 2010 Consorteum had a net loss of $1,599,348 compared to a net loss of $1,158,534 for the year ended June 30, 2009. Loss per share was $0.02 for the year ended June 30, 2010 comapred to $0.02 for the prior year.




GOING CONCERN





These audited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States  assuming the Company will continue as a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing which would assure continuation of the Company’s operations and pilot programs. In order for the Company to meet its liabilities as they come due and to continue operations, the Company remains solely dependant upon its ability to generate such financing.





There can be no assurance that the Company will be able to continue to raise funds in which case the Company may be unable to meet its obligations. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded on the balance sheet. The audited Consolidated Financial Statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.





The current market conditions and volatility increase the uncertainty of the Company’s ability to continue as a going concern given the need to both curtail expenditures and to raise additional funds. The Company is and has experienced negative operating cash flows and needs to invest in continuing pilot projects and operating partnerships which cannot be met from existing cash balances. The Company will continue to search for new funds and for new collaborative partners for the projects but anticipates that the current market conditions may impact the ability to source such funds.





18


As described in note 8 to the financial statements, the Company is indebted to the Royal Bank of Canada who hold a general security agreement over the assets of the company, and on May 27, 2010 the company received demand payment for the balance due under the credit facilities. On the same date, the company received a notice of intention to enforce its security on the property which can be exercised at any time.  Notwithstanding on-going negotiations, the company has been unable to come to terms with the secured party and has not settled the liability.





BALANCE SHEET





Total assets as at June 30, 2010 were $55,837 compared with $101,670 at June 30, 2009, representing a decrease of $45,833 or 45%.




Current assets increased $31,941 in the year to June 30, 2010 with the principal change being represented by deferred debt issuance costs. These costs will be amortized over the next fiscal year.




Bank indebtedness increased $40,724 in the period to Janaury 31, 2010 when the facility was essentially put on hold and stands at $128,489 at June 30, 2010.  The increase was used to finance general activities.  The Company has defaulted under its indebtedness to its lender and the bank loan  is in default.  The bank has begun an action for repayment of the loans against the Company and certain individual guarantors. (Refer to note 8 to the Consolidated Financial Statements). The Bank has also issued notice of its intention to foreclose of its security. The Company is working with the bank to resolve the repayment issue.




Trade payables and accrued liabilities have been reduced $1,350,346 in Fiscal  2010 principally due to the forgiveness of amounts due by officers, employees and suppliers. As at June 30, 2010 trade payables and accrued expenses stand at $656,438 and management will be working with suppliers to assess further opportunities to reduce the liabilities in FY 2011. In addition, the Company issued common shares in exchange for settlement of approximately $1,036,000 of services rendered.





The Company faced significant working capital needs in the year ended June 30,2010 and despite difficult circumstances was successful in securing new loans payable in the year of $491,497 while limiting repayments to $139,114. However the cost of the new loans was higher than experienced in the past and the company was unable to make any interest payments in the year, Accordingly all accrued interest has been capitalized in the amount of $222,015. One additional loan was assumed as a result of the acquisition of the interest in My Golf Rewards Inc.





In the fiscal year ended June 30, 2010 stockholders advanced the company an additional $343,794 in advances to be used for working capital, and as at June 30, 2010 a total of $253,543 is due to stockholders. The decrease in the balance can be attributed to subscription for additional shares in the Company .





Capital stock, including paid-in capital and associated accounts, increased in the year by $2,779,012, including the value of shares issued for cash, shares issued for services rendered and shares issued in exchange of loans and other payables and through the forgiveness of debt from related parties.  See notes 12 and 13 to Consolidated Financial Statements and Item 9B in this Report.





OFF BALANCE SHEET ARRANGEMENTS





The Company does not currently have any off-balance sheet arrangements.





CONTRACTUAL OBLIGATIONS





The Company does not have any significant contractual obligations except for a contract to pay annual license fees of $100,000 to Fidelisoft under a software licensing agreement for the periods commencing November 2010. This license is required for the My Golf Rewards program. The Company is currently in negotiation over the terms and conditions of the license and payment for such fees.





The Company has an annual obligation to MasterCard and People’s Trust under the First Nations Feather initiative not exceeding $50,000 in any year.





There are no commitments for capital expenditures.





There are no current management contracts.





There are no current leased premises or equipment leases.


19





CRITICAL ACCOUNTING POLICIES AND ESTIMATES ALL:





The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and Liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:





RISK AND UNCERTAINTIES:





Factors that could affect the Company's future operating results and cause future results to vary materially from expectations include, but are not limited to, lower than anticipated retail transactions, and inability to control expenses, technology changes in the industry, relationships with processing agencies and networks, changes in its relationship with related parties providing operating services to the Company and general uncertain economic conditions. Negative developments in these or other risk factors could have material adverse effect on the Company's future financial position, results of operations and cash flow.





Cash and Cash Equivalents:





Consorteum considers all highly-liquid investments with a maturity of three months or less when purchased to be cash equivalents. There are no cash equivalents at June 30, 2010 or June 30, 2009.





Equipment, Net





Equipment is recorded at cost. Depreciation, based on the estimated useful life of the equipment, is provided at an annual rate of 30% based on the declining-balance method.





Impairment of Long Lived Assets





In accordance with ASC 360, “Property plant and equipment,” long lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in Note 1 to the Consolidated Financial Statements, the long-lived assets have been valued on a going concern basis. However, substantial doubt exists as to the ability of the Company to continue as a going concern. If the Company closes operations, the asset values may be materially impaired.





Accounts Receivable





The Company carries its accounts receivable at invoice amount, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.





Revenue Recognition





The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.





Equity Investments





Equity investments include entities over which the Company exercise significant influence but do not exercise control. These are accounted for using the equity method of accounting and are initially recognized at cost net of any impairment losses. The Company's share of these entities' profits or losses after acquisition of its interest is recognized in the statement of operations and cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Company's share of losses of these investments equals or exceeds the carrying amount of the investment, the Company only recognizes further losses where it has incurred obligations or made payments on behalf of the affiliate.


20





Joint ventures are entities over which the Company exercises control jointly with another party or parties. Joint ventures are also accounted for under the equity method as described above.





Income Taxes





The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.





Foreign Currency Translation





In accordance with the provision of ASC 830, “Foreign Currency Matters,” the Company, whose functional currency is the Canadian dollar, translates its balance sheet into U.S. dollars at the prevailing rate at the balance sheet date and translates its revenues and expenses at the average rates prevailing during each reporting period. Net gains or losses resulting from the translation of financial statements are accumulated and charged directly to accumulated comprehensive income or (loss), a component of stockholders' equity or (deficit). Realized gains or losses resulting from foreign currency transactions are included in operations for the period.





Comprehensive Income or Loss





The Company applies the provisions of ASC 220, “Comprehensive Income.” Unrealized gains and losses from foreign exchange translation are reported in the accompanying statements as comprehensive income or loss.





Earnings or Loss Per Share





The Company accounts for earnings or loss per share pursuant to ASC 260, “Earnings per Share,” which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. The computation of diluted earnings (loss) per share has not been presented as its effect would be anti-dilutive.





Use of Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from those estimates. These estimates are reviewed on an ongoing basis and as adjustments become necessary, they are reported in earnings in the period in which they become known.





Financial Instruments





Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments. The fair value of the financial instruments approximates their carrying values, unless otherwise noted.





Financial risk is the risk that the Company's earnings are subject to fluctuations in interest risk or currency risk and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.





CONCENTRATION OF CREDIT RISK





ASC 825 “Financial Instruments,” requires disclosure of any significant off-balance-sheet risk and credit risk concentration. The Company does not have significant off-balance-sheet risk or credit concentration. The Company maintains cash with major financial institutions. From time to time, the Company has funds on deposit with commercial banks that exceed federally insured limits. Management does not consider this to be a significant credit risk as these banks and financial institutions are well-known.


21





Comparative Financial Information





Certain financial information for the year ended June 30, 2009, has been reclassified to conform with the financial statement presentation adopted in the current year.





Recent Accounting Pronouncements





In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). ASU 2009-13 applies to revenue arrangements currently in the scope of FASB ASC Subtopic 605-25, “Multiple Element Arrangements”, and provides principles and application guidance on whether arrangements with multiple deliverables exist, how the deliverables should be separated, and the consideration allocated to the deliverables. ASU 2009-13 is effective prospectively for revenuearrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently reviewing the effect, if any; the proposed guidance will have on its consolidated financial statements.
  In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-6”). The standard amends ASC Topic 820, “Fair Value Measurements and Disclosures” to require additional disclosures related to transfers between levels in the hierarchy of fair value measurements. ASU 2010-6 is effective for interim and annual fiscal years beginning after December 15, 2009. The standard does not change how fair values are measured, accordingly the standard did not have an impact on the Company.
  In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855); Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-9”). The standard amends Subtopic 855-10, “Subsequent Events” to remove the requirement for a SEC filer to disclose the date through which subsequent events have been evaluated. ASU 2010-9 is effective upon issuance of the final update. The Company does not expect the adoption of ASU 2010-9 to have a material impact on its consolidated financial statements.
  In July 2010, the FASB issued ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (“ASU 2010-20”). The standard amends ASC Topic 310, “Receivables”to enhance disclosures about the credit quality of financing receivables and the allowance for credit losses by requiring an entity to provide a greater level of disaggregated information and to disclose credit quality indicators, past due information, and modifications of its financing receivables.ASU 2010-20 is effective for interim and annual fiscal years beginning after December 15, 2010 for public entities and for interim and annual fiscal years beginning after December 15, 2011 for nonpublic entities.The Company does not expect the adoption of ASU 2010-20 to have a material impact on its consolidated financial statements.
  The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. Except for the ASUs listed above, those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.


22


ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk.





As  a  smaller  reporting  company  we  are  not  required  to provide this information  under  Item  305  of  Regulation  S-K.








ITEM  8.  Financial Statements and Supplementary Data.





The Consolidated Financial Statements appear  on page F-1 after the signature pages to this Report on Form 10-K .





ITEM 9.  Changes in and Disagreements With Accountants on Accounting and Financial Data.





None.





ITEM 9A. Controls and Procedures.





Evaluation of Disclosure Controls and Procedures.





The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the Company's periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Company's principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.





Under SEC Rules that affect the Company, the Company is required to provide management's report on internal control over financial reporting for its first fiscal year ending on or after December 15, 2008. The Company has prepared management's report as required. The Company is not required to file the auditor's attestation report on internal control over financial reporting until it files an annual report for its first fiscal year ending on or after June 30, 2009.





As of the end of the period covered by this report, management carried out an evaluation, under the supervision and with the participation of the Company's principal executive officer and principal financial officer, of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon the evaluation,and as a result of the filing of financial statements that were not in final form in the Company’s Form 10-K,theCompany's principal executive officer and principal financial officer concluded that its disclosure controls and procedures were not effective at a reasonable assurance level to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.The Company reached this conclusion because it did not have and does not presently have adequate personnel because it has only two persons performing all accounting-related duties. In the short term, management intends to add additional internal control and review procedures into the preparation and finalization of financial statements prior to the release of such financial statements with immediate effect. Management anticipates that these changes will avoid a recurrence of control deficiencies noted above. In the long-term as funds are available, management intends to add additional personnel to provide the required level of controls.
 
