The Company intends to enter a Plan of Exchange (the “Exchange”) with First Choice Apparel Company LLC and the members of First Choice, including the Company’s CEO and director, Roberto Luciano, pursuant to which 40,000,000 shares of the Company’s common stock is expected to be issued to the members of First Choice in exchange for all of the shares in First Choice. Upon completion of the Exchange, First Choice will become the Company’s wholly-owned subsidiary and the members of First Choice will then own a ‘controlling interest’ in the Company, representing approximately 98.1% of the current voting shares of the Company on a fully dilutive basis. The Exchange is expected to be closed in December, 2014.
Comparatively, we had revenue of $ 1,524,576 for the fiscal year ended June 30, 2013, of which $811,136 was from commissions due to sales of insurance products, including mortgage life insurance and funeral expense insurance, and $713,440 from the sales of leads during the fiscal year ended June 30, 2013. The revenue decreased by $1,212,788 or 79.55 %, during the current fiscal year ended June 30, 2014, because of the change in management of the Company on March 14, 2014 per Share Purchase Agreements discussed above.
Cost of sales includes the costs directly attributable to revenue recognition, such as marketing and leads generation costs, leads purchased costs, and payments to agents, which was $41,947, $48,181, and $67,359, respectively, for the current fiscal year ended June 30, 2014.
The cost of sales was $649,161, or 43 % of revenues for the fiscal year ended June 30, 2013.
Expenses included in other administrative expenses in the accompanying statement of operations are miscellaneous and sundry expenses pertaining to office expenses and office supplies that are immaterial to be presented separately on the face of the statement of operations.
Comparatively, net cash used in operating activities was $50,682 during the fiscal year ended June 30, 2013. Negative cash flow from operation during the fiscal year ended June 30, 2013 was due to the net loss of $48,715, the increase in accounts receivable by $1,780, the increase in rent deposit by 4,578, plus the decrease in accounts payable in amount of $31,987, offset by the amortization of debt discount of $484, the imputed interest expense of $10,000, and the increase in accrued payroll taxes by $25,892.
Net cash provided by financing activities was $85,238 for the current fiscal year ended June 30, 2014 due to $4,662 bank overdraft, $66,229 if proceeds from issuance of convertible debenture, $39,205 of net proceeds from factory arrangements, offset by $24,858 repayment of loans from related party. Comparatively, cash provided by financing activities was $45,484 for the current fiscal year ended June 30, 2013 due to proceeds from related party loans.
Revenue Recognition - The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
We had a bank overdraf of $4,682 as of June 30, 2014, and the accumulated deficit as of June 30, 2014 was $11,767,911. The Company’s current cash on hand is not sufficient to meet our working capital requirements for the next twelve month period.
Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new investors to alleviate the Company’s working deficiency, and 2) implement a plan of exchange with First Choice Apparel Company LLC, which is an e-commerce company generating sales revenues through online trading. The Company’s continued existence is dependent upon its ability to resolve it liquidity problems and increase profitability in its current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. The accompanying financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.
The Report of Independent Registered Public Accounting Firm issued by Bongiovanni & Associates, CPAs for the audited financial statements for the year ended June 30, 2013 and the Report of Independent Registered Public Accounting Firm issued by D. Brooks and Associates CPA's, P.A. for the audited financial statements for current fiscal year ended June 30, 2014 are included herein immediately preceding the audited financial statements.