10QSB 1 concierge10qsb123102.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ CONCIERGE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Commission File No. 000-29913 State of Incorporation: California IRS Employer I.D. Number: 95-4442384 22048 Sherman Way, Suite 303 Canoga Park, CA 91303 818-610-0310 ------------------------------------------------------- (Address and telephone number of registrant's principal executive offices and principal place of business) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of January 30, 2003, there were 126,292,749 shares of the Registrant's Common Stock, $0.001 par value, outstanding. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Balance Sheet December 31, 2002 (Unaudited) 3 Statements of Operations Three Month Periods Ended December 31, 2002 and 2001 and the Period from September 20, 1996 (Inception) to December 31, 2002 (Unaudited) 4 Statements of Cash Flows Periods Ended December 31, 2002 and 2001 and the Period from September 20, 1996 (Inception) to December 31, 2002 (Unaudited) 5 Notes to Unaudited Financial Statements 6 2 CONCIERGE TECHNOLOGIES, INC. (A development stage company) BALANCE SHEET DECEMBER 31, 2002 (Unaudited) ASSETS ------
CURRENT ASSETS: Cash & cash equivalents $ 3,761 Prepaid Expenses 245,800 ----------- Total current assets 249,561 EQUIPMENT, net 233 ----------- $ 249,794 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- CURRENT LIABILITIES: Accrued expenses $ 353,865 Loans Payable-Shareholders 323,208 ----------- Total current liabilities 677,073 ----------- 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, $.001 par value; 190,000,000 shares authorized; issued and outstanding 126,292,749 126,293 Shares to be issued 10,000 Additional paid in capital 296,726 Deficit accumulated during the development stage (2,790,198) ----------- Total stockholders' deficit (2,357,179) ----------- $ 249,794 ===========
The accompanying notes are an integral part of these financial statements. 3 CONCIERGE TECHNOLOGIES, INC. (A development stage company) STATEMENTS OF OPERATIONS THREE MONTH AND SIX MONTH PERIODS ENDED DECEMBER 31, 2002 AND 2001 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO DECEMBER 31, 2002 (Unaudited)
Three month periods ended Six month periods ended September 20, Dec. 31 Dec. 31, Dec. 31, Dec. 31, 1996 (Inception) 2002 2001 2002 2001 to December 31, 2002 ---------- ----------- ----------- ---------- -------------------- REVENUE $ - $ - $ - $ - $ - COSTS AND EXPENSES Product launch Expenses - - - - 1,077,785 General & Administrative Expenses 16,910 41,387 30,833 45,492 1,345,886 ----------- ----------- ----------- ---------- ----------- TOTAL COSTS AND EXPENSES 16,910 41,387 30,833 45,492 2,423,671 OTHER INCOME/(EXPENSES) Settlement income, net - 52,600 - 52,600 52,600 Litigation settlement - - - - (135,000) ----------- ----------- ----------- ---------- ----------- TOTAL OTHER INCOME/(EXPENSES) - 52,600 - 52,600 (82,400) ----------- ----------- ----------- ---------- ----------- NET LOSS BEFORE INCOME TAXES (16,910) 11,213 (30,833) 7,108 (2,506,071) Provision of Income Taxes - - 800 800 5,600 ----------- ----------- ----------- ---------- ----------- NET INCOME (LOSS) $ (16,910) $ 11,213 $ (31,633) $ 6,308 $(2,511,671)* =========== =========== =========== ========== =========== WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED 126,292,749 120,057,713 125,447,623 120,057,713 =========== =========== =========== =========== BASIC AND DILUTED NET LOSS PER SHARE $ (0.000) $ 0.000 $ (0.000) $ 0.000 =========== =========== =========== ===========
* The cumulative net loss does not include $278,527 representing the recapitalization of the Company upon merger, adjusted against the accumulated deficit. The accompanying notes are an integral part of these financial statements. 4 CONCIERGE TECHNOLOGIES, INC. (A development stage company) STATEMENTS OF CASH FLOWS PERIODS ENDED DECEMBER 31, 2002 AND 2001 AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO DECEMBER 31, 2002 (Unaudited)
Sept. 20, 1996 Dec. 31, Dec. 31, (inception) to 2002 2001 Dec. 31, 2002 ---------- --------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (31,633) $ 6,308 $(2,511,671) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 670 1,034 12,677 Stock issued for services - - 280,352 Increase in current assets: Prepaid Expenses - - (245,800) Increase (decrease) in current liabilities: Accrued expenses 5,069 (6,067) 269,333 ---------- --------- ----------- Net cash provided by (used in) operating activities (25,894) 1,275 (2,195,109) ---------- --------- ----------- 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 shares to be issued 10,000 - 10,000 Proceeds from advance subscriptions - - 1,772,983 Costs and expenses of advance subscriptions - - (79,710) Proceeds from (repayments of) related party loans 19,000 (1,000) 41,500 ---------- --------- ----------- Net cash provided by (used in) financing activities 29,000 (1,000) 2,311,780 ---------- --------- ----------- NET INCREASE IN CASH & CASH EQUIVALENTS 3,106 275 3,761 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 655 695 - ---------- --------- ----------- CASH & CASH EQUIVALENTS, ENDING BALANCE $ 3,761 $ 970 $ 3,761 ========== ========= ===========
