10QSB 1 cti10qsb033106.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ CONCIERGE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Commission File No. 000-29913 State of Incorporation: California IRS Employer I.D. Number: 95-4442384 22048 Sherman Way, Suite 301 Canoga Park, CA 91303 818-610-0310 ---------------------------------------------------- (Address and telephone number of registrant's principal executive offices and principal place of business) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of May 5, 2006, there were 142,292,747 shares of the Registrant's Common Stock, $0.001 par value, outstanding. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [X] No [ ] Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] 1 TABLE OF CONTENTS Page ---- PART I - FINANCIAL INFORMATION 3 Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis or Plan of Operation 15 Item 3. Controls and Procedures 16 PART II - Other Information 17 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Balance Sheet March 31, 2006 (Unaudited) 4 Consolidated Statements of Operations For The Three Month And Nine Month Periods Ended March 31, 2006 and 2005 and the Period from September 20, 1996 (Inception) to March 31, 2006 (Unaudited) 5 Statements of Cash Flows For The Nine Month Periods Ended March 31, 2006 and 2005 and the Period from September 20, 1996 (Inception) to March 31, 2006 (Unaudited) 6 Notes to Unaudited Financial Statements 7 3 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) CONSOLIDATED BALANCE SHEET MARCH 31, 2006 (UNAUDITED) ASSETS ------ CURRENT ASSETS: Cash & cash equivalents $ 3,872 Due from related party 3,630 ----------- $ 7,502 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- CURRENT LIABILITIES: Accrued expenses $ 385,242 Notes payable - related parties 121,251 ----------- Total current liabilities 506,493 STOCKHOLDERS' DEFICIT: Preferred stock, par value $.001 per share; 10,000,000 shares authorized; none issued -- Common stock, $.001 par value; 190,000,000 shares authorized; issued and outstanding 142,292,747 142,293 Additional paid in capital 3,246,834 Deficit accumulated during the development stage (3,888,118) ----------- Total stockholders' deficit (498,991) ----------- $ 7,502 =========== The accompanying notes are an integral part of these financial statements. 4
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED MARCH 31, 2006 AND 2005 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO MARCH 31, 2006 (UNAUDITED) For the Period Three Month Periods Ended Nine Month Periods Ended From September 20, March 31, March 31, 1996 (Inception) 2006 2005 2006 2005 to March 31, 2006 ------------- ------------- ------------- ------------- ------------------ COSTS AND EXPENSES Product Launch Expenses $ -- $ -- $ -- $ -- 1,077,785 Impairment of Assets -- -- -- 496,843 988,443 General & Administrative Expenses 7,368 9,973 21,756 34,667 1,450,646 ------------- ------------- ------------- ------------- ------------------ TOTAL COSTS AND EXPENSES 7,368 9,973 21,756 531,510 3,516,874 OTHER INCOME (EXPENSES) Other Income -- -- -- -- 85 Settlement Income -- -- -- -- 52,600 Litigation Settlement -- -- -- -- (135,000) ------------- ------------- ------------- ------------- ------------------ TOTAL OTHER INCOME (EXPENSES) -- -- -- -- (82,315) ------------- ------------- ------------- ------------- ------------------ NET LOSS BEFORE INCOME TAXES (7,368) (9,973) (21,756) (531,510) (3,599,189) Provision of Income Taxes -- -- 1,600 1,600 10,400 ------------- ------------- ------------- ------------- ------------------ NET LOSS $ (7,368) $ (9,973) $ (23,356) $ (533,110) (3,609,589) ============= ============= ============= ============= ================== WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED 142,292,747 142,292,747 142,292,747 142,292,747 ============= ============= ============= ============= BASIC AND DILUTED NET LOSS PER SHARE $ (0.00) $ (0.00) (0.00) $ (0.00) ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. 5
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR NINE MONTH PERIODS ENDED MARCH 31, 2006 AND 2005 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO MARCH 31, 2006 (UNAUDITED) September 20, 1996 March 31, March 31, (inception) to 2006 2005 March 31, 2006 ------------------ ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (23,356) $ (543,083) $ (3,609,589) Adjustments to reconcile net loss to net cash used in operating activities: Impairment of asset -- 496,843 742,643 Depreciation and amortization -- 245 13,155 Stock issued for services -- -- 496,352 Decrease in current assets: Prepaid expense -- -- (245,800) Increase (decrease) in current liabilities: Accrued expenses (11,732) 18,546 300,708 ------------------ ------------------ ------------------ Net cash used in operating activities (35,088) (27,449) (2,302,531) ------------------ ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Cash received on acquisition of subsidiary -- -- 2,912 Note receivable - related party -- -- (100,000) Acquisition of equipment -- -- (12,910) ------------------ ------------------ ------------------ Net cash used in investing activities -- -- (109,998) ------------------ ------------------ ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Due from related party 61 -- (3,630) Proceeds from Issuance of Shares -- -- 587,007 Proceeds from stock subscription forfeited -- -- 10,000 Proceeds from advance subscriptions -- -- 1,772,983 Costs and expenses of advance subscriptions -- -- (79,710) Proceeds from (payments to) related party loans 38,251 (75,000) 129,751 ------------------ ------------------ ------------------ Net cash provided (used) by financing activities 38,312 (75,000) 2,416,401 ------------------ ------------------ ------------------ NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 3,224 (102,449) 3,872 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 648 103,766 -- ------------------ ------------------ ------------------ CASH & CASH EQUIVALENTS, ENDING BALANCE $ 3,872 $ 1,317 $ 3,872 ================== ================== ==================
The accompanying notes are an integral part of these financial statements. 6 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Concierge Technologies, Inc. (the "Company"), a California corporation, was incorporated on August 18, 1993 as Fanfest, Inc. In August 1995 the Company changed its name to Starfest, Inc. During 1998, the Company was inactive, just having minimal administrative expenses. During 1999 the Company attempted to pursue operations in the online adult entertainment field. There were no revenues from this endeavor. On March 20, 2002, the Company changed its name to Concierge Technologies, Inc. In March 2000, the Company acquired approximately 96.83 percent (8,250,000 shares) of the common stock of MAS Acquisition XX Corp. (MAS XX) for $314,688. This amount was expensed in March 2000, as at the time of the acquisition MAS XX had no assets or liabilities and was inactive. On March 21, 2002, the Company consummated a merger with Concierge, Inc. Concierge, Inc. ("CI") was a development stage enterprise incorporated in the state of Nevada on September 20, 1996. The CI had undertaken the development and marketing of a new technology, a unified messaging product "The Personal Communications Attendant" ("PCA(TM)"). "PCA(TM)" will provide a means by which the user of Internet e-mail can have e-mail messages spoken to him/her over any touch-tone telephone or wireless phone in the world. To-date, the Company has not earned any revenue. On April 6, 2004 the Company entered into a Stock Purchase Agreement with Planet Halo, Inc. (PHI) whereby, the Company purchased all of the outstanding and issued shares of PHI in exchange for 10 million shares of the Company's common stock valued at $500,000. On May 5, 2004 the Company issued the shares on a ratio of 8.232 shares of its common stock to each share of PHI stock to the former shareholders of PHI. The existing PHI shares were then retired and cancelled. The Company is now the sole shareholder of PHI, a Nevada corporation. On May 5, 2004 the President of PHI was officially appointed to the Board of Directors of the Company along with one other PHI named appointee. PHI is a development stage company in the wireless telecommunications industry and plans to design, manufacture, sale and distribution of hardware and services that include a hand-held wireless Internet appliance/cell phone known as the "Halo", and an integrated wireless gateway interface to the Internet named "Halomail." The accounting policies of the Company are in accordance with generally accepted accounting principles and conform to the standards applicable to development stage companies. Basis of Preparation The accompanying Interim Condensed Financial Statements are prepared in accordance with rules set forth in Regulation SB of the Securities and Exchange Commission. Accordingly, these statements do not include all disclosures required under generally accepted principles and should be read in conjunction with the audited financial statements included in the Company's form 10KSB for the year ended June 30, 2005. In the opinion of management, all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the nine months ended March 31, 2006 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2006. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 7 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS 2. RECENT PRONOUNCEMENTS In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company's first fiscal year that begins after September 15, 2006. In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal 2006. In June 2005, the EITF reached consensus on Issue No. 05-6, determining the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on its consolidated financial position or results of operations. In March 2006 FASB issued SFAS 156 `Accounting for Servicing of Financial Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement: 1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract. 2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. 3. Permits an entity to choose `Amortization method' or `Fair value measurement method' for each class of separately recognized servicing assets and servicing liabilities. 8 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS 4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value. 5. Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. 