10KSB 1 concierge10ksb63002.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 JUNE 30, 2002 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Concierge Technologies, Inc. ---------------------------- (Exact name of registrant as specified in its charter) (Previous name of Starfest, Inc. was changed on March 20, 2002) California 333-38838 95-4442384 ---------- --------- ---------- (state of (Commission File Number) (IRS Employer incorporation) I.D. Number) 22048 Sherman Way, Suite 303 Canoga Park, CA 91303 (818) 610-0310 ------------------------------------------------------- (Address and telephone number of registrant's principal executive offices and principal place of business) 531 Main Street, #963 El Segundo, CA 90245 (310) 645-1582 ------------------------------------------------------ (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: $1,112,461 computed by reference to the $0.017 average of the bid and asked price of the Company's Common Stock on October 3, 2002. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 126,292,749 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] ii TABLE OF CONTENTS Page ---- Item 1. Description of Business 1 Business Development 1 Business of Concierge Technologies 2 Government Approval of Principal Products 2 Government Regulations 3 Dependence on Major Customers 3 Seasonality 3 Research and Development 3 Environmental Controls 3 Patents, Trademarks, Copyrights and Intellectual Property 3 Number of Employees 3 Item 2. Description of Property 3 Facilities 3 Item 3. Legal Proceedings 3 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 6 Penny Stock Regulations 7 The Penny Stock Suitability Rule 7 The Penny Stock Disclosure Rule 8 Effects of the Rule 9 Recent Sales of Unregistered Securities 9 Item 6. Plan of Operations 10 Liquidity 11 Item 7. Financial Statements 12 Item 8. Changes in and Disagreements With Accountants On Accounting and Financial Disclosure 27 Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 27 Section 16(a) Beneficial Ownership Reporting Compliance 28 Item 10. Executive Compensation 28 Long-Term Compensation 29 Item 11. Security Ownership of Certain Beneficial Owners and Management 29 Item 12. Certain Relationships and Related Transactions 30 iii Item 13. Exhibits and Reports on Form 8-K 31 (a) Exhibits 31 (b) Reports on Form 8-K 31 Signatures 32 iv ITEM 1. DESCRIPTION OF BUSINESS Business Development Concierge Technologies, Inc. was incorporated in California on August 18, 1993 as "Fanfest, Inc." On August 29, 1995 its name was changed to Starfest, Inc., and on March 20, 2002 its name was changed to "Concierge Technologies, 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. An agreement of merger was entered into between Starfest and Concierge, Inc., a Nevada corporation, on January 26, 2000. The proposed merger was submitted to the shareholders of each of Starfest and Concierge pursuant to a Form S-4 Prospectus-Proxy Statement filed with the Commission. 1 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 fiscal year-end of the corporation was changed to June 30, - 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 Concierge Technologies The business of Concierge Technologies is to conceptualize, design, develop, distribute and market software, hardware and services within the personal communications industry. As of June 30, 2002, we offer one product, which is known by the name "Personal Communications Attendant" or the "PCA". The PCA is in the form of a CD containing a proprietary program application coupled with licensed voice recognition and text-to-speech software than enables a user to retrieve email messages from any remote telephone and have the text of the email message "read" in a computer generated voice. This product was developed and manufactured in limited quantities prior to the completion of the merger with Starfest. Although the product was available for distribution, the Company was without sufficient funds to properly market the product in timely fashion. As a result of the passing time, later introduction of new operating systems, changes in email client code, changes in consumer buying habits, the expanding presence of wireless Internet and email appliances, and the declining use of dial-up voice modems have all contributed to the need to upgrade the PCA product prior to re-engaging an aggressive marketing effort. With the PCA in its current form, we do not expect any significant revenues to be generated from retail sales. Until such time as the PCA can be upgraded to a later format, we will only offer the product for sale via its promotion on our website, www.pcahome.com or www.conciergetech.com. The retail price of the PCA is $39.95. Governmental Approval of Principal Products. No governmental approval is required in the U.S. for Concierge's products. 2 Government Regulations. There are no governmental regulations in the U.S. that apply to Concierge's products. 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. Patents, Trademarks, Copyrights and Intellectual Property. Concierge has trademarked its Personal Communications Attendant. It has no patents on the product. Number of Employees. On September 30, 2002, we employed no persons full time and no persons part time. ITEM 2. DESCRIPTION OF PROPERTY We own no plants, real property or personal property. Facilities Our office facilities are co-located with those of our President and C.O.O., David Neibert, at 22048 Sherman Way, Suite 303, Canoga Park, CA 91303. We have no lease and currently pay no rent. In the event we are able to secure the additional funds required to further our business plan, the shared office space consisting of approximately 880 square feet, including furniture and fixtures, can be leased by us for the amount of $1,235 per month on a one-year lease. Should additional space be needed, there is ample office space available in the vicinity at competitive prices. ITEM 3. LEGAL PROCEEDINGS On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd against, jointly and severally, our company, Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus interest and legal fees. Concierge did not defend against the complaint by Brookside, which alleged that Brookside was entitled to a refund of their investment as a result of a breach of contract. 