10QSB 1 cti10qsb093006.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 September 30, 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: Nevada 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 November 8, 2006, there were 147,292,747 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 17 Item 3. Controls and Procedures 18 PART II - Other Information 19 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Balance Sheet September 30, 2006 (Unaudited) 4 Consolidated Statements of Operations For The Three Month Periods Ended September 30, 2006 and 2005 and the Period from September 20, 1996 (Inception) to September 30, 2006 (Unaudited) 5 Statements of Cash Flows For The Three Month Periods Ended September 30, 2006 and 2005 and the Period from September 20, 1996 (Inception) to September 30, 2006 (Unaudited) 6 Notes to Unaudited Financial Statements 7 3 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2006 (UNAUDITED) ASSETS ------ CURRENT ASSETS: Due from related party $ 903 ----------- $ 903 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- CURRENT LIABILITIES: Accounts payable and accrued expenses $ 408,104 Notes payable - related parties 127,500 ----------- Total current liabilities 535,604 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 3,238,334 Deficit accumulated during the development stage (3,915,328) ----------- Total stockholders' deficit (534,701) ----------- $ 903 =========== 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 PERIODS ENDED SEPTEMBER 30, 2006 AND 2005 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2006 (UNAUDITED) For the Period Three Month Periods Ended From September 20, September 30, 1996 (Inception) 2006 2005 to September 30, 2006 ------------- ------------- --------------------- COSTS AND EXPENSES Product Launch Expenses $ -- $ -- $ 1,077,785 Impairment of Assets -- -- 988,443 General & Administrative Expenses (6,020) 8,571 1,477,890 ------------- ------------- --------------------- TOTAL COSTS AND EXPENSES (6,020) 8,571 3,544,118 OTHER INCOME (EXPENSES) Other Income 5 -- 118 Settlement Income -- -- 52,600 Litigation Settlement -- -- (135,000) ------------- ------------- --------------------- TOTAL OTHER INCOME (EXPENSES) 5 -- (82,282) ------------- ------------- --------------------- NET LOSS BEFORE INCOME TAXES (6,015) (8,571) (3,626,400) Provision of Income Taxes -- 1,600 10,400 ------------- ------------- --------------------- NET LOSS $ (6,015) $ (10,171) $ (3,636,800) ============= ============= ===================== WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED 142,292,747 142,292,747 ============= ============= BASIC AND DILUTED NET LOSS PER SHARE $ (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 THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2006 UNAUDITED September 20, 1996 September 30, September 30, (inception) to 2006 2005 September 30, 2006 ------------- ------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (6,015) $ (10,171) $ (3,636,800) Adjustments to reconcile net loss to net cash used in operating activities: Impairment of asset -- -- 742,643 Depreciation and amortization -- -- 13,155 Stock issued for services -- -- 496,352 Decrease in current assets: Prepaid expense -- -- (245,800) Increase (decrease) in current liabilities: Accrued expenses 5,127 (7,056) 323,571 ------------- ------------- ------------------ Net cash used in operating activities (888) (17,227) (2,306,879) ------------- ------------- ------------------ 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 (744) (17,818) (904) 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 (2,251) 55,000 127,500 ------------- ------------- ------------------ Net cash provided by (used in) financing activities (2,995) 37,183 2,416,877 ------------- ------------- ------------------ NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (3,882) 19,956 -- CASH & CASH EQUIVALENTS, BEGINNING BALANCE 3,882 648 -- ------------- ------------- ------------------ CASH & CASH EQUIVALENTS, ENDING BALANCE $ -- $ 20,604 $ -- ============= ============= ==================
The accompanying notes are an integral part of these financial statements. 6 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED 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 (Note 12). 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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, 2006. 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 three months ended September 30, 2006 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2007. 7 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Concierge Technologies, Inc. (parent) and its wholly owned subsidiary, Planet Halo, Inc. All significant inter-company transactions and accounts have been eliminated in consolidation. Use of estimates The preparation of financial statements is in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Basic and diluted 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". SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Stock-based compensation In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related interpretations with pro forma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The company uses the intrinsic value method prescribed by APB25 and has opted for the disclosure provisions of SFAS No.123. The implementation of this standard did not have any material impact on the Company's financial statements. Issuance of shares for service Valuation of shares for services is based on the estimated fair market value of the services performed. Fair value of financial instruments Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value. 