10KSB 1 starfest10ksb2001.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 333-38838 Concierge Technologies, Inc. (Exact name of registrant as specified in its charter) (Previous name of Starfest, Inc. was changed on March 20, 2002) California 000-29913 95-4442384 ---------- --------- ---------- (state of (Commission File Number) (IRS Employer incorporation) I.D. Number) 531 Main Street, #963 El Segundo, CA 90245 310-645-1582 ------------------------------------------------------- (Address and telephone number of registrant's principal executive offices and principal place of business) Starfest, Inc. 4602 East Palo Brea Lane Cave Creek, AZ 85331 480-551-8280 ------------------------------------------------------ (Former name or address, if changed since last report) Securities registered under Section 12(b) of the Exchange Act: Title of each class: None. Name of each exchange on which registered: None. Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value ------------------------------ (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year: None. State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days: $866,638 computed by reference to the $0.145 average of the bid and asked price of the Company's Common Stock on April 8, 2001. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 119,957,713 shares of Common Stock, $0.001 par value, on April 8, 2002. DOCUMENTS INCORPORATED BY REFERENCE If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (3) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The list documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990). None. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] TABLE OF CONTENTS Page ---- Item 1. Description of Business 1 Business Development 1 Business of Starfest 2 Plan of Operation 3 Number of Employees 4 Item 2. Description of Property 4 Facilities 4 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Security Holders 4 Item 5. Market for Common Equity and Related Stockholder Matters 4 Holders 5 Rule 144 and Rule 145 Restrictions on Trading 5 Dividends 7 Penny Stock Regulations 8 The Penny Stock Suitability Rule 9 The Penny Stock Disclosure Rule 10 Effects of the Rule 11 Recent Sales of Unregistered Securities 11 Item 6. Plan of Operations 11 Information About Concierge, Inc. 12 Overview 12 Concierge's Plan of Operation 12 Description of the PCATM 13 The Market 14 Competition 15 Distribution Methods 15 Production Costs 16 Government Approval of Principal Products 16 Government Regulations 17 Properties 17 Dependence on Major Customers 17 Seasonality 17 Research and Development 17 Environmental Controls 17 Number of Employees 17 Venue of Sales 17 Patents, Trademarks, Copyrights and Intellectual Property 17 Legal Proceedings 17 Concierge's Management's Plan of Operation 17 Liquidity 18 Product Research and Development 19 Other Expected Developments 19 Market for Common Equity and Related Stockholder Matters 20 Market Information 20 Holders 20 i Dividends 20 Changes In and Disagreements With Accountants on Accounting and Financial Disclosures 20 Item 7. Financial Statements 22 Item 8. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure 47 Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 48 Section 16(a) Beneficial Ownership Reporting Compliance 48 Item 10. Executive Compensation 49 Long-Term Compensation 50 Item 11. Security Ownership of Certain Beneficial Owners and Management 50 Item 12. Certain Relationships and Related Transactions 52 Item 13. Exhibits and Reports on Form 8-K 52 (a) Exhibits 52 (b) Reports on Form 8-K 52 Signatures 54 ii ITEM 1. DESCRIPTION OF BUSINESS Business Development Starfest, Inc. was incorporated in California on August 18, 1993 as "Fanfest, Inc." On August 29, 1995 its name was changed to Starfest, Inc. Pursuant to a Stock Purchase Agreement (the "Purchase Agreement") dated March 6, 2000 between MAS Capital, Inc., an Indiana corporation, the controlling shareholder of MAS Acquisition XX Corp. ("MAS XX"), an Indiana corporation, and Starfest, approximately 96.83 percent (8,250,000 shares) of the outstanding shares of common stock of MAS Acquisition XX Corp. were exchanged for $100,000 and 150,000 shares of common stock of Starfest in a transaction in which Starfest became the parent corporation of MAS XX. At the time of this transaction, the market price of Starfest's common stock was $1.50 bid at closing on March 7, 2000 on the OTC Bulletin Board. Accordingly, the consideration Starfest paid for the 96.83 percent interest was valued at $325,000. Concierge loaned to Starfest the $100,000 cash portion of the consideration evidenced by a no-interest, demand note. Michael Huemmer, the president of Starfest, loaned to Starfest the 150,000 shares of common stock of Starfest that was the stock portion of the consideration. Upon execution of the Purchase Agreement and the subsequent delivery of $100,000 cash and 150,000 shares of common stock of Starfest on March 7, 2000, to MAS Capital Inc., pursuant to Rule 12g-3(a) of the General Rules and Regulations of the Securities and Exchange Commission, Starfest became the successor issuer to MAS Acquisition XX Corp. for reporting purposes under the Securities and Exchange Act of 1934 and elected to report under the Act effective March 7, 2000. MAS XX had no business, no assets, and no liabilities at the time of the transaction. Starfest entered into the transaction solely for the purpose of becoming the successor issuer to MAS Acquisition XX Corp. for reporting purposes under the 1934 Exchange Act. Prior to this transaction, Starfest was preparing to register its common stock with the Commission in order to avoid being delisted by the OTC Bulletin Board. By engaging in the Rule 12g-3(a) transaction, Starfest avoided the possibility that its planned registration statement with the Commission would not be fully reviewed by the Commission's staff before an April 2000 deadline, which would result in Starfest's common stock being delisted on the OTC Bulletin Board. 1 On December 31, 2001, a change in control of Starfest could occur in the future, should the shareholders of Starfest and Concierge, Inc., a Nevada corporation, approve an agreement of merger entered into between Starfest and Concierge on January 26, 2000. The proposed merger was to be submitted to the shareholders of each of Starfest and Concierge pursuant to a Form S-4 Prospectus-Proxy Statement filed with the Commission. As described in Starfest's Form 8-K filed on April 2, 2002 with the Commission (Commission File No. 000-29913), the shareholders of Starfest and Concierge did approve the merger, and the merger was legally effected on March 20, 2002. Pursuant to the agreement of merger between Starfest and Concierge, - Starfest was the surviving corporation, - The shareholders of Concierge received pro rata for their shares of common stock of Concierge, 99,957,713 shares of common stock of Starfest in the merger, and all shares of capital stock of Concierge were cancelled, - The officers and directors of Concierge became the officers and directors of Starfest, and - The name of Starfest was changed to "Concierge Technologies, Inc." Business of Starfest Starfest's initial business was the production and promotion of theme events involving numerous artists and performers and designed to attract mass audiences of fans drawn by the theme. In 1994 and 1995 it produced "Fanfest," which was held at the Fairplex at the Los Angeles County Fairgrounds, and which won the Airplay International Award as the "Country Music Event of the Year." In 1995 the event won the Country Music Associations of America's award as the "Best Country Event of the Year." The two events lost money, however. By the end of 1995, Starfest had a retained deficit of $1,228,703. In 1996 the event was renamed "Starfest" and was again held in Los Angeles. In 1997 the event was planned but was cancelled before being held. At the end of 1997, Starfest had no business and a retained deficit of $2,135,885. The company was essentially dormant in 1998, losing only $2,366 for the year, with its activities being limited to dealing with creditors and to attempting to raise capital for the resumption of business. 2 In 1999, with no business, Starfest turned the management of the company over to three individuals involved in the adult entertainment business - Billy Harbour, John Whitley and Pamela Miller of southwestern Virginia. Under this new direction the company bought three websites on the Internet - www.starfest.com, www.adultstar.com and www.adultstars.com. Starfest also purchased and paid $12,000 for twelve additional websites on the Internet, but the written transfer of the websites was never obtained, and the right to obtain the transfer of those websites has been sold and transferred to unrelated third parties. Stockholders owning a majority of the outstanding stock of Starfest regained control of the management of the company by obtaining the resignations of directors associated with the Virginia management and having the remaining directors elect Michael Huemmer as president and Janet Alexander as secretary of the company. On December 31, 1999, pursuant to the written consent of persons holding a majority of the outstanding shares of common stock of the company, Starfest sold all the remaining assets of the company associated with the adult entertainment business for $10,000. The assets consisted of the three adult entertainment websites and the right to obtain the additional twelve websites. Starfest applied this and its other cash assets to the payment of outstanding liabilities. Starfest suffered a loss of $518,606 for the year of 1999. On January 18, 2000, Starfest and Concierge executed a letter of intent to submit to their stockholders a proposal to merge. The agreement of merger was executed on January 26, 2000. Starfest was the surviving corporation of the merger, but the business and management of the merged companies would be that of Concierge. Pending approval of the merger, Starfest had no business. Prior to the merger, Starfest had one employee, its president. Starfest's management prior to the March 20, 2002 merger with Concierge consisted of two persons, Michael Huemmer, president, and Janet Alexander, secretary. Plan of Operation ------------------- Starfest's sole plan of operation at the end of fiscal year 2001 was to progress toward a closing of the proposed merger with Concierge. Should the merger be consummated, the company's plan of operation for the next twelve months would then be the plan of operation that Concierge's management had for its company. Until the merger should be consummated or abandoned, Starfest has no paid employees. Its officers and directors contributed their time without compensation. 3 Should the merger with Concierge not have been consummated, Starfest's management would have sought another merger partner. Number of Employees On December 31, 2001, Starfest employed one person full time and no persons part time. ITEM 2. DESCRIPTION OF PROPERTY Starfest owns no plants, real property or personal property. Facilities Starfest's office facilities on December 31, 2001 were in the home of its president, Michael Huemmer, in Cave Creek, Arizona, and were provided rent free. ITEM 3. LEGAL PROCEEDINGS Neither Starfest nor any of its property is the subject of any pending legal proceedings or any proceeding of which Starfest is aware that a governmental authority is contemplating. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during fiscal year 2001. On January 25, 2002 the shareholders of Starfest voted to approve the merger with Concierge. ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Starfest's Common Stock presently trades on the OTC Bulletin Board. The high and low bid and asked prices, as reported by the OTC Bulletin Board, are as follows for 1999, 2000 and 2001. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Average Daily High Low Shares Traded ---- --- -------------- 1999: 1st Qtr. 0.1000 0.0050 108,072 2nd Qtr. 0.5938 0.0200 138,705 3rd Qtr. 0.2000 0.0600 105,733 4th Qtr. 0.1050 0.0450 95,998
4
2000: 1st Qtr. 2.3125 0.075 852,552 2nd Qtr. 2.9688 0.3700 215,654 3rd Qtr. 0.7813 0.35 108,162 4th Qtr. 0.41 0.09375 186,584 2001: 1st Qtr. 0.18 0.081 79,969 2nd Qtr. 0.25 0.08 146,105 3rd Qtr. 0.215 0.035 110,617 4th Qtr. 0.26 0.05 98,005