 In addition, the Company's principal executive officer and principal financial officer concluded that its disclosure controls and procedures were not  effective at a reasonable assurance level to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, as a result of the filing of financial statements that were not in final form in the Company’s Form 10-K.  The Company reached this conclusion because it did not have and does not presently have adequate personnel because it has only two persons performing all accounting-related duties. In the short term, management intends to add additional internal control and review procedures into the preparation and finalization of financial statements prior to the release of such financial statements with immediate effect. Management anticipates that these changes will avoid a recurrence of control deficiencies noted above. In the long-term as funds are available, management intends to add additional personnel to provide the required level of controls.





ITEM 9A(T)  Controls and Procedures.





Management's Report on Internal Control over Financial Reporting





Consorteum's management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company's financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of June 30, 2010. We identified the following material weakness in our internal control over financial reporting- we did not have adequately segregation of duties, in that we only had one person performing all accounting-related on-site duties. Because of the "barebones" level of relevant personnel, however, certain deficiencies which are cured by separation of duties cannot be cured, but only a monitored as a weakness.





In addition, we do not have an independent person serving on the Audit Committee, but we do have any person, the Chairman, with the qualifications to serve as an audit committee financial expert.





Attestation Report of Independent Registered Public Accounting Firm





An attestation report of our registered public accounting firm regarding internal control over financial reporting is not required.


23


Changes in Internal Control over Financial Reporting





There was no change in our internal control over financial reporting identified in connection with our evaluation that occurred during our last quarter (our fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





ITEM 9B. Other Information.





(a)           On November 2, 2010 the Company issued its $300,000 convertible secured promissory note bearing interest at 12% per annum to a private investor of which $200,000 has been received to date. These funds will be used for general working capital. Interest only is payable quarterly in arrears, with all remaining interest and principal due and payable on November 2, 2011.  At the option of the investor, all or part of the principal  may be paid by cancelling the amount sought to be converted through  the issuance of shares of the Company’s common stock at a discount of thirty-five percent (35%) from the average of the bid and ask price of the common stock for the ten days preceding the date selected for conversion.  In the event that the shares of the Company trade at a price above $0.10 for a period of twenty (20)  consecutive trading days, the Company may require the lender to convert the principal amount of the loan into shares of common stock at a conversion price equal to 35% below the 20 day average bid and asked prices.  The Company also issued the lender 7,500,000 restricted shares of the Company as part of the transaction. The collateral to secure the promissory note has not yet been specified.




(b)

On October 18, 2010  the Board of Directors of the Company approved all of the following issuances:
 (1)
3,500,000 shares of the Company’s common stock to Mr. Peter Rickerby to replace an equivalent number of shares that Mr. Rickerby previously returned to the Company’s treasury.
 (2)
11,835,000 shares of the Company’s common stock to Mr. Quentin Rickerby to replace an equivalent number of shares that Mr. Rickerby previously returned to the Company’s treasury.
 (3)
2,500,000 shares of the Company’s common stock to Mr. Frank Fielding to replace an equivalent number of shares that Mr. Fielding previously returned to the Company’s treasury.
 (4)
5,000,000 shares of the Company’s common stock to William Bateman, Esq. for professional services under the Professional Services Agreement between the Company and Mr. Bateman.
 (5)
8,000,000 shares of the Company’s common stock in satisfaction of a loan of $24,000 from Mr. Frank Fielding to the Company.
 (6)
20,000,00 shares of the Company’s common stock to James D. Beatty and Associates as compensation for Mr. Beatty’s services up to and including August 26, 2010.
 (7)
8,750,000 shares of the Company’s common stock to Mr. Craig A. Fielding to replace the identical number of shares owned by Mr. Fielding that were foreclosed upon in satisfaction of a Company obligation to pay a promissory note for $100,000.
 (8)
30,000,000 shares of the Company’s common stock to Mr. Craig A. Fielding as compensation for services performed by Mr. Fielding through and including October 19, 2010.
 (9)
33,333,333 shares of the Company’s common stock to Mr. Craig A. Fielding in consideration for the elimination of a $100,000 loan from Mr. Fielding to the Company.





ITEM 10. Directors, Executive Officers and Corporate Governance.





BOARD OF DIRECTORS AND EXECUTIVE OFFICERS





The names, ages and respective positions of the current director and executive officer of the Company are set forth below. Directors are elected for a term ending upon the date of the next annual stockholders' meeting. Officers will hold their positions until the next annual meeting of directors and until their respective successors are elected. There are no family relationships between any two or more of the Company's directors or executive officers. There are no arrangements or understandings between any two or more of the Company's directors or executive officers. There is no arrangement or understanding between any of the Company's directors or executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current board of directors. There are no legal proceedings involving the executive officers or directors of the Company.





MR. CRAIG A. FIELDING., B.A. - CEO , PRESIDENT AND DIRECTOR, AGE 46





From April 2006 to the present Mr. Fielding has served as a director and CEO of Consorteum, a company he co-founded.  Mr. Fielding assumed the role of President in August 2010. From January 2002 to February 2006 Mr. Fielding was part of the management team (Vice President of Sales) at Mint Technology Corp, a technology based company in Toronto. Prior to that he was Vice-President of Sales at Softtracks Enterprises from September 1999- November 2001, a startup company based in Vancouver, British Columbia.  From August 1989 to August 1999 Mr. Fielding worked in a number of Sales Management and Senior Management roles in North America with Xerox Canada Ltd. Mr. Fielding  attended Manchester Polytechnic in England where he studied business .  Mr. Fielding’s experience in technology, programming and large system building in his prior positions enables him to bring this valuable experience to the Board and to act as the Company’s CEO and President.





MR. QUENT RICKERBY - PRESIDENT/COO AND DIRECTOR, AGE 44 (resigned August 2010)





Mr. Rickerby co-founded Consorteum in April 2006 and served as Director, President and COO from inception until his resignation. Mr. Rickerby has been in the payments and transactions industry for over 10 years and brings extensive management and sales experience in the gift, payroll prepaid card, transaction processing and financial services industry. From January 2003 to December 2005 Mr. Rickerby was part of the management team (Director of Sales) at Mint Technology Corp, a technology company based in Toronto. Prior to that, from March 1999 to September 2002 Mr. Rickerby worked as Director of Sales at Softtracks Enterprises, a startup company based out of Vancouver B.C in the wireless payment processing industry. Prior to that, Mr. Rickerby spent eight years working for two national wireless telecom companies in various management positions, including being part of the start up team for the launch of Clearnet Wireless in Western Canada.


24


MR. JAMES D. BEATTY, B.A., M.B.A. - CHAIRMAN AND DIRECTOR, AGE 65





From July 1982 to the present, Mr. Beatty has been the President and Chief Executive Officer of Trinity Capital Corporation, a private Canadian merchant bank. Mr. Beatty has served as the Executive Chairman of Consorteum since May 2006. From January 2005 to the present Mr. Beatty has also been the Chairman of Canary Resources Inc., a U.S. publicly traded coal bed methane company operating in Eastern Kansas and Western Missouri. From March 2006 until June 2008 Mr. Beatty served as Chairman of First Metals Inc. a Canadian base metals producer listed on the Toronto Stock Exchange. Mr. Beatty is a graduate of University of Toronto and York University, with a degree in History and a Masters in Business Administration.  Mr. Beatty’s experience as a board member in a variety of companies, public and private, coupled with his experience in fund raising for various business ventures gives him the range of experience necessary to act as the Company’s Chairman.





MR. GEOFFREY WILLIAM SMETHURST, CA - CHIEF FINANCIAL OFFICER, AGE 58 (from June 2010)




Mr. Smethurst joined the Company in June 2010 as Chief Financial Officer.  Prior to joining the Company, Mr. Smethurst was employed as Chief Financial Officer of Bronte Financial Services and Bronte Renewable Group SA for the past five years.  For the five years prior to that appointment, Mr. Smethurst worked as Vice President Finance and Operations at MFP Financial Services Limited , a computer and technology leasing company based in Mississauga, Canada.  Mr. Smethurst is a member of the Chartered Accountants Institute of Scotland and Ontario. Mr. Smethurst is a graduate of University of Manchester with a degree in Economics.  Mr. Smethurst's experience as a Chief Financial Officer gives him the background to perform these services for the Company.





MR. PETER SIMPSON, CMA - CHIEF FINANCIAL OFFICER, AGE 45 (resigned June 2010)





Mr. Simpson was the Company’s CFO from April 2006 until his resignation in June 2010.  Mr. Simpson will continue to furnish financial services to the Company on a consulting basis.  Mr. Simpson received his professional accounting designation in 1990. Since that time, he has operated a successful consulting and accounting practice, working with small to medium sized businesses during rapid growth stages, creating and maintaining proper infrastructures and financial reporting. Another area of expertise for Mr. Simpson is in filing R&D tax credit claims with the Federal and Provincial government. Since 1989, Mr. Simpson has filed returns that total well over a million dollars in tax savings. Along with R&D tax credit claims, Mr. Simpson has acted as CFO for companies in the software, professional medical journal and manufacturing industries. During 2007/2008, Mr. Simpson assisted a client in successfully completing a buyout of their company.





SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE





Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. Directors, executive officers and persons who own more than 10% of our common stock are required by Securities and Exchange Commission regulations to furnish to us copies of all Section 16(a) forms they file.





Based solely on our review of such forms furnished to us, we believe that there were the following filing deficiencies applicable to our executive officers and directors for the fiscal year ended June 30, 2010:  Our CEO did not file four Form 4 reports; our then CFO did not file four Form 4 reports; and our Board Chairman did not file four Form 4 reports.





CODE OF ETHICS





The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, and principal accounting officer, controller and all others performing similar functions. The Code of Ethics is not yet posted on the Company's web site. The Company will furnish without charge a copy of its Code of Ethics to any person requesting a copy. Any request for a copy should be directed via e-mail to the Company's Chief Executive Officer at cfielding@consorteum.com.





CORPORATE GOVERNANCE





Our Board of Directors has no separate committees and all of the members of our Board of Directors serve as members of the Audit Committee.  We do not have a Compensation Committee or a Nominating Committee or independent members of the Audit Committee because  the Company does not have funds sufficient to compensate independent directors for their services.  The Company intends to appoint independent members to the Board and to create additional committees to fulfill these other functions at such time as it is fiscally able to do so and can attract qualified individuals . There are no independent directors serving on our Board of Directors. We do not have a qualified financial expert serving on our Board of Directors. During the last fiscal year the Company held eight meetings of its Board of Directors, which were attended by all of the Company's directors. During the last fiscal year, there were four meetings of the Audit Committee.





25


OTHER BOARD MATTERS





Our  business,  property and affairs are managed under the direction of our Board.  We have determined that the Company's  interests would best be served by having a Chairman of the Board who is independent of the management of the Company because it is our view this inherently strengthens board independence in dealing  with  issues  that  closely  involve  management; however, since our Chairman receives an executive salary from the Company we have classified him as non-independent. Our Chief Executive Officer has responsibility for setting our strategic direction and  the day-to-day leadership and performance, while the Chairman of the Board has a greater  focus on long-range Company goals and plans and governance of our Board of Directors. This balance between the two positions enables Mr. Fielding to focus on the operational and strategic challenges we presently face, with Mr. Beatty providing board leadership on matters of governance and management oversight.





Our  Board,  as  a  whole,  has  the  responsibility  for risk oversight of management.  The  role of our Board of Directors is to oversee the President and Chief  Executive  Officer, and the Chief Financial Officer  in  the  operation of the Company, including management's establishment and  implementation  of appropriate practices and policies with respect to areas of potentially significant risk to us.  Our Board considers risks to the Company as  part of the strategic planning process and thorough review of compliance issues  in committees of our Board, as appropriate.  While the Board has the ultimate oversight  responsibility for such risk management process, various committees of the Board are structured to oversee specific risks in the areas covered by their respective assignments such as audits.  In addition, our Board may retain, on such terms as determined by the Board and in its sole discretion, independent legal, financial and other consultants and advisors to advise and assist the Board in fulfilling its oversight responsibilities.  Currently, there are no such consultants in any category assisting or advising the Company.