3. GOING CONCERN The accompanying financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern. However, the Company has accumulated deficit of $3,888,118 including a net loss of $23,356 during the nine month period ended March 31, 2006. The continuing losses have adversely affected the liquidity of the Company. Losses are expected to continue for the immediate future. The Company faces continuing significant business risks, including but not limited to, its ability to maintain vendor and supplier relationships by making timely payments when due. In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. Management devoted considerable effort from inception through the period ended March 31, 2006, towards (i) obtaining additional financing and (ii) management of accrued expenses and accounts payable. Management believes that the above actions will allow the Company to continue operations through the next twelve months. 4. DUE FROM RELATED PARTY Concierge Technologies, Inc. has no bank account in its own name. Wallen Group, a consulting company headed by David W. Neibert (the president and director of Concierge Technologies, Inc.), maintains an administrative account for Concierge Technologies, Inc. at Wells Fargo Bank. As of March 31, 2006, $3,630 is due from Wallen Group. The due from related party are non interest bearing, unsecured and due on demand. 5. NOTES PAYABLE - RELATED PARTIES On September 2, 2005, the Company signed a promissory note and borrowed $35,000 from a Company based in Hong Kong. The Note is due before or on October 1, 2006 and bears an interest rate of 8%. Upon default, the holder has the right to foreclose or otherwise enforce all liens or security interests securing payment hereof from the Company. 9 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS Notes payable to related parties consisted of the following at March 31, 2006: Note payable to shareholder, non interest bearing, unsecured, and due on demand $ 3,251 Notes payable to shareholder, interest rate of 10%, unsecured, and payable on July 31, 2004 (past due) 5,000 Notes payable to shareholder, interest rate of 10%, unsecured and payable on October 1, 2004 (past due) 28,000 Notes payable to shareholder, interest rate of 8%, unsecured and payable on October 1, 2004 (past due) 14,000 Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on September 1, 2004 (past due) 3,500 Notes payable to shareholder, interest rate of 8%, unsecured and payable on October 1, 2005 (past due) 20,000 Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on February 1, 2006 5,000 Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on June 1, 2006 5,000 Notes payable to director/shareholder, interest rate of 8%, unsecured and payable on June 1, 2006 2,500 Notes payable to shareholder, interest rate of 8%, unsecured and payable on October 1, 2006 35,000 ---------- Total Notes payable $ 121,251 ========== The Company has recorded interest expense payable to related parties, amounting to $7,638 and $4,786 for the nine month periods ended March 31, 2006 and 2005, respectively. 6. SHARES OF CONCIERGE, INC. ISSUED SUBJECT TO CONTINGENCY AND SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY Concierge, Inc. (CI) issued 117,184 shares for cash totaling $202,061 and 354,870 shares for services of $3,549 during the year ended June 30, 2000. Since December 1998, CI sold securities to persons in six states in the U. S. CI did not file Form D or other filings in any of the states or with the SEC for such shares and did not properly follow the requirements for complying with available exemptions in each state. Accordingly, all such shares were subject to the contingency that they might have been issued without the availability of an exemption from registration under the Securities Act of 1933 and under the securities laws of each of the six states. Therefore, CI had treated all such shares issued since December 1998, as Common stock issued subject to contingency. Total shares issued subject to contingency through December 31, 2004 were 680,504 for cash and services amounting to $266,610. 10 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS Concierge, Inc. (CI) entered into subscription agreements to issue "post merger" shares in exchange for cash. Through December 31, 2000, CI had received advance subscriptions for a gross amount of $1,255,500 before deducting associated costs of $79,710, for 5,928,750 post merger shares. In the event the merger between CI and the Company was not completed prior to November 31, 2000, the obligation of the Company under this agreement might have been satisfied by the issuance of shares in the Company equivalent on a pro-rata basis to the number of shares in "post merger" Corporation that were subject to this agreement. CI merged with the Company on March 20, 2002. The Company filed a registration statement with the Securities and Exchange Commission ("the Commission") on June 8, 2000 related to the proposed merger, naming CI as the entity proposed to be merged into the Company. From July 1, 2000 through September 15, 2000, CI received additionally $487,500 as advance subscription for 2,127,500 post merger shares in an offering intended to be exempt from registration