8 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition Revenue is recognized when earned. The Company's revenue recognition policies are in compliance with all applicable accounting regulations, including American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition, SOP 98-9, Modification of SOP 97-2 and Staff accounting bulletin (SAB) 104. With Respect to Certain Transactions. Revenue from license programs is recorded when the software has been delivered and the customer is invoiced. Revenue from packaged product sales to and through distributors and resellers is recorded when related products are shipped. The Company does not charge monthly service fee, instead charges only one-time purchase price and the option of buying upgrades at a fixed fee based on fair value of the upgrade. When the revenue recognition criteria required for distributor and reseller arrangements are not met, revenue is recognized as payments are received. Costs related to insignificant obligations, which include telephone support for certain products, are accrued. Provisions are recorded for returns, concessions and bad debts. Cost of revenue includes direct costs to produce and distribute product and direct costs to provide online services, consulting, product support, and training and certification of system integrators. Research and development costs are expensed as incurred. The company did not earn any revenue in the years ended June 30, 2006 and 2005. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 3. RECENT PRONOUNCEMENTS In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements: a. A brief description of the provisions of this Statement b. The date that adoption is required c. The date the employer plans to adopt the recognition provisions of this Statement, if earlier. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements. 9 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements. 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. 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. This Statement is effective as of the beginning of the Company's first fiscal year that begins after September 15, 2006. Management believes that this statement will not have a significant impact on the consolidated financial statements. 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 10 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS or issued after the beginning of the Company's first fiscal year that begins after September 15, 2006. The Company has not evaluated the impact of this pronouncement its financial statements. 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. We are evaluating the effect the adoption of this interpretation will have on its financial position, cash flows and results of operations. 4. 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 did not earn any revenue during the three month period ended September 30, 2006. The Company has accumulated deficit of $3,915,328, a net loss of $6,015 during the three month period ended September 30, 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, which includes 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 quarter ended September 30, 2006, towards (i) obtaining additional equity (ii) management of accrued expenses and accounts payable (iii) liquidation of the software "PCA(TM)" and (vi) searching for a suitable strategic partner. Management believes that the above actions will allow the Company to continue operations through the next fiscal year. 5. DUE FROM RELATED PARTY Concierge Technologies, Inc. has no bank account in its own name. Wallen Group, a consulting company headed by the president and director of the Company, maintains an administrative account for the Company. As of September 30, 2006, $904 is due from Wallen Group. 11 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. NOTES PAYABLE - RELATED PARTIES Notes payable consisted of the following at September 30, 2006: Notes payable to shareholder, interest rate of 8%, unsecured and payable on October 1, 2006 (past due) 35,000 Notes payable to director/shareholder, non-interest bearing unsecured and payable on demand 8,500 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 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 February 1, 2006 2,500 ----------- Notes payable to director/shareholder, interest rate of 6%, Unsecured and payable on September 1, 2007 1,000 ----------- Total Notes payable $ 127,500 =========== The Company has recorded interest expense payable to related parties, amounting to $2,562 and $2,040 for the three month periods ended September 30, 2006 and 2005, respectively. 12 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. 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 are subject to the contingency that they may 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 has treated all such shares issued since December 1998, as Common stock issued subject to contingency. Total shares issued subject to contingency through June 30, 2006, were 680,504 for cash and services amounting to $266,610. 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 is not completed prior to November 31, 2000, the obligation of the Company under this agreement may be 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 is 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 does not concede that there was no exemption from registration available for this offering. Nevertheless, should the aforementioned circumstances have constituted general advertising or general solicitation, CI would be 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 have been available with respect to the sale of these shares, the persons who bought them would be entitled, under the Securities Act of 1933, to the return of their subscription amounts if actions to recover such monies should be filed within one year after the sales in question. Accordingly, the amounts received by CI from the sale of these shares are 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. 13 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. 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. 9. 