3 Brookside had entered into a subscription agreement with Concierge, Inc. which called for, among other things, the pending merger between Starfest and Concierge to be completed within 180 days of the investment. The merger was not completed within 180 days and Brookside sought a refund of their investment, which Concierge was unable to provide. As of October 3, 2002, Brookside has not attempted to enforce its judgment. We are in discussions with representatives from Brookside concerning a resolution of the matter. As of October 3, 2002, we are unable to pay the amount of the judgment and have no assets available to Brookside for liquidation in settlement of the judgment. Neither Concierge Technologies nor any of its property is the subject of any other pending legal proceedings or any proceeding which a governmental authority is contemplating. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On January 25, 2002 the shareholders of Starfest voted to approve the merger with Concierge Technologies, Inc. ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our 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 fiscal years ended June 30, 2000, 2001 and 2002. 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 ---- --- -------------- Calendar 1999: 3rd Qtr. 0.2000 0.0600 105,733 4th Qtr. 0.1050 0.0450 95,998 Calendar 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 Calendar 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
Calendar 2002: 1st Qtr. 0.14 0.049 41,877 2nd Qtr. 0.15 0.035 104,629
Holders On September 30, 2002 there were approximately 285 holders of record of our common stock. Approximately 63,608,655 shares are held for approximately 4,200 owners of our 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, Inc. were issued pursuant to registration with the Commission. Nevertheless, there are certain restrictions on the transfer for value of the shares received in the merger by the affiliates of Concierge, Inc. 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, Inc. 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 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) (which is the case, here), - 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. 5 The above resale provisions of Rule 145 shall continue for such affiliates for one year after the merger - until March 20, 2003. 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, Inc.'s and Starfest's affiliates at the time of the merger:
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 126,292,749 100.0 66,661,909 ----------- ----- ---------- Issued and outstanding shares to be controlled by Concierge, Inc.'s Rule 145: affiliates 59,993,856 47.5 59,993,856 Issued and outstanding shares to be controlled Rule 144: by Starfest's affiliates 860,000 0.7 860,000 Shares issued for services or cash in the post-merger period Rule 144: to non-affiliates 5,808,053 4.6 5,808,053 Shares in the "public float," subject to no restrictions on trading 59,630,840 47.2 - ----------- ----- --------- 126,292,749 100.0 66,661,909
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 We have had no earnings and have declared no dividends on our capital stock. Under California law, a company - such as our company - can pay dividends only 6 - 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 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 Our 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." We are not now a "substantial issuer" and cannot become one until we have net tangible assets of at least $2 million. 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. 7 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: - 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 8 - 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, - 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. Our 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 Our company sold the following shares of its common stock during the last three years without registering the shares: 9
No. of Value of Date Shares Name of Purchaser Type of Consideration Consideration 08-12-02 500,000 Samuel Wu Cash $ 30,000 06-20-02 2,532,581 John Everding Services $ 119,031 08-12-02 2,870,259 Ken Lamkin Services $ 134,873 08-12-02 405,213 Trudy Self Services $ 19,041
All of the above sales were made pursuant to the exemption from registration provided by the Commission's Regulation D, Rule 506. All purchasers were either accredited investors or, if not, were provided copies of the company's recent filings with the Commission including financial statements meeting the requirements of the Commission's Item 310 of Regulation S-B. All purchasers were provided the opportunity to ask questions of Concierge's management. ITEM 6. PLAN OF OPERATIONS Our plan of operation for the next twelve months is to source and secure a development partner to upgrade the PCA to a viable commercial product. We have initiated discussions with several companies who have the expertise to further the development of the PCA to modern operating systems, and to also provide a multi-user version as well as other feature set upgrades. The final nature of the proposed relationship between us and any development partner is yet to be determined. Once the multi-user, upgraded version of the PCA is completed, we intend to continue our marketing efforts via direct mail, bundled OEM software with new PCs, web based advertising and a physical presence at