The computer software industry, in which Concierge will operate, is also volatile. For instance, the Computer Technology Index ("XCI") closed on November 16, 2000 at 1,160. During the 52 weeks prior to this date, the closing price of this index ranged from 1,078 to 1,820. The Computer Technology Index is a widely recognized and used index. It is compiled by the American Stock Exchange and represents a cross section of widely-held corporations involved in various phases of the computer industry. It is market-value weighted, based on the aggregate market value of its 27 component stocks. Holders On December 31, 2001 there were approximately 96 holders of record of Starfest's common stock. Approximately 19 million shares are held for 4,146 owners of Starfest's common stock in the name of "Cede & Co.," which is the record holder for shares in numerous brokerage accounts. Rule 144 and Rule 145 Restrictions on Trading. ----------------------------------------------------- All shares of common stock of the post-merger company issued in the merger to the stockholders of Concierge were issued pursuant to registration with the Commission. Nevertheless, there will be certain restrictions on the transfer for value of the shares received in the merger by the affiliates of Concierge, who may be deemed to be underwriters. Securities and Exchange Commission rules define as "affiliates" a corporation's executive officers, directors and other persons who, by any manner, exercise control over the corporation's direction and policies. The affiliates of Concierge at the time of the merger, in order to sell their shares received in the merger, must either register them for resale or comply with the resale provisions set forth in paragraph (d) of the Commission's Rule 145, unless some other exemption-from-registration provision is available. The resale provisions of paragraph (d) of Rule 145 refer to certain provisions of 5 the Commission's Rule 144 and require, for sales of the shares by such affiliates, that: - the company must have been subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act for at least 90 days (which is the case, here), - the company must have filed all reports with the Commission required by such rule during the twelve months preceding such sale (or such shorter period that the company was required to file such reports), - transfers for value by such affiliates can occur only either (1) through broker transactions not involving the solicitation of buyers or (2) directly to market-makers, and - each such affiliate can transfer for value, during a 90-day period, no more shares than the greater of one percent of all issued and outstanding shares of common stock of the company (119,957,713 shares immediately after the merger) or the average weekly volume of trading in such common stock reported through the automated quotation system of Nasdaq or the Bulletin Board during the four calendar weeks prior to placing the sell order with a broker-dealer. The above resale provisions of Rule 145 shall continue for such affiliates for one year after the merger. Then, only the company's reporting requirement shall continue. When any such affiliate has ceased to be an affiliate of the post-merger company for at least three months, and provided at least two years have elapsed since the date of the merger, then even the requirement that the company file reports with the Commission will no longer be required for such a former affiliate to sell any of the shares acquired in the merger. The following table allocates the post-merger company's common stock between restricted and non-restricted stock for Concierge's and Starfest's affiliates at the time of the merger: 6
Percent of No. of Shares Restricted Post-Merger Company No. of Shares Total Issued by Rules 144 and 145 -------------------- ------------- ------------ ------------------------ Authorized shares 190,000,000 - - Issued and outstanding shares 119,957,713 100.0 60,353,856
6
Issued and outstanding shares to be controlled by Rule 145: Concierge's affiliates 59,493,856 49.6 59,493,856 Issued and outstanding shares to be controlled by Rule 144: Starfest's affiliates 860,000 0.7 860,000 Pre-merger restricted shares of Starfest issued during 2000 to persons other Rule 144: than its affiliates 1,402,001 1.2 1,402,001 Shares in the "public float," subject to no restrictions on trading 58,201,856 48.5 - ----------- ----- ---------- 119,957,713 100.0 60,353,856
7 The 860,000 shares controlled by Starfest's affiliates were issued in 2000 and will continue to be "restricted" shares until they have been held for two years. The same is true of the 1,402,001 other shares of Starfest issued in 2000. After such shares have been held for one year, they may be sold pursuant to the provisions of Rule 144, the principal ones of which are set forth above on pages 5 and 6 as "bullet points" in the second paragraph of this heading. No equity of Starfest is subject to outstanding options or warrants to purchase, or securities convertible into, equity of the company. Dividends. Starfest has had no earnings and has declared no dividends on our capital stock. Concierge has never earned a profit and may not do so in the future. Under California law, a company - such as our post-merger company - can pay dividends only - from retained earnings, or - if after the dividend is made, - its tangible assets would equal at least 11/4 times its liabilities, and - its current assets would at least equal its current liabilities, or - if the average of its earnings before income taxes and before interest expenses for the last two years was less than the average of its interest expenses for the last two years, then its current assets must be equal to at least 11/4 times its current liabilities. The post-merger directors' strategy on dividends is to declare and pay dividends only from retained earnings and when the directors deem it prudent and in the best interests of the company to declare and pay dividends. Penny Stock Regulations 8 Starfest's common stock trades on the OTC Bulletin Board at a price less than $5 a share and is subject to the rules governing "penny stocks." A "penny stock" is any stock that: - sells for less than $5 a share. - is not listed on an exchange or authorized for quotation on The Nasdaq Stock Market, and - is not a stock of a "substantial issuer." Starfest is not now a "substantial issuer" and cannot become one until it has net tangible assets of at least $2 million, which it does not now have and will not have solely as a result of the proposed merger with Concierge. There are statutes and regulations of the Securities and Exchange Commission (the "Commission") that impose a strict regimen on brokers that recommend penny stocks. The Penny Stock Suitability Rule ------------------------------------ Before a broker-dealer can recommend and sell a penny stock to a new customer who is not an institutional accredited investor, the broker-dealer must obtain from the customer information concerning the person's financial situation, investment experience and investment objectives. Then, the broker-dealer must "reasonably determine" (1) that transactions in penny stocks are suitable for the person and (2) that the person, or his advisor, is capable of evaluating the risks in penny stocks. After making this determination, the broker-dealer must furnish the customer with a written statement setting forth the basis for this suitability determination. The customer must sign and date a copy of the written statement and return it to the broker-dealer. Finally the broker-dealer must also obtain from the customer a written agreement to purchase the penny stock, identifying the stock and the number of shares to be purchased. The above exercise delays a proposed transaction. It causes many broker-dealer firms to adopt a policy of not allowing their representatives to recommend penny stocks to their customers. The Penny Stock Suitability Rule, described above, and the Penny Stock Disclosure Rule, described below, do not apply to the following: 9 - transactions not recommended by the broker-dealer, - sales to institutional accredited investors, - transactions in which the customer is a director, officer, general partner, or direct or indirect beneficial owner of more than 5 percent of any class of equity security of the issuer of the penny stock that is the subject of the transaction, and - transactions in penny stocks by broker-dealers whose income from penny stock activities does not exceed five percent of their total income during certain defined periods. The Penny Stock Disclosure Rule ----------------------------------- Another Commission rule - the Penny stock Disclosure Rule - requires a broker-dealer, who recommends the sale of a penny stock to a customer in a transaction not exempt from the suitability rule described above, to furnish the customer with a "risk disclosure document." This document is set forth in a federal regulation and contains the following information: - A statement that penny stocks can be very risky, that investors often cannot sell a penny stock back to the dealer that sold them the stock, - A warning that salespersons of penny stocks are not impartial advisers but are paid to sell the stock, - The statement that federal law requires the salesperson to tell the potential investor in a penny stock - - the "offer" and the "bid" on the stock, and - the compensation the salesperson and his firm will receive for the trade, - An explanation that the offer price and the bid price are the wholesale prices at which dealers are willing to sell and buy the stock from other dealers, and that in its trade with a customer the dealer may add a retail charge to these wholesale prices, - A warning that a large spread between the bid and the offer price can make the resale of the stock very costly, - Telephone numbers a person can call if he or she is a victim of fraud, 10 - Admonitions - - to use caution when investing in penny stocks, - to understand the risky nature of penny stocks, - to know the brokerage firm and the salespeople with whom one is dealing, and - to be cautious if ones salesperson leaves the firm. Finally, the customer must be furnished with a monthly statement including prescribed information relating to market and price information concerning the penny stocks held in the customer's account. Effects of the Rule ----------------------- The above penny stock regulatory scheme is a response by the Congress and the Commission to known abuses in the telemarketing of low-priced securities by "boiler shop" operators. The scheme imposes market impediments on the sale and trading of penny stocks. It has a limiting effect on a stockholder's ability to resell a penny stock. Starfest's merger shares likely will trade below $5 a share on the OTC Bulletin Board and be, for some time at least, shares of a "penny stock" subject to the trading market impediments described above. Recent Sales of Unregistered Securities Starfest sold no shares of its common stock during 2001. ITEM 6. PLAN OF OPERATIONS As described above under "Item 1. Description of Business," on January 26, 2000, Starfest and Concierge, Inc. entered into an agreement of merger to be submitted to the shareholders of each corporation for their approval or rejection. The submittal was pursuant to a Form S-4 Prospectus-Proxy Statement filed with the Commission on June 8, 2000. The merger was approved by the shareholders of both companies and was effected on March 20, 2002. The business of Concierge is now the business of Starfest. Until the merger was consummated, Starfest had no paid employees. Its officers and directors contributed their time without compensation. Starfest no longer has sufficient cash to meet cash requirements that arose before the 11 merger with Concierge was consummated. Until the shareholders of the two companies voted on the proposed merger, Starfest's president, Michael Huemmer, and legal counsel, Thomas J. Kenan, advanced most of the costs associated with registering the merger transaction shares with the Securities and Exchange Commission, and Conceirge and persons associated with Concierge paid the balance of these costs. Starfest's management has been advised by the management of Concierge that Concierge's present and proposed business is as follows: INFORMATION ABOUT CONCIERGE, INC. Overview Concierge was incorporated in Nevada on September 20, 1996, with the business purpose to develop personal computer software designed to read an Internet e-mail user's e-mail messages to one over any wirelined telephonic connection. The user may call ones computer from any telephone to initiate the transaction. The software may also be configured by the user to automatically call one at any telephone number when new e-mail is received from any e-mail address entered on the user-defined "VIP list." The concept uses