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 twelve months ended June 30, 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. On August 10, 2006 the Company paid the minimum tax requirement for the fiscal year ending June 30, 2007 to the State of California, and together with a penalty payment in the amount of $33.59 paid on July 27, 2006, settles all amounts owing to the State of California Franchise Tax Board. The amount reserved for income tax in the accompanying financial statements as been appropriately adjusted to reflect the current status. On August 12, 2006, the Company signed a promissory note and borrowed $1,000 from David Neibert, a director. The Note is due before or on September 1, 2007 and bears an interest rate of 6%. Upon default, the holder has the right to foreclose or otherwise enforce all liens or security interests securing payment hereof from the Company. August 17, 2006, Planet Halo closed its bank account at Schwab, repaid the outstanding unsecured note in the amount of $3,251 to Marc Angell, and transferred the balance of $636 to The Wallen Group account maintained for Concierge. 10. COMMITMENT The Company is co-located with the president of the Company and pays no rent. Rent expense was $0 for the three month periods ended September 30, 2006 and 2005. 11. 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 in the year 2002 as litigation settlement in the accompanying financial statements. This amount is included in accrued expenses as of September 30, 2006. 14 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. 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 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. The Company evaluated value of its prepaid expenses during the year ended June 30, 2004 and based upon uncertainness surrounding the utilization of its software for the "PCA" development, the Company has recorded an impairment of the prepaid expense amounting $245,800. 15 CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY (A development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. 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 consummate the merger, the Secretary of State in California requires a Certificate of Tax Clearance from the Franchise Tax Board. The delay in acquiring the tax clearance caused for the Nevada Corporation to become inactive. On September 22, 2006 the Franchise Tax Board issued the tax clearance certificate. On October 6, 2006 the tax clearance certificate from California, and the other documents necessary to reactivate Concierge Technologies, Inc. in Nevada, were filed in the respective states. The Secretary of State of California has acknowledged receipt of the tax clearance certificate and the merger documents and the Articles of Merger were filed with the State of California on October 5, 2006. Concierge Technologies, Inc. is now a Nevada corporation. Consent of Service will be to the Resident Agent in Nevada, Capitol Corporate Services, Inc., 202 South Minnesota Street, Carson City, NV 89703. 14. SUBSEQUENT EVENTS On October 2, 2006, the Company signed a promissory note and borrowed $12,500 from Marc Angell, a director. The Note was repaid in full on October 25, 2006. On October 16, 2006 the Company signed a promissory note and borrowed $15,000 from Polly Force Ltd, a Hong Kong corporation and affiliate of the Company. The Note is due before or on November 1, 2007 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. On July 19, 2006 Allen Kahn, Chairman of the Board, received a unanimous vote from the directors in favor of issuing Five Million (5,000,000) shares of stock to compensate Ryan Consultants Ltd, a Jersey, UK corporation, who have provided the services for the previous two years. The shares of stock were issued on November 1, 2006. 16 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 acquire revenue streams by partnering and other business combinations with development stage wireless and technology companies seeking marketing expertise and investment liquidity, o source a buyer for our PCA pre-paid inventory in bulk form 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. On June 17, 2002, David W. Neibert became our President and Chief Operations Officer. Upon assuming that role, he moved the general accounting and 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 September 30, 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 17 are continuing to provide services without cash compensation; however, there are no assurances that this situation will continue for the indefinite future. 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 and pay our required state income taxes. 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 to realize our objectives with third parties. 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 carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures provide reasonable assurances that the information the Company is required to disclose in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period required by the Commission's rules and forms. There were no significant changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting. 18 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.** 3.7 - Articles of Incorporation of Concierge Technologies, Inc. filed with the Secretary of State of Nevada on April 20, 2005.+ 3.8 - Articles of Merger between Concierge Technologies, Inc., a California corporation, and Concierge Technologies, Inc., a Nevada corporation, filed with the Secretary of State of Nevada on March 2, 2006 and the Secretary of State of California on October 5, 2006.+ 10.1 - Agreement of Merger between Starfest, Inc. and Concierge, Inc.* 14 - Code of Ethics for CEO and Senior Financial Officers.*** 19 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. 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. +Previously filed with Form 10-K FYE 06-30-06 on October 13, 2006; 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: November 20, 2006 CONCIERGE TECHNOLOGIES, INC. /s/ David W. Neibert By ---------------------------- David W. Neibert, President 20