retail points of purchase. In order to complete the development and initiate the marketing efforts, we project that $500,000 of expenses will be incurred prior to achieving a break-even cash flow position. There is currently no assurance that we will be able to source the needed funds, or that if we are successful in sourcing funds through either debt or equity financing, that such funds will be sufficient to achieve profitability. In addition to pursuing an upgrade to its current product offering, we intend to aggressively pursue other opportunities in the field of communication services by partnering with start-up and development stage companies whose products are in the introductory stages. Through a combination of product offerings including wireless airtime, wireless Internet access, software offerings, and subscription services, we hope to build a vertically integrated company able to respond in timely fashion to the consumer demand for communications services. Our management believes that such a vertically integrated company will be worth, as a whole, more than the sum of the otherwise separate entities. As such, management expects the consolidated company to be a more attractive investment opportunity for the financial community in general. Leveraging the expertise of its management and directors, who are currently providing their time without charge, we have established contact with several likely strategic partners. Should we be successful in our negotiations, management hopes to be able to acquire control of certain of these targeted companies through an equity exchange and cash compensation. Management is not seeking a transaction that would result in a change of control; however, it is 10 likely that, if the transactions being contemplated by management are to be carried through to conclusion, our current shareholders would suffer some dilution. Further dilution to current shareholders is also possible, and likely, to occur simultaneous with a successful financing effort. On June 17, 2002, David W. Neibert became our President and Chief Operations Officer. Upon assuming that role, he moved the general accounting and administrative offices of the company to co-location with his firm, The Wallen Group. We do not currently pay rent and have no lease for the facilities being provided by Mr. Neibert. He has agreed to provide his services at no charge to the company until such time as we are in a financial position to pay a reasonable salary commensurate with compensation packages paid to other executives of publicly traded companies in similar stages of development within the personal communications industry. As of September 30, 2002, we had no employees other than unpaid officers and no fixed overhead other than the variable cost of web hosting, legal and professional fees, fees charged by our transfer agent and minimum tax payments. We own no office fixtures, furniture or appliances. Liquidity Our only source of operating capital has been funding sourced through insiders or shareholders under the terms of unsecured promissory notes. The amount of borrowed funds have been sufficient to pay the cost of legal and accounting fees as necessary to maintain a current reporting status with the Securities and Exchange Commission. However, sufficient funds have been unavailable to pay down commercial and vendor accounts payable. We have also been unable to pay salaries to our officers and several of our outside consultants who had performed services earlier in the fiscal year. Although our management will continue to provide service to the Company for the near term without pay, we will still require additional funding to maintain the corporation and further the development of the PCA product. Management hopes to source the needed funds through a debt financing of the acquisitions targeted for the next several months. If the financing is not available, the acquisitions themselves will also not be completed. In the event either the financing or the proposed acquisitions are not completed, our funds will be exhausted and continuing operations may be impossible. 11 ITEM 7. FINANCIAL STATEMENTS INDEX The financial statements of the company appear as follows: Independent Auditors' Report 13 Balance Sheet, June 30, 2002 14 Statements of Operations, Twelve Months Ended June 30, 2002 and June 30, 2001 and the Period from September 20, 1996 (Inception) to June 30, 2002 15 Statements of Changes in Stockholders' Equity (Deficit), Advance Subscriptions and Common Stock Subject to Contingency for the Period September 30, 1996 (Inception) to June 30, 2002 16 Statements of Cash Flows, Years Ended June 30, 2002 and June 30, 2001 and the Period from September 20, 1996 (Inception) to June 30, 2002 17 Notes to Financial Statements 18 12 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors Concierge Technologies, Inc. We have audited the accompanying balance sheet of Concierge Technologies, Inc. (a development stage company) as of June 30, 2002 and the related statements of operations, stockholders' equity and cash flows for the period then ended and for the period from September 20, 1996 (inception), to June 30, 2002. 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 audit. 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 audit 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 Concierge Technologies, Inc. as of June 30, 2002 and the results of its operations and its cash flows for the period then ended and from September 20, 1996 (inception), to June 30, 2002, 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's has not earned any revenue since its inception and has accumulated deficit of $2,758,565 at June 30, 2002, including a net loss of $478,229 during the year ended June 30, 2002. 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 September 26, 2002 13 CONCIERGE TECHNOLOGIES, INC. (A development stage company) BALANCE SHEET JUNE 30, 2002 ASSETS ------