voice recognition technology to allow the user to direct the interaction by voice command. Concierge devoted almost all its efforts to the development of a usable product, the Personal Communications Attendant ("PCA "), which was finally completed in September, 2000. It may be purchased through the company's Web sites at http://www.pcahome.com and http://www.conciergetech.com. As presently constituted, the PCA is a single-user product and has a list purchase price of $39.95. The company anticipates future sales to individual end-users, large user groups and re-sellers and is pursuing potential opportunities in all those channels. Concierge's Plan of Operation -------------------------------- Concierge commenced marketing the PCATM in September 2000. It had expected to bring the PCATM to market in early April, announced this expectation in an interview on a television program and set up a toll-free line with contract personnel available to take telephone orders. Approximately 50 orders were received. Unfortunately, Concierge's initial marketing effort was precipitous. The company Concierge had hired to write the programming code to implement Concierge's design, technical specifications and program logic did not timely meet its contractual commitments. The product was not ready. The initial marketing effort was terminated. On May 12, 2000 the responsibility for writing the programming code was reassigned to Dave Cook Consulting of Mercer Island, Washington. That company's work was overseen by Concierge. Detailed technical development of the initial PCATM product, packaging design, documentation, field testing and attendant tasks were completed, and the PCATM became available for direct purchase online in September 2000. Full scale marketing efforts have not yet commenced. Concierge has placed evaluation units of the PCA with a number of major end-user and reseller organizations for their assessment of the product's suitability for their purposes. Technical problems in automatic credit card verification and funds transfer have been resolved. The company is positioned to ship ordered units expeditiously. Aggressive sales and marketing campaigns are planned but are being held in abeyance pending the generation of additional funding. Two hundred units were shipped between September, 2000 and January 15, 2001. Of these, only a small number were sold to individual end-users. 12 Approximately 120 units were sent as evaluation copies to large corporate users and re-sellers to stimulate demand in situations representing high volume potential. Such technical evaluations were arranged by Concierge or intermediaries; no unsolicited evaluation units have been sent. Product evaluations of this nature by major organizations tend to be time-consuming, and there is no guarantee of success. Product inventory is not maintained on company premises but was recently moved from XeTel Corp. in San Ramon, CA to Point to Point, LLC in Mill Valley, CA from which location order fulfillment services will be performed. Current inventory, all pre-paid, consists of 14,800 packages, 14,800 printed User's Guides and 1,800 CDs containing the PCA software itself. Description of the PCATM. Concierge's PCATM provides a means by which any user of Internet e-mail can have e-mail messages spoken to him or her over any touch-tone telephone or wireless phone in the world. The PCATM responds to the user's voice commands to read, verbalize and manage e-mail traffic stored on a personal computer. The PCATM is "trained" to respond only to the voice commands and personal voice password of the individual user, thus guaranteeing that each user's personal messages cannot be accessed by anyone else. Responding to spoken instructions, the PCATM can verbalize e-mail (with future fax and voice-mail capabilities) over the phone and save or delete those messages as directed by the user. The PCATM software executes on a personal computer operating under Windows 95 or Windows 98 and using Microsoft Outlook or Outlook Express as an e-mail client. It requires 350 megabytes of available hard disk space. The Internet connection may be effected by any standard means, including dial-up or dedicated telephone line, cable or DSL, but voice interaction between the user and the PCATM software requires a dial-up phone line and a voice-capable modem. Generally, although not invariably, many available 56 KB modems are voice-capable. The initial product being offered for sale is a stand-alone, single-user version and is not designed to function in a LAN or WAN environment. There are no set-up costs associated with the product other than assuring that the minimum hardware and software requirements are present. The initial product can verbalize only a user's e-mail. It is, however, implemented with "hooks" for the addition of fax and voice-mail modules. "Hooks" means that the programs have been written to facilitate the future inclusion of additional features such as fax and voice-mail capabilities. The date of availability of these features will depend upon decisions still to be made by Concierge management regarding the assignment of priorities to product introduction. Among future products planned are the "Pro" version, which will enable the user to access by telephone the user's fax and voice-mail messages; a multi-user, server-based version for corporate/enterprise users; and various "nationalized", that is, non-English, versions. An assessment of individual market segments and other considerations will enter into the decision of Concierge's management as to how its available resources might best be utilized. Expansion of the initial product's capabilities to add fax and voice-mail retrieval capabilities will not be a major effort; however, it may or may not be 13 the best application of Concierge's capabilities from a strategic marketing standpoint. The e-mail version will retail at $39.95. With a $19.95 upgrade, the planned pro version will monitor and collect fax, voice mail and e-mail messages. A user's personal computer will then become a universal communications center. All the user's incoming communications, be they fax, voice- or e-mail, will reside on the user's own computer and will be readily accessible from any telephone. There will be no monthly service fee - only the one-time purchase price and the option of buying upgrades. No device other than an ordinary telephone is needed to access the PCATM. The PCATM also includes an auto pager that notifies the user by phone or pager when new e-mail is received. The underlying technology is the subject of patents, and Concierge is required to pay royalties of $0.425 a delivered PCATM unit to Lexicus, a subsidiary of Motorola, for its Clamor Automatic Speech Recognition software and $1.00 a delivered unit to fonix for its text-to-speech software. Concierge has paid advance royalties to Lexicus for 100,000 units and advance royalties to fonix for 200,000 units. Concierge intends to "nationalize" the product to accommodate several foreign languages, possibly including Japanese, Korean, German, Latin American Spanish, French and Brazilian Portuguese. fonix has advised Concierge that its text-to-speech software will be available in up to seven foreign languages commencing in the first quarter of 2001. "Nationalizing" the PCATM will also require the translation of PCA-generated voice prompts, packaging for the product and preparation of the user documentation. The voice recognition component of the PCA is "language independent" and requires no revision - once trained by the user, it accepts any sound as signifying any corresponding instruction provided the sound is uttered consistently and in context. Concierge anticipates that it will complete the first nationalization of the PCATM within 45 days after it receives from fonix the nationalized text-to-speech development materials. The Market. In a study published May 12, 2000 and entitled "Communications Software and Services," Donaldson Lufkin & Jenrette reported on the past, present and future estimated users of the Internet. Referring for its information to the International Data Corporation, a research and analysis organization in the information technology field, DLJ reported the following estimates of Internet users: 14
In Millions ------------ No. of Users Internet -------------- -------- U.S.A.: End of 1998 30 End of 2002 67 Global: End of 1999 196 End of 2003 503
Every Internet user with access to a standard telephone is a potential buyer of Concierge's PCA . In a February 2000 research report on "unified messaging," Jurisdoctor-LLC.com described a burgeoning cottage industry seeking to integrate access to e-mail, voice mail, pager messaging and fax mail boxes through PC desktops, screenphones, and voice/touch-tone telephones. Based on digital technology and automated voice recognition technology that translates spoken words into text format that can be edited by a common word processor, unified messaging systems are being developed by a number of companies. The Gartner Group, a Massachusetts-based market research firm, predicts that unified messaging will become a $6.6 billion market this year. Competition. ------------ In August 1999 Lucent Technologies announced that it was entering the unified messaging field and proposes to provide to Internet service providers and to businesses a solution to bring together into a single system a company's complete voice mail, e-mail and fax capabilities. USWest is in the field with a unified messaging system that permits the user to access e-mail, fax and voice messages from ones telephone or PC. It is called "VoiceWire ", and USWest markets it for $27.90 a month. Among other entrants in the field are Jfax.com, which offers a unified messaging system at $12.50 a month plus a $15 activation fee; Premiere Technologies, whose system is offered at $9.95 a month plus fifteen cents a minute for phone access; and General Magic, whose Portico system is offered at $19.95 a month and a $50 setup fee. Concierge believes that it has positioned itself, with its one-time $39.95 purchase price for its PCATM with no monthly fees, to compete in a growing market segment. Distribution Methods. Concierge's marketing methods will include direct, high-volume, e-mail advertising promulgated on the Internet. Lists of e-mail addresses are readily available for purchase. Such lists typically contain from millions to tens of millions of valid e-mail addresses. The lists may cost from a few hundred dollars to one or two thousand dollars, depending upon the specificity of the target audience. In the case of Concierge's PCATM product, any e-mail user who communicates 15 in English and has a need to retrieve e-mail messages while away from his or her personal computer may legitimately be considered a prospect. The lists to be utilized by Concierge will be unfiltered lists, generally restricted geographically to English-speaking North America. Concierge has elected not to use its in-house server capacity to perform the actual bulk mailings but will employ an outside service for this function. Both list sources and mailing services advertise extensively on the Internet and can also be easily identified through any comprehensive search engine such as www.dogpile.com. In addition to direct e-mail Internet marketing, Concierge's marketing plan includes the cultivation of Internet Service Providers (ISPs) as a sales channel for the PCATM. Under discussion are strategic alliances to provide PCAs with personal computer systems and sales through direct marketing organizations. Concierge has participated and will continue to participate, in radio and television business-oriented shows designed to expose companies and their products to a mass audience. Approximately 50 percent of Concierge's present resources will be allocated to advertising, marketing and product promotion. Production Costs. The PCATM will be manufactured and produced for Concierge by XeTel Corp. and Point To Point LLC of Mill Valley, CA. A service order fulfillment contract has been executed with eAssist.com of San Diego, California, an unaffiliated third party corporation. Dave Cook Consulting of Mercer Island, Washington will provide product development services to implement products designed by Concierge. Product Development Agreement. Dave Cook Consulting of Mercer Island, Washington earlier provided product development consulting services to Concierge. Payment for the services was based upon hourly charges. After a previous consultant hired to perform program coding implementation of Concierge's design of the PCATM failed to perform as required by March 22, 2000, Concierge hired Dave Cook Consulting to perform the work. Dave Cook Consulting restructured the fundamental systems architecture of the PCATM, rewrote the basic programming code of major modules of the software package, and revised the user interface. Mr. Cook, together with Lisa Monte of Creative Web Works, recommended major changes that were made in Concierge's web site (www.pcahome.com) and helped equip the site to handle on-line entry order, credit card verification and order fulfillment. The intellectual property rights associated with the work product of Dave Cook Consulting are owned by Concierge. The March 17, 2000 agreement with Dave Cook Consulting expired after one year. At such time as Concierge should obtain the capital for additional product development, it proposes to negotiate a new agreement with Dave Cook Consulting. Governmental Approval of Principal Products. No governmental approval is required in the U.S. for Concierge's products. 