Management  is responsible for the Company's day-to-day risk management, and the entire  Board's  role  is  to engage in informed oversight.  Our Chief Executive Officer  is  a member of the Board of Directors, and our Chief Financial Officer regularly attends Board meetings, which helps facilitate discussions regarding risk between the Board and our senior  management, as well as the exchange of risk-related information or concerns between the Board and the senior management.  The Board believes Mr. Fielding's service as Chief Executive Officer and on the Board is appropriate because it bridges a critical gap between our management and the Board, enabling the Board to benefit  from management's perspective on our business while the Board  performs  its oversight  function.





COMMITTEES  OF  THE  BOARD  OF  DIRECTORS





The  Board has the following standing committees:  the Audit Committee.  As the Company has only two directors, all members of the Board serve on the Audit Committee. The  function of the Audit Committee is set forth  below:





AUDIT  COMMITTEE





We do not have a written Audit  Committee  Charter.  Furthermore, at this time, although we are not subject to NASDAQ Rules, there are no independent members of the Audit  Committee  as  determined  thereunder.   The  Audit  Committee currently  is not subject to, and does not follow, the independence criteria set forth in Section 10A of the Securities Exchange Act 1934, as amended.  Since none of the directors who serve on the Audit Committee are "independent" under the NASDAQ rules, both of them have a relationship with us that may interfere with their independence from us and our management.  None of the Audit Committee members qualifies as a "financial  expert" as defined by the Securities and Exchange Commission (the "SEC").





The  Audit  Committee  recommends  the  appointment of the outside auditor, oversees  our  accounting  and internal audit functions and reviews and approves the  terms  of transactions between us and related party entities.  During FY 2010, the  Audit Committee met four times.





COMPENSATION COMMITTEE and NOMINATING COMMITTEE





We do not have a Compensation  Committee nor a Nominating Committee due to the small size of the current Board of Directors, and the lack of funds with which to attract outside directors to serve.


26





ITEM 11. Executive Compensation.





COMPENSATION OF DIRECTORS





For the fiscal year ended June 30, 2010, none of the current or former directors were compensated for their services as directors except for Mr. James D. Beatty for his services as Executive Chairman described below.





EXECUTIVE COMPENSATION





The following table sets forth certain information regarding compensation paid by the company for services rendered for the fiscal year ended June 30, 2010 to each of the individuals who served as Executive Chairman, Chief Executive Officer, Chief Operating Officer and President, and Chief Financial Officer (executives collectively referred to as the "Named Executives").





EXECUTIVE COMPENSATION TABLE





Name and Principal Position

Year

Salary


Stock

Awards

($)


Option

Awards

($)(3)


All other

Compensation

($)(2)


Total

($)James D. Beatty, Executive Chairman

2010

$
56,820
(1)


0


$
45,266


$
15,910


$
117,996Craig A. Fielding, Chief Executive Officer

2010

$
151,520
(1)


0


$
45,266


$
22,160


$
218,946Quentin Rickerby, Chief  Operating Officer and President

2010

$
124,294
(1)


0


$
45,266


$
19,603


$
189,163Peter Simpson, Chief Financial Officer

2010

$
66,290
(1)


0


$
22,633


$
0


$
88,923Geoffrey William Smethurst

2010

$
9,470



0


$
0


$
0


$
9470





(1)
Mr. Beatty waived $72,730 of his accrued salary for fiscal 2010 and agreed to be compensated by the issuance of shares of the Company’s common stock at a rate pf $0.003 per share or a total of 20,000,000 shares and the issuance of shares of the Company's common stock at the rate of $0.01 per share or a total of 1,194,400 shares.  Mr. Fielding waived $173,680  of his accrued salary for fiscal 2010 and agreed to be compensated by the issuance of shares of the Company’s common stock at a rate of $0.003 per share or a total of 30,000,000 shares.  Mr. Rickerby waived $189,163 of his accrued salary for fiscal 2010 and  has agreed to not receive any other form of compensation.  Mr. Simpson waived all but $10,000  of his accrued salary for fiscal 2010 and has agreed to not receive any other form of compensation.




(2)
Other compensation consists of a monthly car allowance and a monthly home office use allowance in the respective amounts set forth below:





James Beatty

$
1,326Craig Fielding

$
1,847Quent Rickerby

$
1,847





(3)
On September 19, 2009, the Company issued 1,750,000 options to purchase shares of its common stock to the following named directors and officers.





Name of Executive Officer

Number of Options

Exercise PriceJames D. Beatty

500,000

$0.15Craig A. Fielding

500,000

$0.15Quent Rickerby

500,000

$0.15Peter Simpson

250,000

$0.15





27





All of the options granted will expire on September 21, 2012, and the Company and each optionee must enter into definitive option agreements.  The options issued to Messrs. Simpson and Rickerby terminated upon their departure from the Company.





In prior years, Consorteum, Inc. has entered into management services agreements with each of three officers in order to retain the named Executive Officers and retain continuity of management. Each agreement sets severance benefits in the event of a change of control or termination without cause. While these management contracts have been terminated by mutual agreement with the three officers at June 30, 2010, details of these contracts were as follows:





(i)
On April 3, 2006 Consorteum entered into a management services agreement with Craig Fielding, its CEO and a member of the board of directors of Consorteum and the Company under which Mr. Fielding was paid an annual salary of $128,670 and received additional compensation aggregating $20,073. From commencement of Mr. Fielding’s management services, his salary was accrued and carried as a liability on the books of Consorteum.   For the period prior to April 1, 2009, in September 2009 the Company and Mr. Fielding agreed to exchange $376,163 of his accrued salary for the period through March 31, 2009 for 2,000,000 shares of the Company's common stock at prices ranging from $ 0.15 - $0.218 per share. If Mr. Fielding leaves Consorteum he would have been entitled to a severance of $257,940. In Fiscal 2010, Mr. Fielding agreed to forgive $173,680 of accrued salary representing the period between April 2009 and June 30, 2010.





(ii)
On May 1, 2006 Consorteum entered into a management services agreement with Quentin Rickerby, its COO, President and a member of the board of directors of Consorteum and the Company under which Mr. Rickerby was paid an annual salary of $128,670 and received additional compensation aggregating $20,073. From commencement of Mr. Rickerby’s management services Mr. Rickerby's salary was accrued and carried as a liability on the books of Consorteum. For the period prior to April 1, 2009, in September 2009 the Company and Mr. Rickerby agreed to exchange $376,163 of his accrued salary for the period through March 31, 2009 for 2,000,000 shares of the Company's common stock at prices ranging from $ 0.15 - $0.218 per share. If Mr. Rickerby leaves Consorteum he would have been entitled to a severance of $257,940. In Fiscal 2010, Mr. Rickerby agreed to forgive $299,767 of accrued salary representing the period between  April 2009 and June 30, 2010.





(iii)
On May 1, 2006 Consorteum entered into a management services agreement with James D. Beatty Associates, Ltd., a corporation owned by Mr. James D.Beatty, a member and Chairman of the Board of Directors of Consorteum and the Company under which Mr. Beatty was paid an annual salary of $51,468 and received additional compensation aggregating $14,411. From commencement of Mr. Beatty’s management services, his salary was accrued and carried as a liability on the books of Consorteum. For the period prior to April 1, 2009, in September 2009 the Company and Mr. Beatty agreed to exchange $175,399 of his accrued salary for the period through March 31, 2009 for 1,300,000 shares of the Company's common stock at prices ranging from $ 0.15 - $0.218 per share. If Mr. Beatty leaves Consorteum he would have been entitled to a severance of $51,588. In Fiscal 2010, Mr. Beatty agreed to forgive $72,730 of accrued salary representing the period between  April 2009 and June 30, 2010.





(iv)
The Company did not have a written management services agreement with Peter Simpson. From commencement of Mr. Simpson’s management services, his salary was accrued and was carried as a liability on the books of Consorteum.  For the period prior to April 1, 2009, in September 2009 the Company and Mr. Simpson agreed to exchange $64,485 of his accrued salary for the period through March 31, 2009 for 500,000 shares of the Company's common stock at prices ranging from $ 0.15 - $0.218 per share. In Fiscal 2010, Mr Simpson agreed to forgive $65,506 of accrued salary representing the period between  April 2009 and June 30, 2010.





OTHER COMPENSATION.





There are no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans. Except as set forth immediately below, there are no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payment(s) to a named executive officer at, following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of the Company or a change in the named executive officer's responsibilities following a change in control, with respect to each named executive officer.





STOCK OPTION PLANS AND STOCK COMPENSATION PLANS





The Company currently has the following forms of stock compensation, equity compensation, deferred compensation or other plan or pension in place for its directors, executive officers and employees of the Company: (i) 2008 Stock Option Plan of the Company and (ii) 2008 Employees Compensation and Stock Option Plan. The Company is authorized to issue up to a maximum of 2,500,000 shares of its common stock under each such Plan. No grants of any kind were issued and outstanding under either Plan during the fiscal year ended June 30, 2010.





28


On September 19, 2009, subsequent to the end of the last fiscal year, the Company issued 1,750,000 options to purchase shares of its common stock to the following named directors and officers.





Name Of Executive Officer

Number Of Options

Exercise PriceJames D. Beatty

500,000

$0.15Craig A. Fielding

500,000

$0.15Quent Rickerby

500,000

$0.15Peter Simpson

250,000

$0.15





All of the options granted will expire on September 21, 2012, and the Company and each optionee must enter into definitive option agreements.  The options granted to Messrs. Simpson and Rickerby expired when they resigned.





ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.





The following table sets forth information regarding the beneficial ownership of the Company's common stock as of November 12, 2010 by: (i) all stockholders known to the Company to be owners of more than 5% of the outstanding common stock of the Company; and (ii) all officers and directors of the Company, individually and as a group:








Name and Address of Beneficial Owner

Amount (1)

Percentage of Class Ownership (2)Quentin Rickerby

11,786,035 common shares (3)

5.33% (2)42 Angus Meadow Drive,Markham, Ontario,Canada, L6C 1Z2Craig A. Fielding

72,093,333 common shares (4)

32.61% (2)464 Worthington Avenue,Richmond Hill, Ontario,Canada, L4E 4R6.James D. Beatty

23,000,000 common shares (5)

10.40% (2)46 Teddington Park Avenue,Toronto, Ontario,Canada, M4N 2C6.Geoffrey William Smethurst

-0-

-0-%1511 Sgtoneybrook TrailOakville Ontario L6M 2R4OFFICERS AND DIRECTORS

95,093,333 COMMON SHARES (1)

43.01% (2)







(1)
The amount includes shares owned of record and beneficially by each of the directors and officers as at November 12, 2010.; thus it includes shares issued and to be issued for accrued compensation, return of previously surrendered shares to the Company’s treasury for other use, the reissuance of shares for an equivalent number of shares foreclosed upon in satisfaction of a Company obligation and the foregivness of Company indebtedness owned to directors or officers.  See Item 9B. Other Information.


(2)
For purposes of this calculation all beneficial ownership issuances have been included as issued and outstanding.
 
 (3)
Represents beneficial ownership and not ownership of record.
 