The accompanying notes are an integral part of these financial statements. 5 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Concierge Technologies, Inc. (the "Company"), a California corporation, was incorporated on August 18, 1993 as Fanfest, Inc. In August 1995 the Company changed its name to Starfest, Inc. During 1998, the Company was inactive, just having minimal administrative expenses. During 1999 the Company attempted to pursue operations in the online adult entertainment field. There were no revenues from this endeavor. On March 20, 2002, the Company changed its name to Concierge Technologies, Inc. In March 2000, the Company acquired approximately 96.83 percent (8,250,000 shares) of the common stock of MAS Acquisition XX Corp. (MAS XX) for $314,688. This amount was expensed in March 2000, as at the time of the acquisition MAS XX had no assets or liabilities and was inactive. On March 21, 2002, the Company consummated a merger with Concierge, Inc. (see note 11). 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. To-date, the Company has not earned any revenue. The accounting policies of the Company are in accordance with generally accepted accounting principles and conform to the standards applicable to development stage companies. Principles of Recapitalization The accompanying financial statements for the period ended December 31, 2002 and 2001 include the accounts of the CI for the six-month periods ended December 31, 2002 and 2001. 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. Basis of Preparation The accompanying Interim Condensed Financial Statements are prepared in accordance with rules set forth in Retaliation SB of the Securities and Exchange Commission. As said, these statements do not include all disclosures required under generally accepted principles and should be read in conjunction with the audited financial statements for the year ended June 30, 2002. In the opinion of management, all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the six months ended December 31, 2002 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2003. Reclassifications Certain prior period amounts have been reclassified to conform with the current period presentation. 2. RECENT PRONOUNCEMENTS 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 6 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS 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. The Company does not expect that the adoption of above pronouncements will have a material effect on its financial position, results of operations or cash flows. 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 financial position, results of operations or cash flows. 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 activity be recognized when the liability is incurred. Under 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 Company does not anticipate that adoption of SFAS 146 will have a material effect on its financial position, results of operations or cash flows. In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and Interpretation 9 thereto, to recognize and amortize any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset. This statement requires that those transactions be accounted for in accordance with SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." In addition, this statement amends SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to include certain financial institution-related intangible assets. The Company does not expect adoption of SFAS No. 147 to have a material impact, if any, on its financial position, results of operations or cash flows. In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect 7 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. The recognition provisions of FIN 45 are effective for any guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN45 is not expected to have a material effect on the Company's financial position, results of operations, or cash flows. In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123, "Accounting for Stock Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used, on reported results. The Statement is effective for the Companies' interim reporting period ending January 31, 2003. The Companies do not expect the adoption of SFAS No. 148 to have a material impact on its financial position or results of operations or cash flows. 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 through the period ended December 31, 2002 and the Company has incurred net losses from inception to December 31, 2002 of $2,790,198 including a net loss of $31,633 during the six month period ended December 31, 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 period ended December 31, 2002, towards (i) obtaining additional financing (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 twelve months. 4. 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 8 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS 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. 5. LOANS PAYABLE - RELATED PARTIES The Company has loans payable to shareholders amounting $5,000 due January 31, 2003 and $18,000 due February 15, 2003, and a loan payable to a related party, related by common shareholder, $10,000 due April 15, 2003 with interest rate of 10% per annum on all. The remaining notes payable to shareholders of $290,208 are non-interest bearing, unsecured and due on demand. 6. INCOME TAXES No provision was made for Federal income tax since the Company has significant net operating loss carryforwards. Through December 31, 2002, the Company incurred net operating losses for tax purposes of approximately $2,500,000. Differences between financial statement and tax losses consist primarily of amortization allowance, was immaterial at December 31, 2002. The net operating loss carryforwards may be used to reduce taxable income through the year 2017. Net operating losses for carry-forwards 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 December 31, 2002 and 2001 were approximately $1,000,000 and $798,000, respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carrytforwards cannot reasonably be assured. 7. 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. CI did not file Form D or other filings in any of the states or with the SEC for such shares and did not properly follow the requirements for complying with available exemptions in each state. Accordingly, all such shares are subject to the 9 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS 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 680,504 shares were issued subject to contingency through December 31, 2002 for cash and services amounting $266,610. 8. 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. 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 10, 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 December 31, 2002. 