CURRENT ASSETS: Cash & cash equivalents $ 655 Prepaid Expenses 245,800 --------- Total current assets 246,455 EQUIPMENT, net 903 --------- $ 247,358 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT -------------------------------------- CURRENT LIABILITIES: Accrued expenses $ 348,796 Loans Payable-Shareholders 304,208 ----------- Total current liabilities 653,004 SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY 1,663,290 COMMON STOCK ISSUED SUBJECT TO CONTINGENCY 266,610 STOCKHOLDERS' DEFICIT: Preferred stock, par value $.001 per share; 10,000,000 shares authorized; none issued Common stock, no par value; 190,000,000 shares authorized; issued and outstanding 122,590,294 239,089 Shares to be issued 183,930 Deficit accumulated during the development stage (2,758,565) ----------- Total stockholders' deficit (2,335,546) ----------- $ 247,358 ===========
The accompanying notes are an integral part of these financial statements. 14 CONCIERGE TECHNOLOGIES, INC. (A development stage company) STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 2002 AND 2001 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2002
SEPTEMBER 20, JUNE 30, JUNE 30, 1996 (INCEPTION) 2002 2001 TO JUNE 30, 2002 ----------- ------------ ---------------- REVENUE $ - $ - $ - COSTS AND EXPENSES Product launch Expenses - 230,241 1,077,785 General & Administrative Expenses 395,029 313,039 1,315,053 ----------- ------------ ----------- TOTAL COSTS AND EXPENSES 395,029 543,280 2,392,838 OTHER INCOME/(EXPENSES) Settlement income, net 52,600 - 52,600 Litigation settlement (135,000) - (135,000) ----------- ------------ ----------- TOTAL OTHER INCOME/(EXPENSES) (82,400) - (82,400) ----------- ------------ ----------- NET LOSS BEFORE INCOME TAXES (477,429) (543,280) (2,475,238) Provision of Income Taxes 800 800 4,800 ----------- ------------ ----------- NET LOSS $ (478,229) $ (544,080) $(2,480,038) =========== =========== =========== WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED 120,134,037 120,057,713 =========== =========== BASIC AND DILUTED NET LOSS PER SHARE $ (0.004) $ (0.005) =========== ===========
The accompanying notes are an integral part of these financial statements. 15 CONCIERGE TECHNOLOGIES, INC. (A development stage company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT), ADVANCE SUBSCRIPTIONS AND COMMON STOCK SUBJECT TO CONTINGENCY FOR THE PERIOD SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2002
Common Stock Common Stock Number of Par Additional Shares Accumulated Stockholders' Advance subject to shares value Paid In Capital to be issued Deficit Equity (deficit) Subscriptions contingency --------- ----- --------------- ------------ ----------- ---------------- ------------- ------------- Common Stock issued for cash though 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 Recapitalization upon merger 118,681,333 113,099 (300,812) - (278,527) (466,240) - - Stock subscription received for 500,000 shares - - - 29,983 - 29,983 - - Stock issued for services 2,532,581 119,031 - - - 119,031 - - Stock to be issued for services - 3,275,472 shares - - - 153,947 - 153,947 - - Net loss for the year ended June 30, 2002 - - - - (478,229) (478,229) - - ---------------------------------------------------------------------------------------------------------- Balance at June 30, 2002 122,590,294 $239,089 $ - $ 183,930 $(2,758,565) $ (2,335,546) $ 1,663,290 $ 266,610 ==========================================================================================================
The accompanying notes are an integral part of these financial statements. 16 CONCIERGE TECHNOLOGIES, INC. (A development stage company) STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2002 AND 2001 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2002
SEPTEMBER 20, JUNE 30, JUNE 30, 1996 (INCEPTION) 2002 2001 TO JUNE 30, 2002 ----------- ------------ ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (478,229) $ (544,080) $(2,480,038) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,207 2,582 12,007 Stock issued for services 119,031 - 126,405 Stock to be issued for services 153,947 153,947 Increase in current assets: Prepaid Expenses - - (245,800) Increase/(decrease) in current liabilities: Accrued expenses 173,521 (48,012) 264,264 Payroll tax payable - (4,400) - ---------- ----------- ----------- Net cash used in operating activities (30,523) (593,910) (2,169,215) ---------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Note receivable - related party - - (100,000) Acquisition of property & equipment - - (12,910) ---------- ----------- ----------- Net cash used in investing activities - - (112,910) ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Issuance of Shares - - 567,007 Proceeds from advance subscriptions 29,983 487,500 1,772,983 Costs and expenses of advance subscriptions - - (79,710) Proceeds from (repayments of) related party loans 500 22,000 22,500 ---------- ----------- ----------- Net cash provided by financing activities 30,483 509,500 2,282,780 ---------- ----------- ----------- NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS (40) (84,410) 655 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 695 85,105 - ---------- ----------- ----------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 655 $ 695 $ 655 ========== ========== ===========