 (4)
Mr. Fielding owns of record 10,000 shares of the Company’s common stock and is the beneficial owner of 72,083,333 shares of the Company’s common stock.
 
 (5)
Mr. Beatty owns of record and beneficially 3,000,000 shares of the Company’s common stock and is the beneficial owner of 20,000,000 shares of the Company’s common stock.


29


ITEM 13. Certain Relationships and Related Transactions, and Director Independence.





Other than as set forth below, during the last fiscal year there has not been any relationships, transactions or proposed transactions to which the Company was or is to be a party, in which any of the directors, officers, or 5% or greater stockholders (or any immediate family thereof) had or is to have a direct or indirect material interest except for the following:




Share Issuances:
 
 The Company issued shares of its common stock to each of the directors and/or named executive officers named below.
 
 (a)  In April 2010, Mr. Quentin Rickerby (former President and COO) , and in August 2010 Messrs. James D. Beatty (chairman of the Board of Directors) , Craig A. Fielding (current CEO)  and Peter Simpson (former CFO), rescinded the issuance of certain shares to them made in Seoptember 2009 as compensation for services rendered through April 30, 2009.  The table of the original issuances that were rescinded is set forth below.
 
 Name of executive officer

Amount of arrears

Number of sharesJames D. Beatty

$175,399

1,300,000Crag A. Fielding

$376,163

2,000,000Quent Rickerby

$376,163

2,000,000Peter Simpson

$  64,485

500,000
  (b)  On October 18, 2010 the Board of Directors of the Company approved all of the following issuances:
  (1)
3,500,000 shares of the Company’s common stock to Mr. Peter Rickerby to replace an equivalent number of shares that Mr. Rickerby previously returned to the Company’s treasury..
 (2)
11,835,000 shares of the Company’s common stock to Mr. Quentin Rickerby to replace an equivalent number of shares that Mr. Rickerby previously returned to the Company’s treasury.
 (3)
2,500,000 shares of the Company’s common stock to Mr. Frank Fielding to replace an equivalent number of shares that Mr. Fielding previously returned to the Company’s treasury..
 (4)
8,000,000 shares of the Company’s common stock in satisfaction of a loan of $24,000 from Mr. Frank Fielding to the Company.
 (5)
20,000,00 shares of the Company’s common stock to James D. Beatty and Associates as compensation for Mr. Beatty’s services up to and including August 26, 2010.
 (6)
8,750,000 shares of the Company’s common stock to Mr. Craig A. Fielding to replace the identical number of shares owned by Mr. Fielding that were foreclosed upon in satisfaction of a Company obligation to pay a promissory note for $100,000.
 (7)
30,000,000 shares of the Company’s common stock to Mr. Craig A. Fielding as compensation for services performed by Mr. Fielding through and including October 19, 2010.
 (8)
33,333,333 shares of the Company’s common stock to Mr. Craig A. Fielding in consideration for the elimination of a $100,000 loan from Mr. Fielding to the Company.


Management Agreements:





Consorteum, Inc. had management services agreements with each of Messrs. Fielding, Rickerby and Simpson, which contracts were terminated at the end of fiscal year 2010. .





ITEM 14. Principal Accounting Fees and Services





(1) Audit Fees





The aggregate fees billed for each of the last two fiscal years for professional services rendered by SF Chartered Accountants, LLP, ("Accountant") for the audit of the Company's annual financial statements, and review of financial statements included in the Company's Form 10-Q's: 2010 $55,000  2009 $40,000;





(2)Audit Related Fees





The aggregate fees billed in each of the last two fiscal years for assurance and related services by the Accountant that are reasonably related to the performance of the audit or review of the Company's financial statements and are not reported under Audit Fees above: 2010 $7,500 2009: $5,000;





(3)Tax Fees





The aggregate fees billed in each of the last two fiscal years for professional services rendered by the Accountant for tax compliance, tax advice, and tax planning: 2010: $-0-; 2009: $-0-.





(4)All Other Fees





The aggregate fees billed in each of the last two fiscal years for products and services provided by the Accountant, other than the services reported above: 2010: $-0- 2009: $-0-.


30


ITEM 15. Exhibits, Financial Statement Schedules.





Index to Exhibits





(3)(i)
Articles of Incorporation of Consorteum, Inc., (incorporated by reference to Exhibit (3)(i) to the Company's Current Report on Form 8-K filed on June 19, 2009).(3)(ii)
By-laws of Consorteum, Inc. (incorporated by reference to Exhibit (3)(ii) to the Company's Current Report on Form 8-K filed on June 19, 2009).10.4
Shareholder Agreement dated January 5, 2009 among Consorteum, Inc., Innovative Solutions, Inc., William Bateman and Michael Frasse (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on June 19, 2009).10.5
Management Services Agreement dated April 5, 2006 between Consorteum, Inc. and FP Financial Services, Ltd. (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on June 19, 2009).10.6
Management Services Agreement dated as of May 1, 2006 between Consorteum, Inc. and Craig Fielding (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on June 19, 2009).10.7
Management Services Agreement dated as of May 1, 2006 between Consorteum, Inc. and Quentin Rickerby (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on June 19, 2009).10.8
Management Services Agreement dated as of May 1, 2006 between Consorteum, Inc. and James D. Beatty and Associates, Inc. (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on June 19, 2009).10.9
Joint Venture Agreement dated December 13, 2006 between Consorteum, Inc. and 1510848 Ontario, Inc. (incorporated by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed on June 19, 2009).10.10
Amended and Restated Management Services Agreement dated January 16, 2007 between Consorteum, Inc. and FP Financial Services, Ltd. (incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K filed on June 19, 2009).16.
Letter dated June 25, 2009 from Sutton Robinson Freeman & Co., PC regarding change in accountants.31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.1
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).32.2
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).


31





SIGNATURES








Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





CONSORTEUM HOLDINGS, INC.Dated:   March 24, 2011By:  /s/  Craig A. FieldingCraig A. Fielding,

Chief Executive Officer and President(Principal Executive Officer)





Pursuan  to the requirements of  the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.





Dated:   November 16, 2010





Name
Position
Date/s/  Craig A. Fielding

Craig A. Fielding
Chief Executive Officer,

President and Director (Principal Executive Officer)
March 24, 2011/s/ Geoffrey William Smethurst

Geoffrey William Smethurst
Chief Financial Officer (Principal Financial Officer)
March 24, 2011/s/  James  D. Beatty

James  D. Beatty
Director and Chairman of the Board
March 24, 2011


32







CONSORTEUM HOLDINGS, INC.
 (FORMERLY IMPLEX CORPORATION)
 (A DEVELOPMENT STAGE COMPANY)
  CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010, and 2009
  (EXPRESSED IN U.S. DOLLARS)
  
 
 CONTENTS
   Report of Independent Registered Public Accounting Firm
F-2Consolidated Balance Sheets
F-3Consolidated Statements of Operations and Comprehensive Loss
F-4Consolidated Statements of Stockholders' Deficit
F-5 - F-6Consolidated Statements of Cash Flows
F-7Notes to Consolidated Financial Statements
F-8 - F-35
  
 F-1
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of
 Consorteum Holdings, Inc.
  We have audited the accompanying balance sheets of Consorteum Holdings, Inc.(formerly known as Implex Corporation) (A Development Stage Company) (the “Company”) as of June 30, 2010, and 2009, and the related statements of operations and comprehensive (loss), stockholders' (deficit) and cash flows for each of the two years ended June 30, 2010, June 30, 2009, and the period from November 7, 2005 (date of inception) through June 30, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consorteum Holdings, Inc. as of June 30, 2010, and 2009, and the results of its operations and its cash flows for each of the two years ended June 30, 2010, June 30, 2009, and the period from November 7, 2005 (date of inception) through June 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company is in the development stage, has an accumulated deficit during the development stage, and has insufficient working capital to meet its planned business operations.  During the year ended June 30, 2010, the Company received demand for repayment of the balance due under the credit facilities to the Royal Bank of Canada.  Furthermore, the Company received a notice of intention from the Royal Bank of Canada to enforce its security which can be exercised at any time.  These and other factors 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 1.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  As discussed in Note 19, the June 30, 2010 financial statements have been restated.
  
 
 
  /s/ SF Partnership, LLPToronto, Canada
CHARTERED ACCOUNTANTS
 November 12, 2010 (except for Note 19 and the effects
 thereof, as to which the date is March 22, 2011)
      F-2
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Consolidated Balance Sheets
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  2010


2009ASSETS

(Restated)(Note 19)Current AssetsCash

$
9,110


$
185Other receivables, net (Note 4)


11,061



7,303Deferred finance charges


20,543



-Prepaid expense


-



1,285Total Current Assets


40,714



8,773Investments in Affiliated Companies(Note 5)


-



86,123Equipment, Net (Note 6)


5,201



6,774Intangible Asset(Note 7)


9,922



-Total Assets

$
55,837


$
101,670LIABILITIESCurrent LiabilitiesBank indebtedness (Note 8)

$
128,489


$
87,765Accounts payable


211,677



276,459Accrued liabilities (Note 13)


444,761



1,730,325Loans payable (Note 9)


985,041



917,944Due to stockholders (Note 10)


253,543



30,779Total Current Liabilities


2,023,511



3,043,272Commitments and Contingencies(Note 16)STOCKHOLDERS' DEFICITCapital Stock(Note 12)Preferred stock, par value $0.001 per share; 100,000,000 shares authorized; none issued and outstanding.


-



-Common stock, par value $0.001 per share; 100,000,000 shares authorized; 93,953,715 shares (2009 – 46,859,750 shares) issued and outstanding.


125,954



46,860Treasury Stock


15,286



-Additional Paid In Capital


2,705,908



-Discount on Common Stock


-



(116,224
)Collateralized Shares Issued


(137,500
)


-Accumulated Other Comprehensive (Loss) Income


(54,694
)


151,042Deficit Accumulated during the Development Stage


(4,622,628
)


(3,023,280
)Total Stockholders' Deficit


(1,967,674
)


(2,941,602
)Total Liabilities and Stockholders’ Deficit

$
55,837


$
101,670
   F-3
 
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Consolidated Statements of Operations and Comprehensive Loss
 For the Years Ended June 30, 2010, and 2009, and Cumulative
 from Inception (November 7, 2005) Through June 30, 2010
 (Expressed in U.S. Dollars)
 
 Year Ended

June 30,

2010

(Restated)

(Note 19)


Year Ended

June 30,

2009


Cumulative from

Inception

(November 7, 2005)Through

June 30,

2010

(Restated)

(Note 19)Revenues

$
1,873


$
581


$
248,290Operating ExpensesManagement and consulting fees


826,031



628,344



2,627,536General and administration expenses


742,760



413,205



1,528,928Bad debt expense


-



-



99,738Selling expenses


-



-



98,010Depreciation expense


2,239



2,897



13,347Forgiveness of debt (Note 13)


(294,974
)


-



(294,974
)Total Operating Expenses


1,276,056



1,044,446



4,072,585Loss from Operations


(1,274,183
)


(1,043,865
)


(3,824,295
)Other ExpensesEquity in net loss of an affiliated company


(49,925
)


(17,777
)


(282,474
)Write off of investment in an affiliated company


-



-



(78,783
)Interest and financing costs


(275,240
)


(96,892
)


(437,076
)Total Other Expenses


(325,165
)


(114,669
)


(798,333
)Net Loss


(1,599,348
)


(1,158,534
)


(4,622,628
)Foreign currency translation adjustment


(205,736
)


