U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
CONCIERGE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 000-29913
State of Incorporation: California
IRS Employer I.D. Number: 95-4442384
22048 Sherman Way, Suite 301
Canoga Park, CA 91303
818-610-0310
----------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of November 1, 2005, there were 142,292,747 shares of the Registrant's
Common Stock, $0.001 par value, outstanding.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act. Yes [X] No [ ]
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 14
Item 3. Controls and Procedures 15
PART II - OTHER INFORMATION 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Balance Sheet September 30, 2005 (Unaudited) 4
Statements of Operations Three Month Periods Ended
September 30, 2005 and 2004 and the
Period from September 20, 1996 (Inception) to
September 30, 2005 (Unaudited) 5
Statements of Cash Flows Three Month Periods Ended September 30, 2005
and 2004 and the Period from September 20, 1996
(Inception) to September 30, 2005 (Unaudited) 6
Notes to Unaudited Financial Statements 7
3
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2005
(UNAUDITED)
ASSETS
------
CURRENT ASSETS:
Cash & cash equivalents $ 20,604
Due from related party 21,509
-----------
$ 42,113
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 389,918
Notes payable - related parties 428,208
-----------
Total current liabilities 818,126
STOCKHOLDERS' DEFICIT:
Preferred stock, par value $.001 per share; 10,000,000
shares authorized; none issued --
Common stock, $.001 par value; 190,000,000 shares
authorized; issued and outstanding 142,292,747 142,293
Additional paid in capital 2,956,626
Deficit accumulated during the development stage (3,874,932)
-----------
Total stockholders' deficit (776,013)
-----------
$ 42,113
===========
The accompanying notes are an integral part of these financial statements.
4
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2005
(UNAUDITED)
For the Period
Three Month Periods Ended From September 20,
September 30, September 30, 1996 (Inception)
2005 2004 to September 30, 2005
--------------------- --------------------- ---------------------
COSTS AND EXPENSES
Product Launch Expenses $ -- $ -- $ 1,077,785
Impairment of Assets -- -- 988,443
General & Administrative Expenses 8,571 14,093 1,437,461
--------------------- --------------------- ---------------------
TOTAL COSTS AND EXPENSES 8,571 14,093 3,503,689
OTHER INCOME (EXPENSES)
Other Income -- -- 86
Settlement Income -- -- 52,600
Litigation Settlement -- -- (135,000)
--------------------- --------------------- ---------------------
TOTAL OTHER INCOME (EXPENSES) -- -- (82,314)
--------------------- --------------------- ---------------------
NET LOSS BEFORE INCOME TAXES (8,571) (14,093) (3,586,003)
Provision of Income Taxes 1,600 1,600 10,400
--------------------- --------------------- ---------------------
NET LOSS $ (10,171) $ (15,693) $ (3,596,403)
===================== ===================== =====================
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING, BASIC AND DILUTED 142,292,747 142,292,747
===================== =====================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.00) $ (0.00)
===================== =====================
The accompanying notes are an integral part of these financial statements.
5
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2005
(UNAUDITED)
September 20, 1996
September 30, September 30, (inception) to
2005 2004 September 30, 2005
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (10,171) $ (15,693) $ (3,596,403)
Adjustments to reconcile net loss to net cash used in
operating activities:
Impairment of asset -- -- 742,643
Depreciation and amortization -- 245 13,155
Stock issued for services -- -- 496,352
Decrease in current assets:
Prepaid expense -- -- (245,800)
Increase (decrease) in current liabilities:
Accrued expenses (7,056) 2,443 305,383
------------------ ------------------ ------------------
Net cash used in operating activities (17,227) (13,005) (2,284,670)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received on acquisition of subsidiary -- -- 2,912
Note receivable - related party -- -- (100,000)
Acquisition of equipment -- -- (12,910)
------------------ ------------------ ------------------
Net cash used in investing activities -- -- (109,998)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due from related party (17,818) -- (21,509)
Proceeds from Issuance of Shares -- -- 587,007
Proceeds from stock subscription forfeited -- -- 10,000
Proceeds from advance subscriptions -- -- 1,772,983
Costs and expenses of advance subscriptions -- -- (79,710)
Proceeds from (payments to) related party loans 55,000 (80,000) 146,500
------------------ ------------------ ------------------
Net cash provided (used) by financing activities 37,183 (80,000) 2,415,272
------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 19,956 (93,005) 20,604
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 648 103,766 --
------------------ ------------------ ------------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 20,604 $ 10,761 $ 20,604
================== ================== ==================
The accompanying notes are an integral part of these financial statements.