pursuant to the provisions of Section 4(2) of the Securities Act of 1933 and of Regulation D, Rule 506 of the Commission. It was possible, but not certain, that the filing of the registration statement by the Company and the manner in which CI conducted the sale of the 2,127,500 post merger shares of common stock constituted "general advertising or general solicitation" by CI. General advertising and general solicitation are activities that are prohibited when conducted in connection with an offering intended to be exempt from registration pursuant to the provisions of Regulation D, Rule 506 of the Commission. CI did not concede that there was no exemption from registration available for this offering. Nevertheless, had the aforementioned circumstances constituted general advertising or general solicitation, CI would have been denied the availability of Regulation D, Rule 506 as an exemption from the registration requirements of the Securities Act of 1933 when it sold the 2,127,500 post merger shares of common stock after June 8, 2000. Should no exemption from registration had been available with respect to the sale of these shares, the persons who bought them would have been entitled, under the Securities Act of 1933, to the return of their subscription amounts if actions to recover such monies had been filed within one year after the sales in question. Accordingly, the amounts received by CI from the sale of these shares were set apart from Stockholders' Equity as "Subscription received for common stock subject to contingency" to indicate this contingency. The total contingent liabilities related to such shares amounted to $1,929,900 ($2,009,610 less cost and expenses of $79,710). On January 1, 2005, the Company re-classified such shares to its equity since the lapse of time had removed any contingencies because of applicable statutes of limitation. 7. COMMON STOCK On May 5, 2004 the Company issued 9,999,998 shares of its common stock valued at $500,000 in exchange for Planet Halo's 100% outstanding and issued shares on a ratio of 8.232 shares of the Company to each share of Planet Halo stock. 8. MERGER AGREEMENT On January 26, 2000 the Company entered into an agreement of merger with Concierge, Inc. (CI), a California Corporation. Under the agreement, the outstanding 1,376,380 share of common stock of the CI were converted into 96,957,713 common stock of the Company on the basis of 70.444 shares of the Company for each share outstanding of the CI. The 96,957,713 post merger shares were distributed to the shareholders of CI on a pro-rata basis. For accounting purposes, the transaction was treated as a recapitalization of the CI, with CI as the accounting acquirer (reverse acquisition), and was accounted for in a manner similar to a pooling of interests. The operations of the Company have been included with those of the CI from the acquisition date. The Company had 11 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS minimal assets before the merger and did not have significant operations prior to the merger. The merger was subject to approval by shareholders of both companies and Securities and Exchange Commission. The merger was consummated on March 20, 2002. 9. NET LOSS PER SHARE Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net loss per share is based upon the weighted average number of common shares outstanding. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of dilutive securities is anti-dilutive. 10. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95. During the nine months ended March 31, 2006, the Company paid all tax liabilities outstanding with the Franchise Tax Board of the State of California for the fiscal years ended June 30, 2003, 2004 and 2005, including all calculated penalties and interest, totaling $3,322.97. The amount reserved for income tax in the accompanying financial statements as been appropriately adjusted to reflect the current status. The Company paid $0 for interest during the nine month periods ended March 31, 2006 and 2005. 11. COMMITMENT The Company is co-located with the president of the Company and pays no rent. Rent expense was $0 for the nine month periods ended March 31, 2006 and 2005. 12. LITIGATION On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd against, jointly and severally, Concierge, Inc, Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus legal fees. The Company did not defend against the complaint by Brookside, which alleged that Brookside was entitled to a refund of their investment as a result of a breach of contract. Brookside had entered into a subscription agreement with Concierge, Inc., which called for, among other things, the pending merger between Starfest and Concierge to be completed within 180 days of the investment. The merger was not completed within 180 days and Brookside sought a refund of their investment, which Concierge was unable to provide. The Company has accrued the judgment amount of $135,000 as litigation settlement in the accompanying financial statements. This amount is included in accrued expenses as of March 31, 2006. 