232,841



(54,694
)Comprehensive Loss

$
(1,805,084
)

$
(925,693
)

$
(4,677,322
)Loss Per ShareBasic and Diluted

$
(0.02
)

$
(0.02
)Weighted average number sharesoutstanding – basic and diluted


70,935,189



68,914,545
  F-4
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Consolidated Statements of Stockholders' Deficit
 For the Periods from Inception (November 7, 2005) Through June 30, 2010
 (Expressed in U.S. Dollars)
  Preferred Stock


Common Stock


Discount on

Common


Additional

Paid-In


Accumulated

Other

Comprehensive

Income


(Deficit)

Accumulated

during the

Development


Total

Stockholders'Shares


Amount


Shares


Amount


Stock


Capital


(Loss)


Stage


(Deficit)Opening balance – November 7, 2005


-


$
-



39,999,750


$
40,000


$
(40,000
)

$
-


$
-


$
-


$
-Common stock issued at inception


-



-



24,000,000



24,000



(23,900
)


-



-



-



100Common stock issued for cash


-



-



3,200,000



3,200



12,800



-



-



-



16,000Net loss for the period


-



-



-



-



-



-



-



467



467Balance – December 31, 2005


-



-



67,199,750



67,200



(51,100
)


-



-



467



16,567Common stock issued for cash


-



-



2,250,000



2,250



9,000



-



-



-



11,250Common stock issued for services rendered


-



-



400,000



400



5,600



-



-



-



6,000Services contributed by stockholder


-



-



-



-



10,320



-



-



-



10,320Net loss for the period


-



-



-



-



-



-



-



(24,960
)


(24,960
)Balance – December 31, 2006


-



-



69,849,750



69,850



(26,180
)


-



-



(24,493
)


19,177Stockholder contributions


-



-



-



-



-



6,085



-



-



6,085Services contributed by stockholder


-



-



-



-



-



2,400



-



-



2,400Net loss for the period


-



-



-



-



-



-



-



(38,862
)


(38,862
)Balance – December 31, 2007


-



-



69,849,750



69,850



(26,180
)


8,485



-



(63,355
)


(11,200
)Common stock issued for cash


-



-



10,000



10



-



-



-



-



10Stockholder contributions


-



-



-



-



-



4,174







-



4,174Services contributed by stockholder


-



-



-



-



-



1,700



-



-



1,700Recapitalization on reverse merger


-



-



-



-



(8,015
)


(14,359
)


(51,077
)


(802,144
)


(875,595
)Foreign currency translation adjustment


-



-



-



-



-



-



(30,722
)


-



(30,722
)Net loss for the period


-



-



-



-



-



-



-



(999,247
)


(999,247
)Balance - June 30, 2008


-



-



69,859,750



69,860



(34,195
)


-



(81,799
)


(1,864,746
)


(1,910,880
)
  F-5
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Consolidated Statements of Stockholders' Deficit (Cont’d)
 For the Periods from Inception (November 7, 2005) Through June 30, 2010
 (Expressed in U.S. Dollars)
  Preferred Stock


Common Stock


Discount on

Common


Collateralized Shares


Additional

Paid-In


Accumulated Other Comprehensive Income


Treasury


(Deficit)

Accumulated

during the

Development


Total

Stockholders'Shares


Amount


Shares


Amount


Stock


Issued


Capital


(Loss)


Shares


Stage


Deficit(Restated)(Note 19)


(Restated)

(Note 19)






(Restated

(Note 19)


(Restated)

(Note 19)Balance - June 30, 2008


-


$
-



69,859,750


$
69,860


$
(34,195
)

$
-


$
-


$
(81,799
)


-


$
(1,864,746
)

$
(1,910,880
)Stock cancellation


-



-



(23,000,000
)


(23,000
)


23,000



-



-



-



-



-



-Assumptions of liabilities and loan on reverse merger transaction


-



-



-



-



(105,029
)


-



-



-



-



-



(105,029
)Foreign currency translationAdjustment


-



-



-



-



-



-



-



232,841



-



-



232,841Net loss for the period


-



-



-



-



-



-



-



-



-



(1,158,334
)


(1,158,534
)Balance – June 30, 2009 (Restated Note 19)


-



-



46,859,750



46,860



(116,224
)


-



-



151,042



-



(3,023,280
)


(2,941,602
)Shares issued for market awareness


-



-



3,280,000



3,280



(3,280
)


-



-



-



-



-



-Shares issued for cash


-



-



300,000



300



119,504



-



11,184



-



-



-



130,988Shares issued for services rendered










30,300,000



30,300



-



(137,500
)


1,143,200



-



-



-



1,036,000Shares issued from term note


-



-



1,500,000



1,500



-



-



388,397



-



-



-



389,897Shares issued to extinguish debt


-



-



27,000,000



59,000



-



-



106,500



-



-



-



165,500Shares returned to treasury


-



-



(15,286,035
)


(15,286
)


-



-



-



-



15,286



-



-Options Issued


-



-



-



-



-



-



158,436



-



-



-



158,436Forgiveness of debt


-



-



-



-



-



-



898,191



-



-



-



898,191Foreign currency translation Adjustment


-



-



-



-



-



-



-



(205,736
)


-



-



(205,736
)Net loss for the period


-



-



-



-



-



-



-



-



-



(1,599,348
)


(1,599,348
)Balance – June 30, 2010


-


$
-



93,953,715


$
125,954


$
-


$
(137,500
)

$
2,705,908


$
(54,694
)


15,286


$
(4,622,628
)

$
(1,967,674
)
    F-6
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Consolidated Statements of Cash Flows
 For the Years Ended June 30, 2010, and 2009, and Cumulative from
 Inception (November 7, 2005) Through June 30, 2010
 (Expressed in U.S. Dollars)
  Year Ended

June 30,

2010

(Restated)

(Note 19)


Year Ended

June 30,

2009


Cumulative from

Inception

(November 7, 2005)

June 30,

2010

(Restated)

(Note 19)Cash Flows from Operating ActivitiesNet loss

$
(1,599,348
)

$
(1,158,534
)

$
(4,622,628
)Adjustments to reconcile net (loss) to net cash (used in) operating activities:Equity in net loss of an affiliated company


49,925



17,777



282,474Writeoff of investment in an affiliated company


-



-



78,213Depreciation


2,239



2,897



13,347Stock issued on reverse merger


-



-



35,579Forgiveness of debt


(294,974
)


-



(294,974
)Stock option expense


158,436



-



158,436Amortization of deferred finance charges


31,957



-



31,957Changes in non-cash working capital, net of effectsfrom reverse merger transaction:Other receivables


5,118



(861
)


(3,089
)Prepaid expenses


1,285



(1,282
)


3Accounts payable


149,949



12,212



372,215Accrued liabilities


635,005



759,441



2,359,915Net Cash (Used in) Operating Activities


(860,408
)


(368,350
)


(1,588,552
)Cash Flows from Investing ActivitiesAcquisition of equipment


-



-



(19,249
)Acquisition of investment in affiliated companies


9,814



-



(277,102
)Net Cash Provided by (Used in) Investing Activities


9,814



-



(296,351
)Cash Flows from Financing ActivitiesProceeds from loans


491,497



407,847



1,456,472Repayment of loans


(139,114
)


(4,289
)


(143,403
)Proceeds from bank indebtedness


32,275



(19,664
)


141,691Repayment of bank indebtedness


-



-



(6,492
)Proceeds from issuance of capital stock


130,988



-



131,074Repayments of stockholders’ advances


-



(224,097
)


(1,216,010
)Proceeds from stockholders’ advances


343,794



194,727



1,599,119Net Cash Provided by Financing Activities


859,440



354,524



1,962,451Effect of Exchange Rate Change on Cash


79



(2,038
)


(68,438
)Net Increase (Decrease) in Cash


8,925



(15,864
)


9,110Cash - Beginning of Period


185



16,049



-Cash - End of Period

$
9,110


$
185


$
9,110
 
  F-7
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  1.
Organization, Development Stage Activities, and Going Concern (Restated Note 19)
  Consorteum Holdings, Inc. ("Holdings" and subsequent to the reverse merger, the “Company”), formerly known as Implex Corporation, was incorporated in the State of Nevada on November 7, 2005.  On April 9, 2009, Holdings changed its name to Consorteum Holdings, Inc.
  On June 15, 2009 Holdings entered into an agreement and plan of exchange whereby Holdings acquired 100% of the issued and outstanding shares of common stock of Consorteum Inc. (“Consorteum”) from Consorteum's stockholders, by exchanging 39,999,750 shares of Holdings’ common stock, in a reverse merger transaction.  Consorteum is a company incorporated under the laws of the province of Ontario on April 3, 2006. Prior to the agreement and plan of exchange, Holdings had 29,860,000 shares of its common stock, issued and outstanding.  At the closing of the exchange transaction, Holdings cancelled 23,000,000 shares of its common stock held by one stockholder.  As a result of the exchange, the principal stockholders of Consorteum control 85% of Holdings.
  Development Stage Activities
  The Company provides pioneering technology solutions and management expertise to companies and organizations looking to develop, streamline or augment their methods of processing payment transactions.  It operates as a technology and services aggregator to meet the diverse needs of its client base by leveraging its wide-ranging partner technologies to develop end-to-end, turn-key card and payment transaction processing solutions.
  F-8
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  1.
Organization, Development Stage Activities, and Going Concern (cont’d)
  Going Concern Assumption
  The Company's consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business.  The Company's negative working capital and accumulated deficit during the development stage raise substantial doubt as to its ability to continue as a going concern.  As of June 30, 2010, the Company had negative working capital of $1,982,797 (2009 - $3,034,499) and a deficit accumulated during the development stage of $4,622,628 (2009 - $3,023,280).
  The Company's continuance as a going concern is dependent on the successful efforts of its directors and principal stockholders in providing financial support in the short term; raising additional long-term equity or debt financing either from its own resources or from third parties; and the attainment of key contracts.  In the event that such resources are not secured, the assets may not be realized or liabilities discharged at their carrying amounts, and differences from the carrying amounts reported in these consolidated financial statements could be material.
  As described in note 8, the Company is indebted to the Royal Bank of Canada (“RBC”) who holds a general security agreement over the assets of the Company, and on May 27, 2010 the Company received demand for repayment of the balance due under the demand term loan and the credit facilities. On the same date, the Company received a notice of intention to enforce RBC’s security on the property which can be exercised at any time.  Notwithstanding on-going negotiations, the Company has been unable to come to terms with RBC and has not settled the liability.
  The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.
  F-9
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  2.
Summary of Significant Accounting Policies (Restated Note 19)
  The accounting policies of the Company are in accordance with accounting principles generally accepted in the United States of America, and their basis of application is consistent with that of the previous year.  Set forth below are the Company's significant accounting policies:
  a)
Basis of Presentation
  The consolidated financial statements include the accounts of Consorteum Holdings, Inc., Consorteum Inc., and My Golf Rewards Canada, Inc.  All significant intercompany balances and transactions are eliminated on consolidation.  The merger of Holdings and Consorteum has been recorded as a recapitalization of Holdings, with the net assets of Consorteum and Holdings brought forward at their historical bases and represents a continuation of the financial statements of Consorteum.  The substance of the Company’s share issuance and the reorganization is a transaction which results in Consorteum becoming a listed public entity through Holdings’ acquisition of Consorteum's net assets.
 b)
Cash and cash equivalents
 Cash and cash equivalents comprise bank balances and short-term bank deposits with an original maturity of three months or less.
  c)
Equipment, Net
  Equipment is recorded at cost. Depreciation, based on the estimated useful life of the equipment, is provided at an annual rate of 30% based on the declining-balance method.
 d)
Intangible Asset
 Intangible asset represents a software license right acquired by way of the acquisition of My Golf Rewards Canada, Inc. (see note 7).  The Company did not amortize this intangible asset since it is not yet in use.
  e)
Impairment of Long Lived Assets
  In accordance with ASC 360, "Property, plant and equipment," long lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.  If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable.  In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.  Long lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in Note 1, the long-lived assets have been valued on a going concern basis, however, substantial doubt exists as to the ability of the Company to continue as a going concern.  If the Company ceases operations, the asset values may be impaired.
  F-10
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 2.
Summary of Significant Accounting Policies (cont’d)
  f)
Other Receivables and Accounts Receivable
  The Company carries its accounts receivable at invoice amount, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.
  Other receivables are recorded at cost and represent the best estimate of the amount recoverable.
  g)
Deferred Finance Charges
  Deferred finance charges represent the unamortized financing costs associated with the issuance of debt instruments and are amortized over the terms of the respective financing arrangement.
  h)
Revenue Recognition
  The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.
  i)
Equity Investments
  Equity investments include entities over which the Company exercises significant influence but does not exercise control.  These are accounted for using the equity method of accounting and are initially recognized at cost net of any impairment losses. The Company’s share of these entities’ profits or losses after acquisition of its interest is recognized in the statement of operations and cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Company’s share of losses of these investments equals or exceeds the carrying amount of the investment, the Company only recognizes further losses where it has incurred obligations or made payments on behalf of the affiliate.
  Joint ventures are entities over which the Company exercises control jointly with another party or parties.  Joint ventures are also accounted for under the equity method as described above.
  F-11
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 2.
Summary of Significant Accounting Policies (cont’d)
  j)
Income Taxes
  The Company accounts for income taxes in accordance with ASC 740, "Income Taxes." Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
  k)
Foreign Currency Translation
  In accordance with the provision of ASC 830, "Foreign Currency Matters," the Company, whose functional currency is the Canadian dollar, translates its balance sheet into U.S. dollars at the prevailing rate at the balance sheet date and translates its revenues and expenses at the average rates prevailing during each reporting period. Net gains or losses resulting from the translation of financial statements are accumulated and charged directly to accumulated comprehensive income or (loss), a component of stockholders' equity or (deficit). Realized gains or losses resulting from foreign currency transactions are included in operations for the period.
  l)
Comprehensive Income or Loss
  The Company applies the provisions of ASC 220, “Comprehensive Income.”  Unrealized gains and losses from foreign exchange translation are reported in the accompanying statements as comprehensive income or loss.
  m)
Earnings or Loss Per Share
  The Company accounts for earnings or loss per share pursuant to ASC 260, "Earnings per Share," which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share.  Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year.  Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. The computation of diluted earnings (loss) per share has not been presented as its effect would be anti-dilutive.
  F-12
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 2.
Summary of Significant Accounting Policies (cont’d)
  n)
Use of Estimates
  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Significant areas requiring the use of estimates relate to the estimated useful lives of equipment, the utilization of future income tax assets and the valuation of stock-based compensation.  These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future.  Actual results may ultimately differ from those estimates.  These estimates are reviewed on an ongoing basis and as adjustments become necessary, they are reported in earnings in the period in which they become known.
  o)
Financial Instruments
 
 Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments.  The Company is exposed to interest risk on bank indebtedness.
  Financial risk is the risk that the Company's earnings are subject to fluctuations in interest risk or currency risk and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.
  Concentration of Credit Risk
  ASC 825 "Financial Instruments," requires disclosure of any significant off-balance-sheet risk and credit risk concentration. The Company does not have significant off-balance-sheet risk or credit concentration. The Company maintains cash with major financial institutions. From time to time, the Company has funds on deposit with commercial banks that exceed federally insured limits. Management does not consider this to be a significant credit risk as these banks and financial institutions are well-known.
  F-13
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 2.
Summary of Significant Accounting Policies (cont’d)
  p)
Recent Accounting Pronouncements
  In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). ASU 2009-13 applies to revenue arrangements currently in the scope of FASB ASC Subtopic 605-25, “Multiple Element Arrangements”, and provides principles and application guidance on whether arrangements with multiple deliverables exist, how the deliverables should be separated, and the consideration allocated to the deliverables. ASU 2009-13 is effective prospectively for revenuearrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently reviewing the effect, if any; the proposed guidance will have on its consolidated financial statements.
  In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-6”). The standard amends ASC Topic 820, “Fair Value Measurements and Disclosures” to require additional disclosures related to transfers between levels in the hierarchy of fair value measurements. ASU 2010-6 is effective for interim and annual fiscal years beginning after December 15, 2009. The standard does not change how fair values are measured, accordingly the standard did not have an impact on the Company.
  In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855); Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-9”). The standard amends Subtopic 855-10, “Subsequent Events” to remove the requirement for a SEC filer to disclose the date through which subsequent events have been evaluated. ASU 2010-9 is effective upon issuance of the final update. The Company does not expect the adoption of ASU 2010-9 to have a material impact on its consolidated financial statements.
  In July 2010, the FASB issued ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (“ASU 2010-20”). The standard amends ASC Topic 310, “Receivables”to enhance disclosures about the credit quality of financing receivables and the allowance for credit losses by requiring an entity to provide a greater level of disaggregated information and to disclose credit quality indicators, past due information, and modifications of its financing receivables.ASU 2010-20 is effective for interim and annual fiscal years beginning after December 15, 2010 for public entities and for interim and annual fiscal years beginning after December 15, 2011 for nonpublic entities.The Company does not expect the adoption of ASU 2010-20 to have a material impact on its consolidated financial statements.
  The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. Except for the ASUs listed above, those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.
  F-14
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 3.
Fair Value Measurements
  The Company adopted ASC 820 “Fair Value Measurements and Disclosures”. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
  Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
  Level 2 - Other inputs that are directly or indirectly observable in the marketplace.
  Level 3 - Unobservable inputs which are supported by little or no market activity.
  The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Cash,  bank indebtedness (Level 1), other receivables, due to stockholders, accounts payable, accrued liabilities, and loans payable (Level 2) are reflected in the balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.
  4.
Other Receivables, Net
  2010


2009Other receivables

$
11,061


$
7,303
  Other receivables represent the estimated amount of recoverable sales taxes.
 
 F-15
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 5.
Investments in Affiliated Companies (Restated Note 19)
 
 2010


2009Acquisition costs49% ownership interest in My Golf Rewards Canada Inc.

$
343,502


$
343,502Accumulated equity in net (loss) of My Golf Rewards Canada Inc.Balance, beginning of period


(257,379
)


(224,945
)Equity in net (loss) for the period


(49,925
)


(17,777
)Translation adjustment


10,519



(14,657
)Balance, end of period


(296,785
)


(257,379
)Consolidation


(46,717
)


-Total

$
-


$
86,123
 On January 13, 2010, the Company purchased an additional 26% interest in My Golf Rewards Canada Inc. for cash consideration of $2 and the assumption of liabilities totaling $123,891. The assets, liabilities and operating results of My Gold Rewards Canada Inc. have been consolidated from that date. As at January 13, 2010, the Company owned 75 % of the issued and outstanding share capital of My Golf Rewards Canada Inc.
 
 Cumulative operating losses amounting to $307,304 (2009 - $242,722) arising in My Golf Rewards Canada Inc. have been accounted for using the equity method.
  6.
Equipment, Net
  Equipment comprises the following:
 
 Cost


2010

Accumulated

Depreciation


Cost


2009

Accumulated

DepreciationComputer equipment

$
18,887


$
(13,686
)

$
17,221


$
(10,447
)Equipment, net





$
5,201






$
6,774
  Depreciation expense charged to operations amounted to $2,239 for the year ended June 30, 2010 (2009 - $2,897).
  F-16
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 7.
Intangible Asset
  As a result of the acquisition of the additional interest in My Golf Rewards Canada Inc., the Company acquired an interest in the rights to a software license and other proprietary software necessary to operate the business. Accordingly, the asset has been recorded at its estimated acquisition cost, which value has been supported by recent arms-length negotiations.
  The asset will be amortized on a systematic basis over its estimated life. The software license is subject to an annual renewal fee which will be expensed as incurred.
  Purchase price allocation as follows:
 Purchase Price







$
46,717Cash




$
9,814Accounts Receivable





150,872Total Assets




$
160,686Accounts Payable

$
40,199Loan Payable

$
83,692Total Liabilities





$
123,891Net Assets









$
36,795Purchase Price Discrepancy









$
9,922
 
 The intangible asset has not been amortized during the current fiscal year as the program was not active.  It is anticipated that amortization of the intangible asset will commence in May 2011 when the initial program will be launched, and will be amortized over a five year period.
  F-17
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 8.
Bank Indebtedness
  Bank indebtedness of $128,489 is comprised of a RBC demand term loan and an operating credit facility (2009 - $87,765). Starting July 2008, the loan was repayable on a monthly basis at $1,792 plus interest, at RBC’s prime rate plus 2% per annum.  The loan was scheduled to mature in June 2013. The loan is secured by a general security agreement signed by the Company constituting a first ranking security interest in all personal properties of the Company and personal guarantees from certain stockholders.
  In the current fiscal year ended June 30, 2010, the demand term loan and the operating line of credit are both in default and demands for full repayment have been made. The Company has been unable to meet any repayment terms and accordingly RBC has commenced legal proceedings to recover the full balances due. The legal proceedings have also named an officer and a former officer as defendants under guarantees in writing by both officers acting as stockholders.
  On May 27, 2010 the Company received notice of intention to enforce security by RBC, as secured creditor, on all the property of the Company. The Company has engaged legal counsel to act on this matter and is working towards a settlement of the bank indebtedness.
  F-18
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 9.
Loans Payable (Restated Note 19)
  2010


2009Loan 1. Investment loan, secured by shares of an individual shareholder, bearing interest at 18% per annum, principal due February 2010.  In default, due on demand.

$
299,349


$
229,091Loan 2. Investment loan (net of discount of $22,510), secured by 1,500,000 shares of an individual stockholder, bearing no interest, principal plus bonus due March 2010. In default, due on demand.


177,490



-Loan 3. Investment loan (net of discount of $15,775), unsecured, bearing no interest, due June 2009. In default, due on demand.


123,789



146,166Loan 4. Investment loan, unsecured, bearing interest at 18% per annum, due January 2009.  In default, due on demand.


50,084



83,887Loan 5. Investment loan, unsecured, bearing interest at 15% on late payments, with eleven monthly repayments commencing January 2010. No payments have been made since April 2010.  In default, due on demand.


56,578



-Loan 6. Investment loan, unsecured, bearing interest at 10% per annum, due on demand.


84,246



-Loan 7. Investment loan, unsecured, bearing interest at 18% per annum, due June 2009.  In default, due on demand.


34,728



26,577Loan 8. Investment loan, unsecured, bearing interest at 18% per annum, due on demand.


30,302



-Loan 9. Investment loan, unsecured, bearing interest at 18% per annum, due October 2009.  In default, due on demand.


30,234



23,138Loan 10. Investment loan, unsecured, bearing interest at 18% per annum, no fixed terms of repayment.


29,929



22,905Loan 11. Investment loan, unsecured, bearing interest at 18% per annum, due June 2009.  In default, due on demand.


20,312



45,992Loan 12. Investment loan, secured by 1,500,000 shares of an individual stockholder, bearing interest at18% per annum, with no fixed terms of repayment.