9. COMMON STOCK During the six-month period ended December 31, 2002, the Company issued 500,000 shares of common stock for $29,983 cash received in the prior period and 3,275,472 shares for services amounting $153,947 received in the prior period. During the six-month period ended December 31, 2002, 73,017 shares, which were issued in error, were cancelled. 10. SHARES TO BE ISSUED The Company received cash of $10,000 towards an agreement entered into with Newport Capital whereby the Company would issue shares to Newport Capital upon receiving a full payment of $35,000. 10 CONCIERGE TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS 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 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 $0 for income tax in the six months periods ended December 31, 2002 and 2001. The Company paid $0 for interest during the six months periods ended December 31, 2002 and 2001. The Cash flow statements do not include the effect of merger with CI. 13. COMMITMENT The Company sub-leased office space in Los Angeles, California from Ardent, Ltd. The term of the lease was 26 months with monthly payments of $1,542. The lease expired on August 31, 2002. Rent was $3,084 and $9,252 for the six month periods ended December 31, 2002 and 2001, respectively. The Company is currently co-located with the president of the Company and pays no rent. 14. LITIGATIONS 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 statements of operations for the three month and six month period ended December 31, 2001. On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd against, jointly and severally, Concierge, Inc, Allen E. Kahn, and The Whitehall Companies in the amount of $135,000 plus legal fees. The Company did not defend against the complaint by Brookside, which alleged that Brookside was entitled to a refund of their investment as a result of a breach of contract. Brookside had entered into a subscription agreement with Concierge, Inc., which called for, among other things, the pending merger between Starfest and Concierge to be completed within 180 days of the investment. The merger was not completed within 180 days and Brookside sought a refund of their investment, which Concierge was unable to provide. The Company has accrued the judgment amount of $135,000 as litigation settlement in the financial statements. 11 Item 2. Plan of Operation 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 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. 12 As of December 31, 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. Item 3. Controls and Procedures Evaluation of disclosure controls and procedures. We maintain controls and procedures designed to ensure that information required to be disclosed in this report is recorded, processed, accumulated and communicated to our management, including our chief executive officer and our chief financial officer, to allow timely decisions regarding the required disclosure. Within the 90 days prior to the filing date of this report, our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of the design and operation of these disclosure controls and procedures. Our chief executive officer and chief financial officer concluded, as of fifteen days prior to the filing date of this report, that these disclosure controls and procedures are effective. Changes in internal controls. Subsequent to the date of the above evaluation, we made no significant changes in our internal controls or in other factors that could significantly affect these controls, nor did we take any corrective action, as the evaluation revealed no significant deficiencies or material weaknesses. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 13 The following exhibits are filed, by incorporation by reference, as part of this Form 10-QSB: Exhibit Item 2 - Stock Purchase Agreement of March 6, 2000 between Starfest, Inc. and MAS Capital, Inc.* 3.1 - Certificate of Amendment of Articles of Incorporation of Starfest, Inc. and its earlier articles of incorporation.* 3.2 - Bylaws of Concierge, Inc., which became the Bylaws of Concierge Technologies upon its merger with Starfest, Inc. on March 20, 2002.* 3.5 - Articles of Merger of Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of Nevada on March 1, 2002.** 3.6 - Agreement of Merger between Starfest, Inc. and Concierge, Inc. filed with the Secretary of State of California on March 20, 2002.** 10.1 - Agreement of Merger between Starfest, Inc. and Concierge, Inc.* *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) Forms 8-K None 14 SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 11, 2003 CONCIERGE TECHNOLOGIES, INC. By:/s/ David W. Neibert ----------------------------------- David W. Neibert, President 15 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) I, Allen E. Kahn, Chief Executive Officer of the registrant, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Concierge Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 16 b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ Allen E. Kahn --------------------------------------- Allen E. Kahn Chief Executive Officer 17 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) I, Allen E. Kahn, Chief Financial Officer of the registrant, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Concierge Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 18 b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ Allen E. Kahn --------------------------------------- Allen E. Kahn Chief Financial Officer 19 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the accompanying Quarterly Report of Concierge Technologies, Inc. (the "Company") on Form 10-QSB for the period ended December 31, 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: February 11, 2003 ------------------------------------------- Allen E. Kahn 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-Q or as a separate disclosure document. 20 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the accompanying Quarterly Report of Concierge Technologies, Inc. (the "Company") on Form 10-QSB for the period ended December 31, 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: February 11, 2003 ------------------------------------------- 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-Q or as a separate disclosure document. 21