16 Government Regulations. There are no governmental regulations in the U.S. that apply to Concierge's products. Properties. Concierge subleases office space in Los Angeles, California from Ardent, Ltd. The term of the sublease expires August 31, 2002. Monthly rent is $1,542. Dependence on Major Customers and Suppliers. Concierge does not anticipate that it will be dependent on any major customers or suppliers. Seasonality. There should be no seasonal aspect to Concierge's business other than possible increased sales anticipated in the fourth calendar quarter associated with the year-end holidays. Research and Development. Concierge expended no funds on research and development in 2001. Environmental Controls. Concierge is subject to no environmental controls or restrictions that require the outlay of capital or the obtaining of a permit in order to engage in business operations. Number of Employees. On December 31, 2001 Concierge employed two persons full time and no persons part time. Venue of Sales. Concierge anticipates that some of its initial sales will be attributable to exports to English-speaking countries. Patents, Trademarks, Copyrights and Intellectual Property. Concierge has trademarked its Personal Communications Attendant. It has no patents on the product. Legal Proceedings. Neither Concierge nor any of its property is a party to, or the subject of, any material pending legal proceedings other than ordinary, routine litigation incidental to its business. Concierge Management's Plan of Operation Concierge's management proposes to devote the company's cash assets and the 17 time and efforts of its officers and staff for the next twelve months to the promotion, sale and continued improvement of its Personal Communications Attendant. Liquidity. Concierge is illiquid. It is now operating at a monthly administrative overhead of approximately $20,000. Of this figure, a substantial portion represents salaries due full-time employees and payments made to part-time employees. These parties have all agreed to defer such payments until such time as the company is in a position to meet said obligations. Concierge requires advertising funds to create a demand for its product. It is seeking debt financing from several private sources that have had past business relations with directors of Concierge. One of these sources has asked that Mr. Kahn, president of Concierge, pledge a portion of his Concierge stock holdings to the repayment of any loan to Concierge the source might provide. Mr. Kahn has agreed to do so. Short term, Concierge requires approximately $190,000 for an aggressive sales and marketing campaign and $60,000 for its general and administrative overhead for the next three months. Long term, Concierge requires an additional $180,000 just for general and administrative overhead to complete the next twelve months. It is anticipated that ongoing requirements may be satisfied from cash flow generated by product sales expected to result when the company's product promotion plans are implemented. The $430,000 cash requirements described in this paragraph for the next twelve months would require the sale of approximately 10,763, or 73 percent, of the 14,800 PCA units now in inventory. Concierge has no sources of liquidity other than the persons and entities from whom it is now seeking debt financing. While Mr. Kahn has agreed to secure a loan to the company with his Concierge stock holdings, such action may be insufficient to obtain the loan. The only asset Concierge has is its PCA product. Should debt financing not be obtained soon, the directors of Concierge propose to seek a joint venture partner with whom the PCA can be jointly marketed and who will bear the expenses of marketing the product. Discussions are currently underway with prospective joint venture partners. 18 Concierge has a contingent liability of $2,009,610 for possible violations of the stock registration requirements of federal and state securities laws. The occasion of the contingent liability was Concierge's sale of $142,500 of its common stock after the June 8, 2000 filing of the registration statement of which this Prospectus is a part. Concierge does not concede that no exemption from registration was available, but the contingency exists that the purchasers of all shares of Concierge common stock from December 9, 1998 to the present - some $2,009,610 in amount - could seek - and might prevail in seeking - rescissions of their purchases of stock and a return of their purchase amounts plus interest and attorney fees. Should a demand for rescission be made by the purchasers of such stock, Concierge would oppose such a demand for rescission, and its directors would provide the expenses for the litigation. Concierge's liquidity would not be immediately affected, due to its directors' providing the expenses for such litigation. However, such litigation would likely reduce the ability of Concierge to raise additional capital for its operations and thereby affect its liquidity. And, a plaintiff's judgment in a class action lawsuit would likely force Concierge into a voluntary chapter 11 reorganization or, possibly, liquidation. Product Research and Development. Concierge's initial PCATM (audio e-mail version) is designed to execute on a personal computer operating under Windows 95/98 and using Microsoft Outlook or Outlook Express as an e-mail client. Future versions are expected to operate in the same or successor environments, although the server-based, multi-user, versions will most likely function under Microsoft NT or its derivative, Windows 2000. The initial PCATM, however, is available for purchase and became available on October 3, 2000. A June 3, 2000 and other projected product release dates were predicated upon the fulfillment of firm commitments made to Concierge by outside contractors. Some of those contractors failed to meet their commitments, and Concierge was forced to delay product introduction. Due to the complexity of the PCATM product line, numerous specialized technical skills are essential to successful implementation. However, very few of these niche skills warrant full-time employment of qualified specialists. It has thus always been the intention of Concierge's management to outsource narrowly-focused, technical functions to the greatest extent possible. Support for Eudora and other e-mail clients is expected to be available in the next version, whose release date is yet to be determined. Since Eudora comprises less than ten percent of the Windows-based e-mail users, it is not considered to be a significant impediment to the market appeal of the product. Other Expected Developments. Concierge does not expect to purchase any plant or significant equipment. It outsources the implementation of product designs for its products that it develops, through the collaboration of its president, Allen Kahn, and outside providers. 19 Concierge does expect to increase the number of its employees during the next twelve months by adding approximately three employees, which would include administrative and executive personnel. Market for Common Equity and Related Stockholder Matters. ---------------------------------------------------------------- Market Information. There was never an established public trading market for Concierge's common stock. None of its authorized shares of common stock are subject to outstanding options or warrants to purchase, or securities convertible into, common stock. Concierge's outstanding 1,435,655 shares of common stock were converted in the merger with Starfest on March 20, 2002, to 96,957,713 shares of common stock of Starfest on the basis of 67.5355 shares of Starfest common stock to be exchanged for each share of Concierge common stock. All 96,957,713 shares will be eligible for sale, but 60,189,663 shares distributed to Concierge's officers and directors will be subject to the resale provisions of paragraph (d) of Rule 145. Holders. There were 175 holders of record of Concierge's common stock prior to its merger with Starfest on March 20, 2002. Dividends. Concierge has declared no cash dividends on its common stock since its inception. There are no restrictions that limit Concierge's ability to pay dividends on its common stock or that are likely to do so in the future. Changes In and Disagreements With Accountants on Accounting and Financial -------------------------------------------------------------------------------- Disclosures. ------------ On February 28, 2001, Concierge dismissed its principal independent accountant, Brad B. Haynes The reports of Brad B. Haynes on the financial statements of the Company filed with the Securities and Exchange Commission contained no adverse opinions or disclaimers of opinion, and were not modified as to uncertainty, audit scope, or accounting principles during the past two years or the interim period to February 28, 2001, the date of dismissal. The decision to change accountants was recommended and approved by the Board of Directors of Concierge. During the past two years or interim periods prior to February 28, 2001, there were no disagreements between Concierge and Brad B. Haynes, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Brad B. Haynes' satisfaction, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. On March 1, 2001, Concierge engaged the firm of Kabani & Company, of Fountain Valley, California, as independent accountants for Concierge. Prior to March 1, 2001, neither Concierge, nor anyone on its behalf, had consulted with 20 Kabani & Company concerning the application of accounting principles to any specific completed or contemplated transaction, or the type of audit opinion that might be rendered on Concierge's financial statements. 21 ITEM 7. FINANCIAL STATEMENTS INDEX The financial statements of Starfest and of Concierge appear as follows: Starfest, Inc. Independent Auditors' Report 23 Consolidated Balance Sheet December 31, 2001 24 Consolidated Statements of Operations Twelve Months Ended December 31, 2001 and 2000 25 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the period from December 31, 1997 to December 31, 2001 26 Consolidated Statements of Cash Flows Twelve Months Ended December 31, 2001 and 2000 27 Notes to Consolidated Financial Statements 28 Concierge, Inc. Report of Independent Auditors 34 Balance Sheets June 30, 2001 and 2000 35 Statement of Operations and Deficit Accumulated for the Years Ended June 30, 2001 and June 30, 2000 and the Period from September 20, 1996 (Inception Date) to June 30, 2001 36 Statement of Changes in Shareholders' Equity for the Period from September 20, 1996 (Inception Date) to June 30, 2001 37 Statement of Cash Flows for the Years Ended June 30, 2001 and June 30, 2000 and the Period from September 20, 1996 (Inception Date) to June 30, 2001 38 Notes to Financial Statements 39 22 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors and Stockholders Starfest, Inc.: We have audited the accompanying consolidated balance sheet of Starfest, Inc. (a California Corporation) (the "Company") as of December 31, 2001, and the related consolidated statements of operations, stockholders' deficit and cash flows for the years ended December 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Starfest, Inc. as of December 31, 2001, and the results of its operations and its cash flows for the years ended December 31, 2001 and 2000 in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the consolidated financial statements, the Company's did not earn any revenue during the year ended December 31, 2001 and 2000 and the Company has incurred net losses from inception to December 31, 2001 of $3,177,872 including a net loss of $58,268 during the year ended December 31, 2001. These factors, among others, as discussed in Note 4 to the consolidated financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. KABANI & COMPANY, INC. CERTIFIED PUBLIC ACCOUNTANTS Fountain Valley, California March 26, 2002 23 Starfest, Inc. & subsidiary Consolidated Balance Sheet December 31, 2001