-



315,188Loan 13. Investment loan, unsecured, non interest bearing with no fixed terms of repayment.


-



25,000Loan 14. Investment loan, unsecured, non interest bearing, with no fixed terms of repayment.


48,000



-$
985,041


$
917,944
 
 F-19
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 9.
Loans Payable (cont’d)
 
 Loans 2 and 3 are non-interest bearing loans.  These loans are recorded at their discounted value, which was computed at a discount rate of 12% which approximates the current rate of borrowing for the Company.   The difference between the discount value and the principal amount of the loan was recorded as interest payable.  The discounted loan amount will be accreted to the principal amount with an offsetting charge to interest expense.
 
 On September 17, 2009, the Company entered into an agreement with a lender, who provided a $100,000 loan to the Company, and a stockholder pledged 1,500,000 common shares of the Company as security for the loan (Loan 2).  The lender is entitled to receive a bonus of $100,000 on the maturity date.
 
 On February 3, 2010 the Company had negotiated the assignment of its obligations to affiliates and directors to an unrelated third party, which provided up to $404,746 in the form of a promissory note bearing interest at 15% per annum. The promissory note contained a conversion feature that allows the holder of the note to convert the note into shares of common stock of the Company at a 50% discount. As at March 31, 2010, a total of $124,000 of this facility has been converted into 17,500,000 common stock.
 The Company received a $48,000 loan in June 2010 and later that month agreed to accept repayment of the loan through the issuance of 24,000,000 common shares at a conversion price of $0.002 per share. These shares were issued September 16, 2010.
  Loan 13 was repaid by advances from an officer and stockholder, and resulted in an offsetting increase in amounts due to stockholders.
  10.
Due to Stockholders
 
 The amounts due to stockholders are non-interest bearing, unsecured and have no fixed terms of repayment.
  During the current year, the stockholders have advanced an additional $222,764 to provide working capital for the Company and to meet certain repayment obligations on the loans payable.
  F-20
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 11.
Related Party Transactions and Balances
  The following were charged to the Company by certain stockholders for services provided:
 2010


2009a)  Management and consulting fees

$
411,250


$
407,455b)  General and administrative

$
60,900


$
85,780
 These charges relate to services provided by the President, Chief Executive Officer and Chairman of the Board of Directors, and were provided through company’s owned or controlled by those individuals.
  Included in accrued liabilities is $160,341 (2009 - $1,126,109) owed to certain stockholders for management fees, consulting fees and other expenses. Subsequent to year-end, the stockholders have agreed to the issuance of 50,000,000 common shares at an issue price of $0.003 per share in settlement of $150,000 of this liability.
  Included in accounts payable is $nil (2009 - $122,693) owed to My Golf Rewards Canada Inc., an affiliated company, as part of the Company’s equity investment obligation (see Note 5). The assets, liabilities and operations of this company are now consolidated and intercompany transactions and balances are eliminated.
  12.
Capital Stock
  On April 17, 2009, the Company issued 4,140,000 warrants to stockholders to purchase 4,140,000  shares of common stock of the Company, at a purchase price of $0.001 per share of common stock.
  On June 15, 2009, the Company cancelled 23,000,000 shares of common stock belonging to one individual, pursuant to an exchange agreement for a reverse merger.
  On June 15, 2009, the Company issued 39,999,750 shares of common stock to the shareholders of Consorteum Inc. in exchange for their shares of common stock of Consorteum Inc.
 
 On July 6, 2009, the Board of Directors passed a resolution to issue 3,280,000 shares of common stock to investor relations companies and specified consultants for purpose of building market awareness. The shares were issued between July 7 and September 14, 2009.
 
 On July 13, 2009, the Company issued 300,000 shares of the Company's common stock, pursuant to subscription agreements dated July 13, 2009, for cash consideration of $130,988.
 
 F-21
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 12.
Capital Stock (cont’d)
 
 On September 19, 2009, at a meeting of the Board of Directors, the Company granted 2,500,000 stock options pursuant to the stock option plan established by the Company. In addition, the Board of Directors approved an allotment of 5,800,000 common stock of the Company, valued at $0.15 per share of common stock, to satisfy liabilities owed to directors and officers of the Company.
 
 On November 24, 2009, the Company issued 3,125,000 shares of common stock to a company, in relation to marketing services provided for a value of $50,000.
 
 On November 25, 2009, the Company issued 3,125,000 shares of common stock to a company, in relation to marketing services provided for a value of $50,000.
 
 On December 1, 2009, the Company issued 1,500,000 shares of common stock for finance charges, in relation to the issuance of debt of $130,000.
 
 On December 9, 2009, the Company issued 1,500,000 shares of common stock to a company pursuant to a six-month public and investor relation service contract for $60,000.
 
 On December 18, 2009, the Company issued 8,750,000 shares of common stock in relation to legal services provided for a value of $87,500. The common stock has been put into an escrow account until May 31, 2010 and will be released back to the Company if the services are paid in full, prior to that date.
 
 On January 18, 2010, the Company settled an outstanding debt of $300,000 plus interest through the issuance of 1,500,000 restricted shares of common stock of the Company.
 
 On February 3, 2010, $50,000 of a loan payable was converted into 6,500,000 shares of common stock of the Company by the holder of the loan.
 
 On March 1, 2010, the Company entered into a professional services agreement (the "PSA") with its corporate counsel, pursuant to which the Company agreed to issue 5,000,000 shares of its common stock to its corporate council as collateral for compensation for accrued and unpaid professional fees of $50,000 for the period between January 1, 2009 and June 30, 2009.
 
 On March 1, 2010, the Company issued a total of 3,000,000 shares of its common stock to a director and Chairman of the Board of the Company. Of this total 1,500,000 shares were issued as indemnification for the foreclosure and seizure by a Company creditor of the identical number of
 a director's shares posted by the director as collateral for a loan by the creditor to the Company.  The remaining 1,500,000 shares were issued to the director at $0.01 a share as payment for $15,000 of accrued expenses.
  F-22
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 12.
Capital Stock (cont’d)
 
 On March 1, 2010, $50,000 of a loan payable was converted into 7,500,000 shares of common stock of the Company by the holder of the loan.
 
 On March 11, 2010, $24,000 of a loan payable was converted into 3,500,000 shares of common stock of the Company by the holder of the loan.
 
 On March 11, 2010, a shareholder of the Company returned 1,500,000 shares to the Company's treasury.
 
 On March 18, 2010, two shareholders of the Company returned a total of 2,000,000 shares to the Company's treasury.
 
 On March 31, 2010, a shareholder of the Company returned 11,786,035 shares to the Company's treasury.
 
 On May 5, 2010, the Company settled debt of $40,000 through the issuance of 8,000,000 restricted shares of common stock of the Company. The balance of the debt is still outstanding as at June 30, 2010.
 
 Warrants
  As at June 30, 2010 and June 30, 2009, 4,140,000 warrants were outstanding, having an exercise price of $0.001 per share of common stock with a remaining contractual life of 1.5 years, expiring December 31, 2011.
 
 F-23
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 12.
Capital Stock (cont’d)
  Options
 
 As at June 30, 2010, 2,500,000 options were outstanding, having an exercise price of $0.15 per share of common stock with a remaining contractual life of 2.48 years. These options were valued at $158,436 using the Black-Scholes model, using key assumptions of volatility of 62%, risk-free interest rate of 1.56%, a term life equivalent to the life of the options and reinvestment of all dividends in the Company of zero percent.
 
 The Company has a commitment to issue 500,000 stock options to a private investor as a bonus for a loan, and a further 50,000 stock options to an  individual as a finder's fee which commitments were made on January 12, 2010. As at June 30, 2010, these options have not been issued. By Board resolution dated October 18, 2010, these stock options granted have been replaced by the issue of common shares in an equivalent number at the then current market price of $0.003 per share.
  13.
Forgiveness of Debt (Restated Note 19)
 
 During the year ended June 30, 2010, management of the Company experienced significant difficulty in raising additional long-term equity and debt financing from third parties, in light of the negative working capital and the accumulated deficit accumulated during the development stage.
 
 Accordingly, management agreed to review the liabilities owing to its officers at June 30, 2010 with a view to improving the balance sheet and statement of accumulated deficit by forgiving such amounts and further by mutual consent, agreeing to terminate the corresponding contracts. A total of $501,130 of accrued salaries and allowances have been forgiven by officers of the Company.
 
 Management of the Company also reviewed the liabilities as at June 30, 2010 and contracts for senior officers and employees, and reached a mutual agreement with these parties to forgive a total of $397,061 in accrued salaries and expenses, and all corresponding contracts have been terminated by mutual agreement with the parties.
 
 Management of the Company re-negotiated outstanding liabilities with its vendors. As at June 30, 2010, the Company reached an agreement to eliminate or reduce such liabilities by $294,974 to unrelated parties.
 
 F-24
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 14
Income Taxes (Restated Note 19)
 The Company's income tax expense is as follows:
 2010


2009Expected income tax recovery at the combined statutory rate of 32.50% (2009-33.25%)

$
519,788


$
385,213Change in enacted tax rates


(231,021
)


195,115Impact of lower jurisdictional tax rates


(98,699
)


-Effects of translation adjustments


-



5,348Impact of non- deductible expenses


(30,862
)


(5,311
)Change in valuation allowance


(159,206
)


(585,576
)Benefit from income taxes

$
-


$
-
 
 The components of deferred tax assets are as follows:
  2010


2009Net operating loss carry forwards

$
858,000


$
692,930Investment in affiliated companies


106,716



113,296Equipment


(1,201
)


(1,917
)Valuation allowance


(963,515
)


(804,309
)Net

$
-


$
-
 The Company has net operating loss carryforwards available to be applied against future years' taxable income.  Due to the losses from operations and expected future operating results, it is more likely than not that the deferred tax asset resulting from the tax losses available for carry forward will not be realized through the reduction of future income tax payments. Accordingly, a 100% valuation allowance has been recorded for deferred tax assets and current income taxes.
  As of June 30, 2010, the Company had approximately $3,432,000 of Federal, provincial and state net operating loss carryforwards available to offset future years’ taxable income.  Such carry forwards expire in:
 2026

$
62,0002027


330,0002028


553,0002029


1,139,0002030


1,348,000$
3,432,000
  F-25
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  15.
Cash Flow Supplemental Information (Restated Note 19)
  Non-cash financing and investing activities are as follows:
 
 2010


2009


Cumulative from

Inception

(November 7, 2005) Through

June 30, 2010Issuance of shares for services rendered

$
1,036,000


$
-


$
1,071,579Issuance of shares to extinguish debt

$
553,897


$
-


$
553,897Issuance of shares from term note

$
1,500


$
-


$
1,500Acquisition of investment in an affiliated company through incurrence of liability

$
-


$
-


$
139,946Assumption of liabilities and loan on reverse merger transaction

$
-


$
105,029


$
105,029
 
 During the period, the Company had cash flows arising from interest and income taxes paid as follows:
 
 2010


2009Income tax

$
-


$
-Interest

$
-


$
15,009
 
 During the period, the Company reached agreement with related parties to forgive liabilities totaling $898,191.
 F-26
 