13. ACQUISITION & IMPAIRMENT OF INTANGIBLE ASSET On April 6, 2004 the Company and Planet Halo entered into Stock Purchase agreement whereby, when consummated, the Company would purchase all of the outstanding and issued shares of Planet Halo in exchange for 10 Million shares of the Company's common stock valued at $500,000. On April 20, 2004 all of the conditions of the acquisition were met apart from the issuance of the shares. On May 5, 2004, the Company issued the shares on a ratio of 8.232 shares of the 12 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS Company to each share of Planet Halo stock. The shares were issued directly to the shareholders of Planet Halo. The existing Planet Halo shares were retired and cancelled. The Company is now a sole shareholder of Planet Halo, a Nevada corporation. On May 5, 2004 the President of Planet Halo was officially appointed to the Board of Directors of the Company along with one other Planet Halo named appointee. Planet Halo is a development stage company involved in the wireless telecommunications industry through the design, manufacture, sale and distribution of hardware and services that include a hand-held wireless Internet appliance/cell phone known as the "Halo", and an integrated wireless gateway interface to the Internet named "Halomail." The purchase price was determined in arms-length negotiations between the parties. The assets acquired in this acquisition include without limitation computer hardware and goodwill. A summary of the Planet Halo assets acquired and consideration for is as follows: Allocated amount ---------------- Cash $ 2,912 Equipment, net 245 Goodwill 496,843 ----------- $ 500,000 =========== Consideration paid ------------------ 10,000,000 shares of common stock $ 500,000 =========== The Company evaluates intangible assets, goodwill and other long-lived assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. Potential impairment of goodwill is being evaluated in accordance with SFAS No. 142. The SFAS No. 142 is applicable to the financial statements of the Company beginning July 1, 2002. On December 31, 2004, the Company evaluated the valuation of goodwill based upon the performance and market value of the acquisition. The Company determined the goodwill is impaired and recorded the impairment of $496,843 in the accompanying financial statements. 14. FORMATION OF NEVADA SUBSIDIARY On April 20, 2005, the Company formed a subsidiary corporation under the laws of the State of Nevada. The subsidiary corporation, Concierge Technologies, Inc. (Nevada) was formed for the purpose of re-domesticating the Company stock in the State of Nevada and dissolving the California Corporation. The action was taken pursuant to a vote in favor by a majority of shareholders of the Company. On March 2, 2006, the Company filed articles of merger with the Secretary of State in Nevada effectuating the merger of Concierge Technologies, Inc. of California into the Nevada subsidiary. In order to dissolve the California corporation, the Secretary of State in California requires a Certificate of Tax Clearance from the Franchise Tax Board. Although the Company has paid its tax obligations and 13 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO UNAUDITED FINANCIAL STATEMENTS has a letter of good standing from the Franchise Tax Board, the Tax Clearance Certificate may not be forthcoming until as late as December 2006. Until that time, the State of California considers the merger as pending. When the documents are produced the Company will dissolve its California corporation, which is now inactive. 14 Item 2. Plan of Operation Our plan of operation for the next twelve months is to do the following: o exploit the opportunities afforded us through our acquisition of Planet Halo by implementing a sales strategy to deploy the wireless gateway, Halomail, on synergistic networks, o properly position the corporation and its structure to accommodate a business combination with a funding partner by relocating the corporation to Nevada, o continue efforts to liquidate our existing, pre-paid, inventory of the PCA product and utilize the proceeds for working capital. On April 6, 2004, our company signed a definitive agreement to acquire the privately-held company, Planet Halo, in a cash-free stock transaction. On April 20, 2004 the companies completed the necessary documentation to effect the acquisition. On May 5, 2004 Concierge Technologies instructed its transfer agent to issue the purchase price in shares of common stock to the shareholders of Planet Halo. The transaction was officially closed and the shares considered issued as of May 5, 2004. Planet Halo is a development-stage company that has developed a prototype, hand-held, wireless Internet appliance named the "Halo". The Halo is able to send and receive email, short messages, run applications such as address book, calculator, scheduler, etc and operates as a fully functional cellular telephone. In addition to the Halo device Planet Halo also has an exclusive license to deploy a proprietary wireless gateway in North America. The gateway, named "Halomail", provides a secure interface for wireless access to the Internet, and to the worldwide web. Users of the Halo or other wireless devices may use Halomail as their email client, a secure connection for monetary