The accompanying notes are an integral part of these financial statements. 17 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION 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. On March 20, 2002, the Company changed its name to Concierge Technologies, Inc. In March 2000, the Company acquired approximately 96.83 percent (8,250,000 shares) of the common stock of MAS Acquisition XX Corp. (MAS XX) for $314,688. This amount was expensed in March 2000 as at the time of the acquisition, MAS XX had no assets or liabilities and was inactive. On March 21, 2002, the Company consummated a merger with Concierge, Inc. (see note 11). The Company is the surviving entity as a result of the merger. Concierge, Inc. ("CI"), was a development stage enterprise incorporated in the state of Nevada on September 20, 1996. The CI had undertaken the development and marketing of a new technology, a unified messaging product "The Personal Communications Attendant" ("PCA "). "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. Principles of Recapitalization The accompanying financial statements for the period ended June 30, 2002 and 2001 include the accounts of the CI for the twelve-month periods ended June 30, 2002 and 2001. The operations of the Company have been included with those of CI since the date of consummation of the merger. For accounting purposes, the transaction between the Company and CI has been treated as a recapitalization of the Company, with CI as the accounting acquirer (reverse acquisition), and has been accounted for in a manner similar to a pooling of interests. Proforma financial statements are not presented as the net assets of the Company were insignificant prior to merger. 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. Equipment Equipment is carried at cost. Depreciation of 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. 18 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 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 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 19 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 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. 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 20 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 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, 2002 and 2001. 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, 2002 and 2001. Advertising The Company expenses advertising costs as incurred. Reclassifications Certain prior period amounts have been reclassified to conform with the current period presentation. 2. RECENT PRONOUNCEMENTS 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. Adoption of SFAS No. 144 does not have a material impact on the Company's financial statements. In May 2002, the Board issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). SFAS 145 rescinds the automatic treatment of gains or losses from extinguishments of debt as extraordinary unless they meet the criteria for extraordinary items as outlined in 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. SFAS 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions and makes various technical corrections to existing pronouncements. The provisions of SFAS 145 related to the rescission of FASB Statement 4 are effective for fiscal years beginning after May 15, 2002, with early adoption encouraged. All other provisions of SFAS 145 are effective for transactions occurring after May 15, 2002, with early adoption encouraged. The Company does not anticipate that adoption of SFAS 145 will have a material effect on its earnings or financial position. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This statement requires that a liability for a cost associated with an exit or disposal 21 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS activity be recognized when the liability is incurred. Under EITF Issue 94-3, a liability for an exit cost, as defined, was recognized at the date of an entity's commitment to an exit plan. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002 with earlier application encouraged. The Company does not expect adoption of SFAS No. 146 to have a material impact, if any, on its financial position or results of operations. 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 year ended June 30, 2002 and the Company has accumulated deficit of $2,758,565 at June 30, 2002, including a net loss of $478,229 during the year ended June 30, 2002. 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 year ended June 30, 2002, towards (i) obtaining additional equity (ii) management of accrued expenses and accounts payable (iii) 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. 4. EQUIPMENT
June 30, 2002 --------------- Equipment $ 12,910 Less: Accumulated depreciation 12,007 --------- $ 903 =========
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. 22 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 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. NOTES PAYABLE - RELATED PARTIES The Company has notes payable to shareholders amount $5,000 due September 30, 2002 and $8,000 due February 15, 2003 with interest rate of 10% per annum on both. The remaining notes payable to shareholders of $291,208 are non-interest bearing, unsecured and due on demand. 7. INCOME TAXES No provision was made for Federal income tax since the Company has significant net operating loss carryforwards. Through June 30, 2002, the Company incurred net operating losses for tax purposes of approximately $2,480,000. Differences between financial statement and tax losses consist primarily of amortization allowance, was immaterial at June 30, 2002. The net operating loss carryforwards may be used to reduce taxable income through the year 2017. Net operating loss for carryforwards for the State of California are generally available to reduce taxable income through the year 2007. 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. The net deferred tax asset balance, due to net operating loss carryforwards, as of June 30, 2002 was approximately $992,000. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carrytforwards cannot reasonably be assured. 