6
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Concierge Technologies, Inc. (the "Company"), a California corporation, was
incorporated on August 18, 1993 as Fanfest, Inc. In August 1995 the Company
changed its name to Starfest, Inc. During 1998, the Company was inactive, just
having minimal administrative expenses. During 1999 the Company attempted to
pursue operations in the online adult entertainment field. There were no
revenues from this endeavor. On March 20, 2002, the Company changed its name to
Concierge Technologies, Inc.
In March 2000, the Company acquired approximately 96.83 percent (8,250,000
shares) of the common stock of MAS Acquisition XX Corp. (MAS XX) for $314,688.
This amount was expensed in March 2000, as at the time of the acquisition MAS XX
had no assets or liabilities and was inactive. On March 21, 2002, the Company
consummated a merger with Concierge, Inc.
Concierge, Inc. ("CI") was a development stage enterprise incorporated in the
state of Nevada on September 20, 1996. The CI had undertaken the development and
marketing of a new technology, a unified messaging product "The Personal
Communications Attendant" ("PCA(TM)"). "PCA(TM)" will provide a means by which
the user of Internet e-mail can have e-mail messages spoken to him/her over any
touch-tone telephone or wireless phone in the world. To-date, the Company has
not earned any revenue.
On April 6, 2004 the Company entered into a Stock Purchase Agreement with Planet
Halo, Inc. (PHI) whereby, the Company purchased all of the outstanding and
issued shares of PHI in exchange for 10 million shares of the Company's common
stock valued at $500,000. On May 5, 2004 the Company issued the shares on a
ratio of 8.232 shares of its common stock to each share of PHI stock to the
former shareholders of PHI. The existing PHI shares were then retired and
cancelled. The Company is now the sole shareholder of PHI, a Nevada corporation.
On May 5, 2004 the President of PHI was officially appointed to the Board of
Directors of the Company along with one other PHI named appointee.
PHI is a development stage company in the wireless telecommunications industry
and plans to design, manufacture, sale and distribution of hardware and services
that include a hand-held wireless Internet appliance/cell phone known as the
"Halo", and an integrated wireless gateway interface to the Internet named
"Halomail."
The accounting policies of the Company are in accordance with generally accepted
accounting principles and conform to the standards applicable to development
stage companies.
Basis of Preparation
The accompanying Interim Condensed Financial Statements are prepared in
accordance with rules set forth in Regulation SB of the Securities and Exchange
Commission. Accordingly, these statements do not include all disclosures
required under generally accepted principles and should be read in conjunction
with the audited financial statements included in the Company's form 10KSB for
the year ended June 30, 2005. In the opinion of management, all adjustments
consisting of normal reoccurring accruals have been made to the financial
statements. The results of operation for the three months ended September 30,
2005 are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2006.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
period presentation.
7
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
2. RECENT PRONOUNCEMENTS
In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant- date fair value
of stock options and other equity-based compensation issued to employees. FAS
No. 123R is effective beginning in the Company's second quarter of fiscal 2006.
The Company believes that the adoption of this standard will have no material
impact on its financial statements.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This statement applies to all voluntary changes in accounting
principle and requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless this would be
impracticable. This statement also makes a distinction between "retrospective
application" of an accounting principle and the "restatement" of financial
statements to reflect the correction of an error. This statement is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. We are evaluating the effect the adoption of this
interpretation will have on its financial position, cash flows and results of
operations.
In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the
Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides
guidance on determining the amortization period for leasehold improvements
acquired in a business combination or acquired subsequent to lease inception.