transactions, browse the worldwide web, connect to their own Intranets, and essentially use the gateway as a secure on-ramp to the Internet in much the same way as a wired connection operates. Concierge plans to move the Halo device into production readiness and to seek partners for the launch of the Halomail gateway on service provider networks. Planet Halo continues to be operated by its President, Marc Angell, from his offices located in Ventura, California. Concierge Technologies has not approved an operating budget for Planet Halo and is currently reliant upon Marc Angell to continue providing his services, including operating expenses, for the near term. There is no assurance that this situation will endure for the long term, or that Concierge will not be required to fund its operations in the near future. On June 17, 2002, David W. Neibert became our President and Chief Operations Officer. Upon assuming that role, he moved the general accounting and 15 administrative offices of our company to a co-location with his firm, The Wallen Group. We do not currently pay rent and have no lease for the facilities being provided by Mr. Neibert. As of March 31, 2006, we had no employees and no fixed overhead other than the variable cost of web hosting, legal and professional fees, fees charged by our transfer agent and minimum tax payments. We have a limited amount of office fixtures, furniture and computer equipment acquired with the Planet Halo transaction. Our president, the president of Planet Halo, our CEO and directors are continuing to provide services without cash compensation; however, there are no assurances that this situation will continue for the indefinite future. In the event our President is unwilling to continue in his capacity without compensation, we expect that our CEO and/or the President of Planet Halo will assume those duties on behalf of the Company. Liquidity Our primary source of operating capital has been funding sourced through insiders or shareholders under the terms of unsecured promissory notes. In two instances we have sold shares of our common stock in exchange for cash. The amount of borrowed funds and funds from equity sales has been sufficient to pay the cost of legal and accounting fees as necessary to maintain a current reporting status with the Securities and Exchange Commission. However, sufficient funds have been unavailable to significantly pay down commercial and vendor accounts payable. We have also been unable to pay salaries to our officers and several of our outside consultants who had performed services during the past and present fiscal years. Although our management is continuing to provide services to the Company for the near term without cash compensation, we will still require additional funding to maintain the corporation and market the remaining inventory of the PCA product. With the acquisition of Planet Halo there are added demands for operating capital. The Company has been aggressively pursuing financing for the funding of the Halomail service implementation, however the financial advisor retained to assist with the effort has not produced a satisfactory result. Until such time as definitive agreements are reached with investors, such a financing remains speculative. If the financing is not available, then Halomail may not be put into service. In the event the financing is not completed, our funds and inventory assets will be exhausted at some point and continuing operations may be impossible. Item 3. Controls and Procedures Evaluation of disclosure controls and procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2006. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. 16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are filed, by incorporation by reference, as part of this Form 10-QSB: Exhibit Item ------- ---- 2 - Stock Purchase Agreement of March 6, 2000 between Starfest, Inc. and MAS Capital, Inc.* 3.1 - Certificate of Amendment of Articles of Incorporation of Starfest, Inc. and its earlier articles of incorporation.* 3.2 - Bylaws of Concierge, Inc., which became the Bylaws of Concierge Technologies upon its merger with Starfest, Inc. on March 20, 2002.* 3.5 - Articles of Merger of Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of Nevada on March 1, 2002.** 3.6 - Agreement of Merger between Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of California on March 20, 2002.** 10.1 - Agreement of Merger between Starfest, Inc. and Concierge, Inc.* 14 - Code of Ethics for CEO and Senior Financial Officers.*** 31 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.1 - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 17 32.1 - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *Previously filed with Form 8-K12G3 on March 10, 2000; Commission File No. 000-29913, incorporated herein. **Previously filed with Form 8-K on April 2, 2002; Commission File No. 000-29913, incorporated herein. ***Previously filed with Form 10-K FYE 06-30-04 on October 13, 2004; Commission File No. 000-29913, incorporated herein. SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: May 10, 2006 CONCIERGE TECHNOLOGIES, INC. By /s/ David W. Neibert ---------------------------- David W. Neibert, President 18