Asset ----- Current Asset: Cash $ 119 ---------- Total Current Asset 119 ---------- $ 119 ========== Liabilities And Shareholders' Deficit ------------------------------------- Current Liabilities: Accounts payable $ 84,532 Note payable to Concierge, Inc. 100,000 Payable to shareholders 281,708 ---------- Total current liabilities 466,240 ---------- Shareholders' Deficit: Common stock, no par value, 65,000,000 shares authorized; 23,100,000 issued and outstanding 2,711,751 Accumulated Deficit (3,177,872) ---------- Total shareholders' deficit (466,121) ---------- $ 119 ==========
See notes to consolidated financial statements. 24 Starfest, Inc. & subsidiary Consolidated Statements of Operations Twelve months Ended December 31,
2001 2000 ----------- ----------- Revenues $ - $ - General and administrative expenses 57,468 461,947 ----------- ----------- Operating loss (57,468) (461,947) Provision for income taxes 800 800 ----------- ----------- Net Loss $ (58,268) $ (462,747) =========== =========== Basic and diluted net loss per common share $ .003 $ .020 Basic and diluted weighted average common shares outstanding 23,100,000 23,011,688
See notes to consolidated financial statements. 25 Starfest, Inc. & subsidiary Consolidated Statements of changes in stockholders' equity (deficit)
Balance December 31, 1999 21,697,999 $2,639,651 $(2,656,857) $(17,206) Shares issued for services 1,302,001 65,100 - 65,100 Shares issued for cash 100,000 7,000 - 7,000 Net loss for 2000 - - (462,747) (462,747) ---------- ---------- ----------- --------- Balance December 31, 2000 23,100,000 $2,711,751 $(3,119,604) $(407,853) Net loss for 2001 - - (58,268) (58,268) ---------- ---------- ----------- --------- Balance December 31, 2001 23,100,000 $2,711,751 $(3,177,872) $(466,121) ========== ========== =========== =========
See notes to consolidated financial statements. 26 Starfest, Inc. & subsidiary Consolidated Statements of Cash Flows Twelve months Ended December 31,
2001 2000 ----------- ----------- Net Cash From operating Activities: Net loss $ (58,268) $ (462,747) Adjustments to reconcile net loss to net cash used by operating activities: Shares issued for services - 65,100 Shares issued for debt extinguishment - - Shares issued for assets - - Changes in assets and liabilities: Accounts payable 46,572 20,273 Other liabilities - - ------------ ---------- Net cash used by operating activities (11,696) (377,374) Cash flows from Financing Activities: Loans from Concierge, Inc. - 100,000 Advances from shareholders 11,775 269,933 Common stock issued for cash - 7,000 ------------ ---------- Net cash provided by Financing Activities 11,775 376,933 Increase in Cash 79 441 Cash at beginning of period 40 481 ------------ ---------- Cash at end of period $ 119 $ 40 ============ ========== Supplemental cash flow information: Cash paid during the period for: Interest $ - $ - Income taxes $ - $ - Non cash financing transactions: Shares for services $ - $ 65,100 Shares for debt extinguishment $ - $ - Shares for purchase of assets $ - $ -
See notes to consolidated financial statements. 27 Starfest, Inc. & subsidiary Notes To Consolidated Financial Statements December 31, 2001 and 2000 Note 1 - Nature of Operations and principles of consolidation Nature of operations Starfest, 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. The Company is negotiating an agreement with a company (see Note 3). The purpose of the merger is to effect an online communication retrieval system such as e-mail via the telephone. 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. Starfest is the parent corporation of MAS XX. On March 21, 2002, the Company consummated a merger with Concierge, Inc. (see note 3). The Company has initiated the process to change the name of the surviving entity as Concierge Technologies. Principles of consolidation: The accompanying consolidated financial statements of the Company and its wholly owned subsidiary MAS XX have been prepared in accordance with generally accepted accounting principles. All significant inter-company balances and transactions have been eliminated in consolidation. Note 2 - Summary of significant accounting policies Cash and cash equivalents The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. Use of estimates The preparation of financial statements 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. Income taxes Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income (loss). Valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. 28 Starfest, Inc. & subsidiary Notes To Consolidated Financial Statements December 31, 2001 and 2000 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. The net loss per common share has been restated to retroactively effect a reverse stock split in the ratio of one share for ten shares. 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 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. Costs of start-up activities In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the costs of start-up activities", effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires the costs of start-up activities and organization costs to be expensed as incurred. The Company adopted this standard in fiscal 1999 and the implementation of this standard did not have a material impact on its financial statements. Advertising The Company expenses advertising costs as incurred. 29 Starfest, Inc. & subsidiary Notes To Consolidated Financial Statements December 31, 2001 and 2000 Risks and Uncertainties The Company is subject to certain risks and uncertainties in the normal course of business. Recent Pronouncements On July 20, 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements make significant changes to the accounting for business combinations, goodwill, and intangible assets. SFAS No. 141 establishes new standards for accounting and reporting requirements for business combinations and will require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. This statement is effective for business combinations completed after June 30, 2001. SFAS No. 142 establishes new standards for goodwill acquired in a business combination and eliminates amortization of goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. Intangible assets with a determinable useful life will continue to be amortized over that period. This statement becomes effective January 1, 2002. Management is in the process of evaluating the requirements of SFAS No. 141 and 142 and does not expects these pronouncements will materially impact the Company's financial position or results of operations. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations". SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," was issued in August 2001. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, and addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. Management is in the process of evaluating the requirements of SFAS No. 143 and 144 but does not expect these pronouncements will materially impact the Company's financial position or results of operations. 30 Starfest, Inc. & subsidiary Notes To Consolidated Financial Statements December 31, 2001 and 2000 Note 3 - Merger Negotiations and subsequent event On January 26, 2000 the Company entered into an agreement of merger with Concierge, Inc., a Nevada corporation, pursuant to which, should the merger be approved by the shareholders of both companies, 1,490,744 outstanding shares of common stock of Concierge, Inc., (which includes 1,376,380 shares outstanding at December 31, 2000 and 114,364 shares issued in January, 2001) shall be converted into 96,957,713 common stock of the Company on the basis of 65.0398 shares of the Company for each share outstanding of Concierge, Inc. The 96,957,713 post merger shares shall be distributed to the shareholders of Concierge, Inc. on a pro-rata basis. The transaction will be accounted for as a reverse merger. Subsequent to the year ended December 31, 2001, the merger was approved by the Securities and exchange commission and the shareholders of both companies. Prior to June 30, 2000, Concierge, Inc. entered into subscription agreements to issue "post merger" shares in exchange for cash for a gross amount of $1,255,500 before deducting associated costs of $79,710, for 5,928,750 post merger shares. From July 1, 2000 through September 15, 2000, Conceirge, Inc. 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. As the merger transaction will be treated as a recapitalization, with Concierge as the accounting acquirer (reverse acquisition), the transaction will be accounted for in a manner similar to a pooling of interests. The operations of the Company would be included with those of Concierge, Inc. from the acquisition date. The proforma financial information has not been included as the amounts per historical financial statements of the Company are insignificant to the combined entity. Following are the unaudited financial information of Concierge, Inc. as on December 31, 2001:
Revenue $ - Operating expenses 45,492 Other income 52,600 Net Income after income tax 6,308 Total current assets 246,770 Total non-current assets 1,076 Total current liabilities 105,676
Note 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 incurred a net loss of $58,268 for the twelve months ended December 31, 2001. Accumulated deficit amounted to $3,177,872 at December 31, 2001. At December 31, 2001, the Company had shareholders' deficit of $466,121. The continuing losses have adversely affected the liquidity of the Company. These factors, among others, raise substantial doubt as to the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or classification and amounts of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in this endeavor. 31 Note 5 - Income Taxes No provision was made for Federal income tax since the Company has significant net operating loss carryforwards. Through December 31, 2000, the Company incurred net operating losses for tax purposes of approximately $1,641,000. There is no significant differences between financial statement and tax losses. The net operating loss carryforwards may be used to reduce taxable income through the year 2016. Net operating loss for carryforwards for the State of California are approximately $611,000 and are generally available to reduce taxable income through the year 2006. The availability of the Company's net operating loss carryforwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock. The provision for income taxes consists of the state minimum tax imposed on corporations. 32 Starfest, Inc. & subsidiary Notes To Consolidated Financial Statements December 31, 2001 and 2000 Note 5 - Income Taxes (continue) The gross deferred tax asset balance as of December 31, 2001 was approximately $713,000. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carryforwards can not reasonably be assured. Note 6 - Notes Payable-Related parties Notes payable to shareholders are non-interest bearing, unsecured and due on demand. Note payable to Concierge, Inc. is non-interest bearing, unsecured and due on demand. Note 7 - Shares issued for services During the year ended December 31, 2000, the Company issued 1,301,001 shares of common stock for consulting services amounting $65,100. The Company has recorded the valuation of shares per guidance under APB 25. According to APB 25, "when an entity issues equity instruments to non-employees in exchange for goods or services, the transaction should be accounted for based on the fair value of the goods or services received or the fair value of the equity instrument issued, whichever can be more reliably measured. Frequently, the fair value of goods or services received from suppliers can be reliably measured and therefore indicates the fair value of the equity instruments issued." The valuation of these shares is based upon value of services received since the Company did not have an established market value for its shares. The Company did not issue any shares in the year ended December 31, 2001. 33 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Concierge, Inc. (A development stage company): We have audited the accompanying balance sheets of Concierge, Inc., a development stage company (a Nevada Corporation) (the "Company") as of June 30, 2001 and 2000 and the related statements of operations, stockholders' deficit and cash flows for the years then ended and for the period from commencement of development stage on September 20, 1996 to June 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company at June 30, 2001 and 2000 and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2001 and the period from inception (September 20, 1996) to June 30, 2001 in conformity with accounting principles generally accepted in the United States of America. The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated deficit of $2,001,809 and stockholders deficit of $1,694,038 on June 30, 2001. These factors as discussed in Note 3 to the financial statements, raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/Kabani & Company, Inc. KABANI & COMPANY, INC. CERTIFIED PUBLIC ACCOUNTANTS Fountain Valley, California October 18, 2001 34 (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS JUNE 30, 2001 AND 2000