8. SHARES OF CONCIERGE, INC. ISSUED SUBJECT TO CONTINGENCY Concierge, Inc. (CI) issued 117,184 shares for cash totaling $202,061 and 354,870 shares for services of $3,549 during the year ended June 30, 2000. Since December 1998, CI sold securities to persons in six states in the U. S. For the reasons stated in Note 9 below with regard to sales of securities during the period from July 1 through September 15, 2000, which securities may have been sold without the benefit of an exemption from registration, all sales of securities by CI from and after December 1998 until the merger with Concierge Technologies, Inc. could be integrated with these sales in 2000 and could therefore be deemed to have also been issued without the benefit of an exemption from federal or state registration. Accordingly, all such shares are subject to the contingency that they may have been issued without the availability of an exemption from registration under the Securities Act of 1933 and under the securities laws of each of the six states. Therefore, CI has treated all such shares issued since December 1998, as Common stock issued subject to contingency. Total shares issued subject to contingency through June 30, 2002, were 680,504 for cash and services amounting $266,610. 23 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 9. SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY Concierge, Inc. (CI) entered into subscription agreements to issue "post merger" shares in exchange for cash. Through December 31, 2000, CI had received advance subscriptions for a gross amount of $1,255,500 before deducting associated costs of $79,710, for 5,928,750 post merger shares. Per the subscription agreement, in the event the merger between CI and the Company is not completed prior to November 31, 2000, the obligation of the Company under this agreement may be satisfied by the issuance of shares in the Company equivalent on a pro-rata basis to the number of shares in "post merger" Corporation that are subject to this agreement. As mentioned in Note 11, CI merged with the Company on March 20, 2002. The Company filed a registration statement with the Securities and Exchange Commission ("the Commission") on June 8, 2000 related to the proposed merger, naming CI as the entity proposed to be merged into the Company. From July 1, 2000 through September 15, 2000, CI received additionally $487,500 as advance subscription for 2,127,500 post merger shares in an offering intended to be exempt from registration pursuant to the provisions of Section 4(2) of the Securities Act of 1933 and of Regulation D, Rule 506 of the Commission. It is possible, but not certain, that the filing of the registration statement by the Company and the manner in which CI conducted the sale of the 2,127,500 post merger shares of common stock constituted "general advertising or general solicitation" by CI. General advertising and general solicitation are activities that are prohibited when conducted in connection with an offering intended to be exempt from registration pursuant to the provisions of Regulation D, Rule 506 of the Commission. CI does not concede that there was no exemption from registration available for this offering. Nevertheless, should the aforementioned circumstances have constituted general advertising or general solicitation, CI would be denied the availability of Regulation D, Rule 506 as an exemption from the registration requirements of the Securities Act of 1933 when it sold the 2,127,500 post merger shares of common stock after June 8, 2000. Should no exemption from registration have been available with respect to the sale of these shares, the persons who bought them would be entitled, under the Securities Act of 1933, to the return of their subscription amounts if actions to recover such monies should be filed within one year after the sales in question. Accordingly, the amounts received by CI from the sale of these shares are set apart from Stockholders' Equity as "Subscription received for common stock subject to contingency" to indicate this contingency. The total contingent liabilities related to such shares amounted to $1,929,900 ($2,009,610 less cost and expenses of $79,710) as of June 30, 2002. 10. SHARES ISSUED AND TO BE ISSUED During the year ended June 30, 2002, the Company issued 2,532,581 shares for consulting services of $$119,031. The Company did not issue any shares in the year ended December 31, 2001. During the year ended June 30, 2002, the Company received a net amount of $29,983 for 500,000 shares of common stock at $.06 per share, to be issued under a private placement. As of June 30, 2002, the Company has not issued any shares for the subscription received. During the year ended June 30, 2002, the Company incurred consulting expenses of $153,947 for which 3,275,472 shares of common stock will be issued. All of these shares were issued in August 2002. 11. MERGER AGREEMENT On January 26, 2000 the Company entered into an agreement of merger with Concierge, Inc. (CI), a California Corporation. Under the agreement, the outstanding 1,376,380 share of common stock of the CI were converted into 96,957,713 common stock of the Company on the basis of 70.444 shares of the 24 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS Company for each share outstanding of the CI. The 96,957,713 post merger shares were distributed to the shareholders of CI on a pro-rata basis. For accounting purposes, the transaction was treated as a recapitalization of the CI, with CI as the accounting acquirer (reverse acquisition), and was accounted for in a manner similar to a pooling of interests. The operations of the Company have been included with those of the CI from the acquisition date. The Company had minimal assets before the merger and did not have significant operations prior to the merger. The merger was subject to approval by shareholders of both companies and Securities and Exchange Commission. The merger was consummated on March 20, 2002. 12. 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 for income tax in the years ended June 30, 2002 and 2001. Total amount paid for income taxes from September 20, 1996 (inception) through March 31, 2002 amounted to $4,800. The Company paid $158 for interest during the periods ended June 30, 2002 and $-0- for 2001. Total amount paid for interest from September 20, 1996 (inception) through June 30, 2002, amounted to $4,385. The Company issued 2,532,581 shares of common stock for consulting fees amounting $119,031 during the fiscal year ended June 30, 2002. Valuation of shares is based on the estimated fair market value of the services performed. The Cash flow statements do not include effect of merger with CI. 13. 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 $18,504 and $18,501 for the year ended June 30, 2002 and 2001, respectively. Future minimum lease payments associated with the lease are as follow:
Twelve months ended June 30 Amount ------------------------------- ------ 2003 3,084
14. LITIGATION Concierge, Inc. filed a complaint against Emerald-Delaware, Inc. (ED), in the superior court for the County of Contra Costa on March 9, 2001 for breach of contract, negligence, fraud etc in relation to development of its products PCA. ED filed a cross complaint in the same court. The parties reached a settlement on October 9, 2001, whereby ED agreed to compensate CI by $50,000. The settlement amount was received during the year ended June 30, 2002 and has been reflected as settlement income in the financial statements. On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd against, jointly and severally, Concierge, Inc, Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus legal fees. The Company did not defend against the complaint by Brookside, which alleged that Brookside was entitled to a refund of their investment as a result of a breach of contract. Brookside had 25 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS entered into a subscription agreement with Concierge, Inc. which called for, among other things, the pending merger between Starfest and Concierge to be completed within 180 days of the investment. The merger was not completed within 180 days and Brookside sought a refund of their investment, which Concierge was unable to provide. The Company has accrued the judgment amount of $135,000 as litigation settlement in the financial statements. 26 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 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 Concierge Technologies at September 30, 2002 and a description of the business experience of each.
Office Held Term of Person Offices Since Office David W. Neibert President and Director 06-2002 2003 James E. Kirk Secretary and Director 09-1996 2003 Samuel Wu Director 03-2002 2003 Allen E. Kahn Chairman, CEO, CFO and Director 09-1996 2003 Patrick Flaherty Director 08-2002 2003
David W. Neibert. Mr. Neibert has been the President of Concierge Technologies since June 17, 2002. Prior to assuming the duties of President, Mr. Neibert was, and remains, a director of Concierge Technologies since 1999. Mr. Neibert is also the president of The Wallen Group, a general partnership providing consulting services to wireless communications companies and other high technology firms in development stages. Prior to founding The Wallen Group, Mr. Neibert served as the president of Roamer One and Midland USA, and as a director and executive vice president of business development of their publicly traded parent company Intek Global Corporation. Intek Global Corporation manufactured, sold and distributed radio products globally to the consumer, government and commercial markets and operated a nationwide land mobile radio network in the U.S. Intek Global Corporation was subsequently acquired by their majority shareholder, Securicor plc of Sutton Surrey, England. Mr. Neibert reported to offices located in Los Angeles, California, Kansas City, Missouri New York, New York, and Midsomer Norton, England during his tenure with Intek Global Corporation from 1992 until 1997. James E. Kirk, Esq. Mr. Kirk is Corporate Secretary and General Counsel and has served as a Director of Concierge, Inc. since inception. He is a graduate of Wichita State University and holds LLB and JD degrees from the law school of Washburn University. Mr. Kirk is an attorney in private practice in Albuquerque, New Mexico. Samuel C.H. Wu. With nearly 20 years of experience in engineering, banking and finance, Mr. Wu has played a pivotal role in developing and managing 27 national and international business activity relationships for organizations in the public and private sectors. He was a senior marketing/credit officer with the Bank of America -World Banking Division in Tokyo, London and Hong Kong before founding Woodsford Shipping & Trading Co., Ltd. Under Mr. Wu's guidance, Woodsford has become a preeminent firm in the area's import/export and financial markets. He has been actively involved in the affairs of Concierge since its inception. Mr. Wu is fluent in English, Japanese and a number of Chinese dialects. He is a graduate of the University of California, Berkeley, where he received his BSEE in electronics and computer sciences and MBA. He has also taken advanced studies in manufacturing, quality assurance and community medicine. Allen E. Kahn. Mr. Kahn entered the computer industry as a Systems Engineer with IBM and subsequently held a series of technical, sales, marketing and management positions with other multi-billion dollar corporations before becoming President and CEO of two companies marketing data communications hardware and software. He has extensive experience in voice technology, optical character recognition, data communications and other technical elements of the PCA, which he conceived. Mr. Kahn is an honors graduate of the University of Texas at El Paso and pursued postgraduate studies in