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 16.
Commitments and Contingencies
  The Company is in default under its bank facilities with the RBC and demands have been made for full repayment. The Company provided a general security agreement in favour of RBC in November 2006. Legal proceedings have been commenced by RBC to recover the full balances and on May 27, 2010 a notice of intention to enforce security was received by the Company. Negotiations with RBC are on-going but no resolution has been reached.
  The Company is a defendant in a legal proceeding brought by a former consultant seeking the payment of approximately $91,000 for services provided to the Company. Management is of the opinion that the action is without merit and intends to defend the action and is considering a counter claim against the consultant for damages. A defense has been filed without response.
  The Company is committed to an annual fee for the software license for My Golf Rewards Canada, Inc. in the amount of approximately $100,000. This fee is renewable on an annual basis.
  17.
Subsequent Events (Restated Note 19)
  In the three months ended September 30, 2010, an officer and shareholder advanced a further $55,000 on an unsecured, non- interest bearing basis to the Company to meet working capital needs.  These advances have no fixed terms of repayment.
  On September 13, 2010, the Company received approval to increase its authorized share capital from 100 million to 500 million common shares.
  On September 16, 2010 the Company issued the previously agreed upon 24,000,000 common shares in settlement of loans payable of $48,000 (loan 14 – refer to note 9).
  On October 7, 2010 three officers of the Company returned 3,800,000 common shares to treasury. These shares were originally issued in September 2009 as compensation for services rendered. The individuals have declined to accept the shares and therefore the shares were retired and retuned to treasury.
  On November 2, 2010, the Company issued a promissory note to a lender to secure new financing in the amount of $300,000 bearing interest at 12% per annum. It is anticipated that a formal debenture agreement will be completed, with a one year term and a second charge on the Company’s assets.  The Company also issued the lender 7,500,000 restricted shares of the Company as part of this transaction.
  On November 8, 2010 the Company signed a contract with a service provider under which the Company is committed to an initial annual fee of approximately $50,000 and annual fees of approximately $5,000 per annum.
  F-27
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 18.
Comparative Financial Information (Restated Note 19)
 Certain financial information for the year ended June 30, 2009, has been reclassified to conform with the financial statement presentation adopted in the current year.
  19.
Restatement
  The Company has restated its consolidated financial statements as at June 30, 2010 and for the year then ended. These consolidated financial statements have been restated due to a processing error that arose between management of the Company and its legal and professional advisors and which resulted in the incorrect version of the consolidated financial statements being used to file the 10K report on November 15, 2010. Once the error had been recognized, the restated consolidated financial statements were filed on November 17, 2010. A form 8-K/A was filed November 23, 2010 detailing the restatements, details of which are provided.
  The effects of the restatements on the consolidated financial statements are as follows:
  (a) Consolidated Balance Sheet
  As at June 30, 2010


NoteAs reported


Adjustment


As restated$


$


$Current LiabilitiesAccounts payable


173,393



38,284



211,677



aLoans payable


985,108



(67
)


985,041



bAdditional Paid In Capital


1,807,717



898,191



2,705,908



cAccumulated Other Comprehensive (Loss) Income


(58,570
)


3,876



(54,694
)


dDeficit Accumulated During the Development Stage


(3,682,344
)


(940,284
)


(4,622,628
)


e
  F-28
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  19.
Restatement (cont’d)
  Consolidated Statement of Operations and Comprehensive Loss
    For the year ended June 30, 2010


Cumulative from Inception

(November 7, 2005) Through

June 30, 2010

(note j)


NoteAs reported

$


Adjustment

$


As restated

$


As restated

$Operating ExpensesForgiveness of debt


(1,196,975
)


902m001



(294,974
)


(294,974
)


fOther Income (Expenses)Interest and financing costs


(275,241
)


1



(275,240
)


(437,076
)


tLoan discount


38,284



(38,284
)


-



-



gNet loss


(659,064
)


(940,284
)


(1,599,348
)


(4,622,628
)


iForeign currency translation adjustment


(209,613
)


3,877



(205,736
)


(54,694
)


hComprehensive Loss


(868,677
)


(936,407
)


(1,805,084
)


(4,677,322
)


iLoss per share – Basic & diluted


(0.01
)


(0.01
)


(0.02
)






i
             F-29
  CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 19.
Restatement (cont’d)
  (b) Consolidated Statement of Cash Flows
   For the year ended June 30, 2010


Cumulative from Inception

(November 7, 2005) Through

June 30, 2010

Note s


NoteAs reported

$


Adjustment

$


As restated

$


As restated

$Cash Flows from Operating ActivitiesNet Loss


(678,259
)


(921,089
)


(1,599,348
)


(4,622,628
)


kAdjustments to reconcile net (loss) to net cash (used in) operating activitiesForgiveness of debt


(1,196,975
)


902,001



(294,974
)


(294,974
)


lAmortization of deferred debt issuance


29,400



2,557



31,957



31,957



mChange in non-cash working capital, net of effects of reverse merger transaction:Other receivables


(1,945
)


7,063



5,118



(3,089
)


nPrepaid expenses


1,282



3



1,285



3



tAccounts payable


111,665



38,284



149,949



372,215



oAccrued liabilities


625,536



9,469



635,005



2,359,915



pCash Flows from Investing ActivitiesAcquisition of investment in affiliated companies


9,815



(1
)


9,814



(277,102
)


tCash Flows from Financing ActivitiesProceeds of loans


529,848



(38,351
)


491,497



1,456,472



qEffect of Exchange Rate Change on Cash


15



64



79



(68,438
)


r
     F-30
 
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  19.
Restatement (cont’d)
  The following is a comprehensive summary of the differences between the audited consolidated financial statements of the Company for the year ended June 30, 2010 filed on November 15, 2010 and the restated audited consolidated financial statements of the Company for the year ended June 30, 2010 filed on November 17, 2010:
  A) Consolidated Balance Sheet
  a)
Accounts payable was amended by increasing the balance to record interest payable related to the discounting of the non-interest bearing loans.
 b)
Loans payable was amended by decreasing the balance following a recalculation of the discounting of the non-interest bearing loans.
 c)
Additional paid-in capital was amended by increasing the balance to reflect debt forgiveness by related parties.
 d)
Accumulated other comprehensive (loss) income was amended to reflect the impact of the change to foreign currency translation adjustment.
 e)
Deficit accumulated during the development stage was amended to reflect the cumulative impact of changes made to the consolidated statements of operations and comprehensive loss.
 B)Consolidated Statement of Operations and Comprehensive Loss
 f)
Forgiveness of debt was amended to reduce the balance to reflect amounts forgiven by related parties that were recorded to additional paid-in capital.  Forgiveness of debt reflects those amounts forgiven by unrelated parties.
 g)
Loan discount was amended by way of a reclassification from other income to accounts payable to record interest payable related to the discounting of the non-interest bearing loans.
 h)
Foreign currency translation adjustment was amended to reflect the impact of foreign currency adjustments resulting from revisions to the consolidated balance sheets and consolidated statements of operations and comprehensive loss.
 i)
Net loss, comprehensive loss and loss per share were amended to reflect the impact of the aforementioned revisions to the forgiveness of debt, loan discounting and foreign currency translation adjustments.
 F-31
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  19.
Restatement (cont’d)
 j)
Cumulative from inception (November 7, 2005) through June 30, 2010 balances were amended to reflect the above noted revisions and to reflect correct cumulative summation.
 C) Consolidated Statement of Cash Flows
 k)
Net loss was amended to reflect the revised amount as per the amended consolidated statements of operations and comprehensive loss.
  l)
Forgiveness of debt was amended to reduce the balance to reflect amounts forgiven by related parties that were recorded to additional paid-in capital.  Forgiveness of debt reflects those amounts forgiven by unrelated parties.
 m)
Amortization of deferred debt issuance was amended to change the description to amortization of deferred finance charges and to reflect a revision to the amortization thereon that was not initially reflected in the consolidated statements of cash flows.
 
 n)
Other receivables were amended to reflect the change in the balance following an adjustment to the estimated amount of recoverable sales taxes that was not initially reflected in the consolidated statements of cash flows.
 F-32
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 19.
Restatement (cont’d)
  o)
Accounts payable was amended to reflect the change following the recording of interest payable related to the discounting of the non-interest bearing loans.
 p)
Accrued liabilities were amended to reflect the change following an adjustment to accrue additional professional fees that was not initially reflected in the consolidated statements of cash flows.
  q)
Proceeds from loans were amended to reduce the amount due to the recording of a loan discount which resulted in a reduced loans payable balance.
  r)
Effect of exchange rate change on cash was amended to reflect the impact of foreign currency adjustments resulting from revisions to the consolidated balance sheets and consolidated statements of operations and comprehensive loss.
  s)
Cumulative from inception (November 7, 2005) through June 30, 2010 balances were amended to reflect the above noted revisions and to reflect correct cumulative summation.
 t)
In both the Consolidated Statement of Operations and Comprehensive Loss and the Consolidated Statement of Cash Flows several of the numbers have been restated by small amounts, all of which are considered rounding differences.
 Note 1 – Organization, Development Stage Activities, and Going Concern
  ·
Note was amended by removing last sentence in paragraph two in the 10 K.
 
 ·
Note was amended to reflect updated negative working capital and deficit accumulated during the development stage figures to agree to the revised financial statement balances.
 
 Note 2 – Summary of Significant Accounting Policies
  ·
Note was amended to include accounting policy disclosure regarding cash and cash equivalents.
 
 ·
Note was amended to remove first paragraph regarding recent accounting pronouncements since the policy was adopted by the Company (“Measuring Liabilities at Fair Value”).
 
 F-33
 
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
 
 19.
Restatement (cont’d)
 
 Note 5 – Investment in affiliated Companies
  ·
Note was amended to change the value of the accumulated operating losses.
 
 Note 9 – Loans Payable
  ·
Disclosure regarding loans 2 and 3 were amended to include details regarding the amount discounted from these loans.
 
 ·
Loans payable total was amended by decreasing the balance following a recalculation of the discounting of loan 3.
 
 ·
Disclosure related to the February 3, 2010 loan transaction was amended to reflect the negotiation of the assignment of obligations to affiliates and directors versus the initial disclosure which described the transaction as a negotiation of a debt facility.  In addition, a sentence detailing the advancement of funds in tranches and immediate conversion was removed.
 
 ·
The paragraph immediately following the above disclosure for February 3, 2010, was revised since the Company did not receive funds from the same lender.
 
 Note 13 – Forgiveness of Debt
  ·
Note was amended to revise the amounts forgiven by the various creditors in the second, third and fourth paragraphs.
 
 ·
Note was amended to state that the liabilities forgiven in the fourth paragraph were owing to unrelated parties.
 
 Note 14 – Income Taxes
  ·
Note was amended to reflect the impact on income tax expense and the related tax balances as a result of the revision to net loss.
 
 F-34
 
 CONSORTEUM HOLDINGS, INC.
 (formerly Implex Corporation)
 (A DEVELOPMENT STAGE COMPANY)
 Notes to Consolidated Financial Statements
 June 30, 2010, and 2009
 (Expressed in U.S. Dollars)
  19.
Restatement (cont’d)
  Note 15 – Cash Flow Supplemental Information
  ·
Note was amended to remove 2009 balances related to issuance of shares for services rendered and acquisition of investment in affiliated company through the issuance of liability, as these amounts relate to 2008 and should be $nil.
 
 ·
Note was amended to disclose the debt forgiveness with related parties totaling $898,191.
 
 Note 17 – Subsequent Events
  ·
Disclosure related to the November 2, 2010 transaction was amended to include details regarding the interest rate on the loan as well as the issuance of restricted shares by the Company.
 
 Note 18 – Comparative Financial Information
  ·
Note added to address reclassification of 2009 amounts to conform with presentation in the 2010 financial statements.