ASSETS 2001 2000 ------- ---------- ---------- CURRENT ASSETS: CASH & CASH EQUIVALENTS $ 695 $ 85,105 PREPAID EXPENSES 245,800 245,800 NOTE RECEIVABLE - RELATED PARTY 100,000 100,000 ---------- ---------- TOTAL CURRENT ASSETS 346,495 430,905 EQUIPMENT, NET 2,110 4,692 ---------- ---------- $ 348,605 $ 435,597 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- CURRENT LIABILITIES: ACCRUED EXPENSES $ 90,743 $ 138,755 LOANS PAYABLE-OFFICER 22,000 4,400 ---------- ---------- TOTAL CURRENT LIABILITIES 112,743 143,155 SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY 1,663,290 1,175,790 COMMON STOCK ISSUED SUBJECT TO CONTINGENCY 266,610 266,610 STOCKHOLDERS' DEFICIT: COMMON STOCK, PAR VALUE $.01 PER SHARE; 10,000,000 SHARES AUTHORIZED; ISSUED AND OUTSTANDING 1,376,380 6,959 6,959 ADDITIONAL PAID IN CAPITAL 300,812 300,812 DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (2,001,809) (1,457,729) ---------- ---------- TOTAL STOCKHOLDERS' DEFICIT (1,694,038) (1,149,958) ---------- ---------- $ 348,605 $ 435,597 ========== ==========
The accompanying notes are an integral part of these financial statements. 35 CONCIERGE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 2001 & 2000 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2001
SEPTEMBER 20, JUNE 30, JUNE 30, 1996 (INCEPTION) 2001 2000 TO JUNE 30, 2001 ---------- ---------- ----------------- REVENUE $ - - - COSTS AND EXPENSES PRODUCT LAUNCH EXPENSES 230,241 490,078 1,077,785 GENERAL & ADMINISTRATIVE EXPENSES 313,039 496,108 920,024 ---------- ---------- ---------- TOTAL COSTS AND EXPENSES 543,280 986,186 1,997,809 NET LOSS BEFORE INCOME TAXES (543,280) (986,186) (1,997,809) PROVISION OF INCOME TAXES 800 800 4,000 ---------- ---------- ---------- NET LOSS (544,080) (986,986) (2,001,809) ========== ========== ========== WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED 1,065,960 1,065,960 ========== ========== BASIC AND DILUTED NET LOSS PER SHARE $ (0.51) $ (0.93) ========== ==========
The accompanying notes are an integral part of these financial statements. 36 CONCIERGE, INC. (A development stage company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2001
Subscription Common Stock received for ----------------- common stock Number of Par Additional Accumulated Stockholders' Advance subject to shares value Paid In Capital Deficit Equity (deficit) Subscriptions contingency --------- ----- --------------- ----------- ---------------- ------------- ------------ Common Stock issued for cash through June 30, 1997 176,306 $1,763 $106,162 $ - $ 107,925 $ - $ - Common stock issued for services through June 30, 1997 621,545 6,215 - - 6,215 - - Net loss through June 30, 1997 - - - (96,933) (96,933) - - --------- ------ -------- ----------- ----------- ---------- --------- Balance at June 30, 1997 797,851 7,978 106,162 (96,933) 17,207 - - Common Stock issued for cash in the year ended June 30, 1998 137,475 1,375 194,650 - 196,025 - - Common stock issued for services in the year ended June 30, 1998 22,550 226 - - 226 - - Net loss for the year ended June 30, 1998 - - - (283,891) (283,891) - - --------- ------ -------- ----------- ----------- ---------- --------- Balance at June 30, 1998 957,876 9,579 300,812 (380,824) (70,433) - - Common Stock issued for cash in the year ended June 30, 1999 208,000 - - - - - 60,996 Common stock issued for services in the year ended June 30, 1999 450 - - - - - 4 Net loss for the year ended June 30, 1999 - - - (89,919) (89,919) - - --------- ------ -------- ----------- ----------- ---------- --------- Balance at June 30, 1999 1,166,326 9,579 300,812 (470,743) (160,352) - 61,000 Acquisition and retirement of Common shares (262,000) (2,620) (2,620) - - Common Stock issued for cash in the year ended June 30, 2000 117,184 - - - - - 202,061 Common stock issued for services in the year ended June 30, 2000 354,870 - - - - - 3,549 Post acquisition stock subscription funds received net of costs & expenses of $79,710 - - - - - 1,175,790 - Net loss for the year ended June 30, 2000 - - - (986,986) (986,986) --------- ------ -------- ----------- ----------- ---------- --------- Balance at June 30, 2000 1,376,380 6,959 300,812 (1,457,729) (1,149,958) 1,175,790 266,610 Post acquisition stock subscription funds received - - - - - 487,500 - Net loss for the year ended June 30, 2001 - - - (544,080) (544,080) - - --------- ------ -------- ----------- ----------- ---------- --------- Balance at June 30, 2001 1,376,380 $6,959 $300,812 $(2,001,809) $(1,694,038) $1,663,290 $ 266,610 ========= ====== ======== =========== =========== ========== =========
The accompanying notes are an integral part of these financial statements. 37 CONCIERGE, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2001 & 2000 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2001
SEPTEMBER 20, JUNE 30, JUNE 30, 1996 (INCEPTION) 2001 2000 TO JUNE 30, 2001 ---------- ---------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET LOSS $(544,080) $ (986,986) $(2,001,809) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 2,582 2,350 10,800 STOCK ISSUED FOR SERVICES - 929 7,374 INCREASE IN CURRENT ASSETS: PREPAID EXPENSES - (245,000) (245,800) INCREASE/(DECREASE) IN CURRENT LIABILITIES: ACCOUNTS PAYABLE - (70,093) - ACCRUED EXPENSES (48,012) 118,537 90,743 PAYROLL TAX PAYABLE (4,400) 4,400 - --------- ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (593,910) (1,175,863) (2,138,692) --------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: NOTE RECEIVABLE - . RELATED PARTY - (100,000) (100,000) ACQUISITION OF PROPERTY & EQUIPMENT - (1,266) (12,910) --------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES - (101,266) (112,910) --------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: PROCEEDS FROM ISSUANCE OF SHARES - 202,061 567,007 PROCEEDS FROM ADVANCE SUBSCRIPTIONS 487,500 1,255,500 1,743,000 COSTS AND EXPENSES OF ADVANCE SUBSCRIPTIONS - (79,710) (79,710) PROCEEDS FROM (REPAYMENTS OF) RELATED PARTY LOANS 22,000 (22,000) 22,000 --------- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 509,500 1,355,851 2,252,297 --------- ----------- ----------- NET INCREASE/(DECREASE) IN CASH (84,410) 78,722 695 CASH, BEGINNING BALANCE 85,105 6,383 - --------- ----------- ----------- CASH, ENDING BALANCE $ 695 $ 85,105 $ 695 ========= =========== ===========
The accompanying notes are an integral part of these financial statements. 38 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Concierge, Inc. ("the Company"), is a development stage enterprise incorporated in the state of Nevada on September 20, 1996. The Company has undertaken the development and marketing of a new technology, a unified messaging product "The Personal Communications Attendant" ("PCA "). "PCA " 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. 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 Cash and cash equivalents The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. Use of estimates The preparation of financial statements 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. Property & Equipment Property and equipment is carried at cost. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to expense as incurred. Income taxes Deferred income tax assets and liabilities are computed annually for differences between the financial statements and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income (loss). Valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. 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 39 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) 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. Accounting for the costs of computer software developed or obtained for internal use In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (ASEC of AICPA) issued Statement of position (SOP) No. 98-1, "Accounting for the costs of computer software developed or obtained for internal use", effective for fiscal years beginning after December 15, 1998. SOP N0. 98-1 requires that certain costs of computer software developed or obtained for internal use be capitalized and amortized over the useful life of the related software. The Company adopted this standard in fiscal year 1999 and the implementation of this standard did not have a material impact on its financial statements. Web site development costs In March 2000, the Emergency Issues Task Force (EITF) of FASB issued its consensus under EITF-00-02. Per the consensus, certain costs incurred in the development of a Web site should be capitalized. According to the EITF, those costs incurred in developing a software program should be capitalized in accordance with Statement of Position (SOP) 98-1, "Accounting for the costs of Computer Software Developed or obtained for internal use". Capitalization of software development costs begins upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future revenues, estimated economic life, and changes in software and hardware technologies. The Company expenses web site development costs, which are allocated for preliminary project development, web site general and maintenance. 40 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) Costs of start-up activities In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the costs of start-up activities", effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires the costs of start-up activities and organization costs to be expensed as incurred. The Company adopted this standard in fiscal year 1999 and the implementation of this standard did not have a material impact on its financial statements. Research and Development Expenditures for software development costs and research are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established. The period between achieving technological feasibility and the general availability of such software has been short. Consequently, costs otherwise capitalizable after technological feasibility is achieved are generally expensed because they are insignificant. Revenue Recognition 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, and SOP 98-9, Modification of SOP 97-2, 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, 2001 and 2000. Allowance for doubtful accounts In determining the allowance to be maintained, management evaluates many factors including industry and historical loss experience. The allowance for doubtful accounts is maintained at an amount management deems adequate to cover estimated losses. The company did not have accounts receivable or allowance for doubtful accounts as of June 30, 2001 and 2000. Advertising The Company expenses advertising costs as incurred. Accounting developments In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and 41 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, is effective for fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not expect that the adoption of this standard will have a material impact on its financial statements. In June 2000, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 138, "Accounting for Certain Instruments and Certain Hedging Activities." The Company does not expect that the adoption of this standard will have a material impact on its financial statements. In June 2000, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 139, "Rescission of FASB Statement No. 53 and Amendments to Statements No. 63, 89, and 121." The Company does not expect that the adoption of this standard will have a material impact on its financial statements. In September 2000, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125." The Company does not expect that the adoption of this standard will have a material impact