The guidance in EITF 05-6 will be applied prospectively and is effective for
periods beginning after June 29, 2005. EITF 05-6 is not expected to have a
material effect on its consolidated financial position or results of operations.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has accumulated deficit of
$3,874,932 including a net loss of $10,171 during the three month period ended
September 30, 2005. 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 September 30, 2005, towards (i)
obtaining additional financing and (ii) management of accrued expenses and
accounts payable.
Management believes that the above actions will allow the Company to continue
operations through the next twelve months.
8
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
4. DUE FROM RELATED PARTY
Concierge Technologies, Inc. has no bank account in its own name. Wallen Group,
a consulting company headed by David W. Neibert (the president and director of
Concierge Technologies, Inc.), maintains an administrative account for Concierge
Technologies, Inc. at Wells Fargo Bank. As of September 30, 2005, $21,509 is due
from Wallen Group. The due from related party are non interest bearing,
unsecured and due on demand.
5. NOTES PAYABLE - RELATED PARTIES
On September 2, 2005, the Company signed a promissory note and borrowed $35,000
from a Company based in Hong Kong. The Note is due before or on October 1, 2006
and bears an interest rate of 8%. Upon default, the holder has the right to
foreclose or otherwise enforce all liens or security interests securing payment
hereof from the Company.
Notes payable to related parties consisted of the following at September 30,
2005:
Note payable to shareholder, non interest bearing, unsecured,
and due on demand $290,208
Notes payable to shareholder, interest rate of 10%, unsecured,
and payable on July 31, 2004 (past due) 5,000
Notes payable to shareholder, interest rate of 10%, unsecured
and payable on October 1, 2004 (past due) 28,000
Notes payable to shareholder, interest rate of 8%, unsecured
and payable on October 1, 2004 (past due) 14,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on September 1, 2004 (past due) 3,500
Notes payable to shareholder, interest rate of 8%, unsecured
and payable on October 1, 2005 (past due) 20,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on February 1, 2006 5,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on June 1, 2006 5,000
Notes payable to director/shareholder, interest rate of 8%,
unsecured and payable on June 1, 2006 2,500
Notes payable to shareholder, interest rate of 8%, unsecured
and payable on October 1, 2006 35,000
--------
Total Notes payable $408,208
========
9
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
The Company has recorded interest expense payable to related parties, amounting
to $2,040 and $1,588 for the three month periods ended September 30, 2005 and
2004, respectively.
6. INCOME TAXES
No provision was made for Federal income tax since the Company has significant
net operating loss carryforward. Through September 30, 2005, the Company
incurred net operating losses for tax purposes of approximately $3,586,004. The
net operating loss carryforward may be used to reduce taxable income through the
year 2025. Net operating loss for carryforward for the State of California is
generally available to reduce taxable income through the year 2010. The
availability of the Company's net operating loss carryforward is 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 deferred tax asset balance, due to net operating loss carryforward, as of
September 30, 2005, was approximately $1,550,000. A 100% valuation allowance has
been established against the deferred tax assets, as the utilization of the loss
carryforward cannot reasonably be assured.
The following is a reconciliation of the provision for income taxes at the U.S.
federal income tax rate to the income taxes reflected in the Consolidated
Statements of Operations:
September 30, September 30,
2005 2004
------------- -------------
Tax expense (credit) at statutory rate-federal (34)% (34)%
State tax expense net of federal tax (6) (6)
Changes in valuation allowance 40 40
Tax expense at actual rate ------------- -------------
-- --
============= =============
7. SHARES OF CONCIERGE, INC. ISSUED SUBJECT TO CONTINGENCY AND
SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY
Concierge, Inc. (CI) issued 117,184 shares for cash totaling $202,061 and
354,870 shares for services of $3,549 during the year ended June 30, 2000. Since
December 1998, CI sold securities to persons in six states in the U. S. CI did
not file Form D or other filings in any of the states or with the SEC for such
shares and did not properly follow the requirements for complying with available
exemptions in each state. Accordingly, all such shares were subject to the
contingency that they might have been issued without the availability of an
exemption from registration under the Securities Act of 1933 and under the
securities laws of each of the six states. Therefore, CI had treated all such
shares issued since December 1998, as Common stock issued subject to
contingency. Total shares issued subject to contingency through December 31,
2004 were 680,504 for cash and services amounting to $266,610.