Business Administration at UTEP and California State University, Long Beach. Patrick Flaherty. Mr. Flaherty has been in the technology related business for over 30 years. During the last five years, he has been president of Manhattan Resources, a consulting company specializing in Network Communications and Storage Management. In late 1999 he became Senior Vice President of Concierge, Inc., and served in that position until March of 2002. Since April 2002, he has resumed his consulting business and was elected to the board of Concierge Technologies, Inc. in August of 2002. There are no family relationships between the directors and officers. There are no significant employees of Concierge 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 our chief executive officer for the last three completed fiscal years. No other executive officers 28 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 Allen Kahn 2002 0 0 Michael Huemmer 2002 0 0 Michael Huemmer 2001 0 0 Michael Huemmer 2000 0 302,001(1) Thomas J. Kenan 2000 0 0 Herb Gronauer 2000 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. Other than as stated above, no cash or stock compensation, deferred compensation or long-term incentive plan awards were issued or granted to our management during or with respect to the period ended June 30, 2002. Further, no member of 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 with respect to any director or executive officer which would in any way result in payments to any such person because of his or her resignation, retirement or other termination of employment, any change in control, or a change in the person's responsibilities following a change in control. Long-Term Compensation We have no long-term compensation plans or employment agreements with any of our officers or directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table below sets forth the ownership, as of September 30, 2002 of each individual known to management to be the beneficial owner of more than five percent of the company's common stock, by all directors, and named executive officers, individually and as a group. 29
Name and Address of Amount Percent of Beneficial Owner Owned Class ---------------------- ------ ----------- Allen E. Kahn 7547 W. Manchester Ave., No. 325 Los Angeles, CA 90045 24,988,135 19.8% Samuel C.H. Wu 1202 Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong, China 20,355,437 16.1% Polly Force Co., Ltd. 1202 Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong, China 10,805,680(1) 8.6% East Asia Strategic Holdings, Ltd. 1202 Tower 1, Admiralty Centre 18 Harcourt Road Hong Kong, China 7,395,137 5.8% F. Patrick Flaherty 637 29th Street Manhattan Beach, CA 90266 4,727,485 3.7% James E. Kirk 1401 Kirby, N.E. Albuquerque, NM 87112 3,883,291 3.1% David W. Neibert 24028 Clarington Drive West Hills, CA 91304 715,876 (2) Officers and Directors as a Group (5 persons) 54,670,224 43.29%
(1) Mr. Samuel C. H. Wu is the beneficial owner of these shares and 1,620,852 shares held by Link Sense through his presence on their respective Boards of Directors. (2) Less than one percent. 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 the company. 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 30 transactions, to which Concierge Technologies 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 Concierge, Inc., which became the Bylaws of Concierge Technologies upon its merger with Starfest, Inc. on March 20, 2002.* 3.5 - Articles of Merger of Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of Nevada on March 1, 2002.** 3.6 - Agreement of Merger between Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of California on March 20, 2002.** 10.1 - Agreement of Merger between Starfest, Inc. and Concierge, Inc.* *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 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 31 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. 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. By:/s/ David W. Neibert Date: October 14, 2002 ------------------------------------------ David W. Neibert, 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. /s/ David W. Neibert Date: October 14, 2002 --------------------------------------------- David W. Neibert, President and Director /s/ Allen E. Kahn Date: October 14, 2002 --------------------------------------------- Allen E. Kahn, Chief Executive Officer, Chief Financial Officer and Director /s/ F. Patrick Flaherty Date: October 13, 2002 --------------------------------------------- F. Patrick Flaherty, Director /s/ James E. Kirk Date: October 15, 2002 --------------------------------------------- James E. Kirk, Secretary and Director /s/ Samuel C.H. Wu Date: October 13, 2002 --------------------------------------------- Samuel C.H. Wu, Director 32 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the accompanying Annual Report of Concierge Technologies, Inc. (the "Company") on Form 10-KSB for the year ended June 30, 2002 (the "Report"), I, Allen E. Kahn, Chief Executive Officer of the Company, hereby certify that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Allen E. Kahn Dated: October 14, 2002 Allen E. Kahn Chairman and Chief Executive Officer The above certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-K or as a separate disclosure document. CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the accompanying Annual Report of Concierge Technologies, Inc. (the "Company") on Form 10-KSB for the year ended June 30, 2002 (the "Report"), I, Allen E. Kahn, Chief Financial Officer of the Company, hereby certify that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Allen E. Kahn Dated: October 14, 2002 Allen E. Kahn Chief Financial Officer The above certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and is not being filed as part of the Form 10-K or as a SEPARATE DISCLOSURE DOCUMENT.