on its financial statements. On July 20, 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These statements make significant changes to the accounting for business combinations, goodwill, and intangible assets. SFAS No. 141 establishes new standards for accounting and reporting requirements for business combinations and will require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. This statement is effective for business combinations completed after June 30, 2001. SFAS No. 142 establishes new standards for goodwill acquired in a business combination and eliminates amortization of goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. Intangible assets with a determinable useful life will continue to be amortized over that period. This statement becomes effective January 1, 2002. The Company does not expect that the adoption of SFAS No. 141 & 142 will have a material impact on its financial statements. In December 1999, the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP to revenue recognition. In June 2000, the SEC released SAB No. 101B that delays the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal years b beginning after December 15, 1999. The Company has reviewed SAB No. 101 and believes that it is in compliance with the SEC's interpretation of revenue recognition. In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44") "Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25". FIN 44 clarifies the application of Opinion 25 for (a) the definition of employee for purposes of applying Opinion 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the 42 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) accounting consequence for various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain provisions cover specific events that occur after either December 15, 1998,or January 12, 2000. The adoption of certain other provisions of FIN 44 prior to March 31, 2000 did not have a material effect on the financial statements. The Company does not expect that the adoption of the remaining provisions will have a material effect on the financial statements. In January 2001, the Financial Accounting Standards Board Emerging Issues Task Force issued EITF 00-27 effective for convertible debt instruments issued after November 16, 2000. This pronouncement requires the use of the intrinsic value method for recognition of the detachable and imbedded equity features included with indebtedness, and requires amortization of the amount associated with the convertibility feature over the life of the debt instrument rather than the period for which the instrument first becomes convertible. Management is in the process of evaluating the requirements of EITF 00-27, but does not expect this pronouncement will materially impact the Company's financial position or results of operations. Reclassifications Certain prior period amounts have been reclassified to conform with the current period presentation. 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's did not earn any revenue during the years ended June 30, 2001 and 2000 and the Company has incurred net losses from inception to June 30, 2001 of $2,001,809 including a net loss of $544,080 during the year ended June 30, 2001. 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, 2001, towards (i) obtaining additional equity (ii) management of accrued expenses and accounts payable (iii) Development of the software "PCA " and (vi) evaluation of its distribution and marketing methods. Management believes that the above actions will allow the Company to continue operations through the next fiscal year. 43 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY)
4. PROPERTY AND EQUIPMENT June 30, 2001 June 30, 2000 -------------- ------------- Property and Equipment $ 12,910 $ 12,910 Less: Accumulated depreciation 10,800 8,218 ---------- ---------- $ 2,110 $ 4,692 ========== ==========
5. PREPAID EXPENSES The Company entered into software license agreements with two Delaware Corporations. One Corporation granted permission to the Company to utilize its software for the "PCA " development. The corporation was paid $202,500 as initial non-refundable license fee and was considered to be pre-paid royalties. The agreement calls for Concierge, Inc. to pay a royalty of $1.00 for the first million units sold and $.75 for units greater than 1,000,000. The second software license agreement granted the Company the rights to incorporate its software in the Company's personal communication attendant e-mail device. The corporation was paid $42,500 by Concierge, Inc. as a non-refundable, advance royalty payment. The agreement calls for the Company to pay a royalty of $1.10 for the first 100,000 units, thereafter $.85 per unit. The Company amortizes the prepaid royalties by the amount which is the greater of the amount computed using (a) the ratio that current gross revenues bear to the total of current and anticipated future gross revenues or (b) the straight-line method over the remaining estimated economic life. Per the guideline under SFAS 86 "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed", amortization shall start when the product is available for general release to customers. The term of licenses is five years from the date the Company begins shipping of its product. The prepaid royalties will be amortized based on straight-line method over five-year period from the date shipping begins. 6. NOTE RECEIVABLE - RELATED PARTY The Company has loaned $100,000 to a Corporation with which the Company is planning to merge (see note 9). The Note is due on demand, unsecured and is non-interest bearing. 7. INCOME TAXES No provision was made for Federal income tax since the Company has significant net operating loss carryforwards. Through June 30, 2001, the Company incurred net operating losses for tax purposes of approximately $2,002,000. Differences between financial statement and tax losses consist primarily of amortization allowance, was immaterial at June 30, 2001. The net operating loss carryforwards may be used to reduce taxable income through the year 2016. Net operating loss for carryforwards for the State of California are generally available to reduce taxable income through the year 2006. The availability of the Company's net operating loss carryforwards are subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock. The provision for income taxes consists of the state minimum tax imposed on corporations. 44 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) The net deferred tax asset balance, due to net operating loss carryforwards, as of June 30, 2001 and 2000 were approximately $800,000 and $580,000, respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carrytforwards cannot reasonably be assured. 8. STOCKHOLDERS' EQUITY AND COMMON STOCK ISSUED SUBJECT TO CONTINGENCY The Company 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, the Company sold securities to persons in six states in the U. S. The Company 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, the Company 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, 2001 and 2000, were 680,504 for cash and services amounting $266,610. During the year ended June 30, 2000, the Company reacquired and cancelled 262,000 shares, previously issued for services of $2,620 in the year ended June 30, 1997. 9. SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY The Company has entered into subscription agreements to issue "post merger" shares in exchange for cash. Through December 31, 2000, the Company 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 Concierge, Inc. and Starfest, Inc. 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 are subject to this agreement. As mentioned in Note 10, the Company is involved in a proposed merger transaction with Starfest, Inc. ("SFI"). SFI filed a registration statement with the Securities and Exchange Commission ("the Commission") on June 8, 2000 related to the proposed merger, naming the Company as the entity proposed to be merged into SFI. From July 1, 2000 through September 15, 2000, the Company 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 SFI and the manner in which the Company conducted the sale of the 2,127,500 post merger shares of common stock constituted "general advertising or general solicitation" by the Company. 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. The Company does not concede that there was no exemption from registration available for this offering. Nevertheless, should the aforementioned circumstances have 45 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) constituted general advertising or general solicitation, the Company 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 the Company 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) and $1,442,400 as of June 30, 2001 and 2000, respectively. 10. MERGER AGREEMENT On January 26, 2000 the Company entered into an agreement of merger with Starfest, Inc., a California Corporation. Under the agreement, the presently outstanding 1,376,380 share of common stock of the Company shall be converted into 96,957,713 common stock of Starfest, Inc. on the basis of 70.444 shares of Starfest, Inc. for each share outstanding of the Company. The 96,957,713 post merger shares shall be distributed to the shareholders of the Company on a pro-rata basis. For accounting purposes, the transaction would be treated as a recapitalization of the Company, with the Company as the accounting acquirer (reverse acquisition), and would be accounted for in a manner similar to a pooling of interests. The operations of Starfest, Inc. would be included with those of the Company from the acquisition date. Starfest, Inc. had minimal assets and did not have significant operations prior to the acquisition. The merger is subject to approval by shareholders of both companies and Securities and Exchange Commission. 11. 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. The Company paid $800 and $800 for income tax in the year ended June 30, 2001 and 2000, respectively. Total amount paid for income taxes from September 20, 1996 (inception) through June 30, 2001 amounted to $4,000. The Company paid $0 for interest during the periods ended June 30, 2001 and 2000. Total amount paid for interest from September 20, 1996 (inception) through June 30, 2001, amounted to $4,227. The Cash flow statements do not include effect of acquisition and cancellation of 262,000 shares issued for services of $2,620. 737,415 shares have been issued since inception through June 30, 2001, for services amounting $7,374. Valuation of shares is based on the estimated fair market value of the services performed 12. COMMITMENT The Company sub-leases office space in Los Angeles, California from Ardent, Ltd. The term of the lease is 26 months with monthly payments of $1,542. The lease expires on August 31, 2002. Rent was $18,501 and $7,823 for the year ended June 30, 2001 and 2000, respectively. 46 CONCIERGE, INC. NOTES TO FINANCIAL STATEMENTS (A DEVELOPMENT STAGE COMPANY) Future minimum lease payments associated with the lease are as follow:
Year ended June 30 Amount --------------------- ---------- 2002 $ 18,501 2003 3,083 ---------- Total $ 21,584 ==========
47 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On March 8, 2000 Starfest's principal independent accountant, Jaak (Jack) Olesk, Beverly Hills, California, resigned. His reports on the Company's financial statements from inception onward contained no adverse opinions or disclaimers of opinions and were not modified as to uncertainty, audit scope or accounting principles. There were no disagreements with Jaak (Jack) Olesk, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Jaak (Jack) Olesk's satisfaction, would have caused him to make reference to the subject matter of the disagreements in connection with his reports. On November 14, 2000, the Company engaged the firm of Kabani & Company, of Fountain Valley, California, as independent accountants for the Company. Prior to November 14, 2000, neither the Company, nor anyone on its behalf, had consulted with Kabani & Company concerning the accounting principles of any specific completed or contemplated transaction, any type of audit opinion on the Company's financial statements or any other material factor which might be considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue. ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Set forth below are the names, and terms of office of each of the directors, executive officers and significant employees of Starfest at December 31, 2002 and a description of the business experience of each.
Office Held Term Person Offices Since of Office ------ ------- ------------ ---------- Michael Huemmer, 61 President and 1999 2002 Director Janet Alexander, 67 Secretary and 1999 2002 Director
Michael Huemmer. Mr. Huemmer has been employed by Starfest since April 1999. Prior to this employment he was the president of Ameripro Sports Marketing Company of Palm Desert, California from 1995 until his employment with Starfest. Janet Alexander. Ms. Alexander has served as Starfest's secretary since July 1999. Prior to this employment she was self-employed as a hypnotherapist in Wildomer, California from 1995 until June 1998 when she moved to Palm 48 Springs, California. She was not employed from June 1998 until she became the secretary of Starfest in July 1999. There are no family relationships between the directors and officers. There are no significant employees of Starfest who are not described above. Section 16(a) Beneficial Ownership Reporting Compliance ------------------------------------------------------------ Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the registrant during its most recent fiscal year and Forms 5 and amendments thereto furnished to the registrant with respect to its most recent fiscal year, and a review of any written representations received by the registrant from the following persons, no person, who was at any time a director, officer or beneficial owner of more than ten percent of any class of equity securities of the registrant registered pursuant to Section 12, failed to file on a timely basis, as disclosed in the above Forms, the reports required by Section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years. ITEM 10. EXECUTIVE COMPENSATION The following information concerns the compensation of Starfest's chief executive officer for the last three completed fiscal years. No other executive officers or individuals received total annual salary and bonus that exceeded $100,000 during the last three completed fiscal years.
Shares of Name of Chief Executive Officer Year Cash Salary Common Stock Awarded ------------------------------- ---- ----------- -------------------- Michael Huemmer 2001 0 0 2000 0 302,001(1) 1999 18,000 300,000(2) Thomas J. Kenan 2000 0 0 Herb Gronauer 2000 0 0 1999 0 0 -------------------------
(1) The value of the 302,001 shares of stock awarded to Mr. Huemmer was $15,100 when the award was made, based upon the $0.045 bid price of the stock on the OTC Bulletin Board the day the shares were awarded. 49 (2) The value of the 300,000 shares of stock awarded to Mr. Huemmer was $13,500 when the award was made, based upon the $0.05 bid price of the stock on the OTC Bulletin Board the day the shares were awarded. In November 1999 Ms. Janet Alexander, secretary of Starfest, was granted 100,000 shares of common stock of Starfest as compensation for her services as secretary and a director. In March 2000, Pamela Miller was awarded 150,000 shares of common stock of Starfest as compensation for her services as secretary and a director of Starfest during part of 1999. Other than as stated above, no cash or stock compensation, deferred compensation or long-term incentive plan awards were issued or granted to Starfest's management during or with respect to the period ended December 31, 2001. Further, no member of Starfest's management has been granted any option or stock appreciation rights; accordingly, no tables relating to such items have been included within this Item. There are no employment contracts, compensatory plans or arrangements, including payments to be received from Starfest, with respect to any director or executive officer of Starfest which would in any way result in payments to any such person because of his or her resignation, retirement or other termination of employment with Starfest or its subsidiaries, any change in control of Starfest, or a change in the person's responsibilities following a change in control of Starfest. Long-Term CompensationCompensation Starfest had no long-term compensation plans or employment agreements with any of its officers or directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table below sets forth the ownership, as of March 15, 2002 of each individual known to management to be the beneficial owner of more than five percent of the post-merger company's common stock, by all directors and nominees, and each of the named executed officers of Starfest, and directors and executive officers of Starfest as a group, of the common stock of Starfest, its only voting security. 50
Amount of Post- Merger Company Name and Address of Shares To Be Percent of Beneficial Owner Owned Class ---------------------- ------------------ ----------- Allen E. Kahn 7547 W. Manchester Ave., No. 325 Los Angeles, CA 90045 23,401,050 19.5% Samuel C.H. Wu 1202 Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong, China 27,250,574 22.7% Polly Force Co., Ltd. 1202 Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong, China 10,805,680 (1) 9.0% East Asia Strategic Holdings, Ltd. 1202 Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong, China 7,395,137 6.2% F. Patrick Flaherty 637 29th Street Manhattan Beach, CA 90266 4,727,485 3.9% Donald V. Fluken 313 Pagosa Way Fremont, CA 94539 143,851 (2) James E. Kirk 1401 Kirby, N.E. Albuquerque, NM 87112 3,883,291 3.2% Herbert Marcus, III 5505 Wenonan Drive Dallas, TX 75209 33,768 (2) Harry F. Camp 1150 Bayhill Drive San Bruno, CA 94066 33,768 (2) David W. Neibert 24028 Clarington Drive West Hills, CA 91304 715,876 (5) (2) Officers and Directors as a Group (8 persons) 60,189,663 50.2%
(1) Mr. Samuel C. H. Wu is the beneficial owner of these shares. (2) Less than one percent. 51 There are no agreements between or among any of the shareholders that would restrict the issuance of shares in a manner that would cause any change in control of Starfest. There are no voting trusts, pooling arrangements or similar agreements in the place between or among any of the shareholders, nor do the shareholders anticipate the implementation of such an agreement in the near future. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There were no transactions during the past two years, or proposed transactions, to which Starfest was or is to be a party, in which any director, executive officer, nominee for election as a director, any security holder named in Item 10 above and any immediate family member of any of the foregoing persons had or is to have a direct or indirect material interest. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed as part of this Form 10-KSB: Exhibit No. Description ------------ ----------- 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 Starfest, Inc.* 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.* *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. (b) Reports on Form 8-K 52 Form 8-K - Item 2 - Acquisition or Disposition of Assets; Item 7 - Articles of Merger of Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of Nevada on March 1, 2002 and Agreement of Merger between Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of California on March 20, 2002; and Item 8 - Change in Fiscal Year (SEC File #000-29913) filed April 2, 2002. 53 SIGNATURES In accordance with Section 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONCIERGE TECHNOLOGIES, INC. Date: April 13, 2002 By/s/ Allen E. Kahn ------------------------------------------ Allen E. Kahn, President In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: April 13, 2002 /s/ Allen E. Kahn ------------------------------------------ Allen E. Kahn, President, Chief Financial Officer and Director Date: April 13, 2002 /s/ F. P. Flaherty ------------------------------------------ F. Patrick Flaherty, Executive Vice President Date: April , 2002 ------------------------------------------ James E. Kirk, Secretary and Director Date: April 13, 2002 /s/ Herbert Marcus III ------------------------------------------ Herbert Marcus III, Director 54 Date: April 13, 2002 /s/ Harry F. Camp ------------------------------------------ Harry F. Camp, Director Date: April 13, 2002 /s/ David W. Neibert ------------------------------------------ David W. Neibert, Director Date: April 13, 2002 /s/ Samuel C. H. Wu ------------------------------------------ Samuel C.H. Wu, Director 55