Concierge, Inc. (CI) entered into subscription agreements to issue "post merger"
shares in exchange for cash. Through December 31, 2000, CI had received advance
subscriptions for a gross amount of $1,255,500 before deducting associated costs
of $79,710, for 5,928,750 post merger shares. In the event the merger between CI
and the Company was not completed prior to November 31, 2000, the obligation of
the Company under this agreement might have been satisfied by the issuance of
shares in the Company equivalent on a pro-rata basis to the number of shares in
"post merger" Corporation that were subject to this agreement.
10
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
CI merged with the Company on March 20, 2002. The Company filed a registration
statement with the Securities and Exchange Commission ("the Commission") on June
8, 2000 related to the proposed merger, naming CI as the entity proposed to be
merged into the Company. From July 1, 2000 through September 15, 2000, CI
received additionally $487,500 as advance subscription for 2,127,500 post merger
shares in an offering intended to be exempt from registration pursuant to the
provisions of Section 4(2) of the Securities Act of 1933 and of Regulation D,
Rule 506 of the Commission. It was possible, but not certain, that the filing of
the registration statement by the Company and the manner in which CI conducted
the sale of the 2,127,500 post merger shares of common stock constituted
"general advertising or general solicitation" by CI. General advertising and
general solicitation are activities that are prohibited when conducted in
connection with an offering intended to be exempt from registration pursuant to
the provisions of Regulation D, Rule 506 of the Commission. CI did not concede
that there was no exemption from registration available for this offering.
Nevertheless, had the aforementioned circumstances constituted general
advertising or general solicitation, CI would have been denied the availability
of Regulation D, Rule 506 as an exemption from the registration requirements of
the Securities Act of 1933 when it sold the 2,127,500 post merger shares of
common stock after June 8, 2000. Should no exemption from registration had been
available with respect to the sale of these shares, the persons who bought them
would have been entitled, under the Securities Act of 1933, to the return of
their subscription amounts if actions to recover such monies had been filed
within one year after the sales in question. Accordingly, the amounts received
by CI from the sale of these shares were set apart from Stockholders' Equity as
"Subscription received for common stock subject to contingency" to indicate this
contingency. The total contingent liabilities related to such shares amounted to
$1,929,900 ($2,009,610 less cost and expenses of $79,710).
On January 1, 2005, the Company re-classified such shares to its equity since
the lapse of time had removed any contingencies because of applicable statutes
of limitation.
8. COMMON STOCK
On May 5, 2004 the Company issued 9,999,998 shares of its common stock valued at
$500,000 in exchange for Planet Halo's 100% outstanding and issued shares on a
ratio of 8.232 shares of the Company to each share of Planet Halo stock.
9. 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.
10. NET LOSS PER SHARE
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net
loss per share is based upon the weighted average number of common shares
11
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
outstanding. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. Weighted average number of shares used to compute basic and diluted
loss per share is the same since the effect of dilutive securities is
anti-dilutive.
11. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid $0 for income tax in the three month periods ended September
30, 2005 and 2004, respectively. The Company paid $0 for interest during the
three month periods ended September 30, 2005 and 2004.
12. 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. The Company is currently co-located with the
president of the Company and pays no rent. Rent expense was $0 for the three
month periods ended September 30, 2005 and 2004.
13. LITIGATION
On May 6, 2002, a default judgment was awarded to Brookside Investments Ltd
against, jointly and severally, Concierge, Inc, Allen E. Kahn, and The Whitehall
Companies in the amount of $135,000 plus legal fees. The Company did not defend
against the complaint by Brookside, which alleged that Brookside was entitled to
a refund of their investment as a result of a breach of contract. Brookside had
entered into a subscription agreement with Concierge, Inc., which called for,
among other things, the pending merger between Starfest and Concierge to be
completed within 180 days of the investment. The merger was not completed within
180 days and Brookside sought a refund of their investment, which Concierge was
unable to provide. The Company has accrued the judgment amount of $135,000 as
litigation settlement in the accompanying financial statements. This amount is
included in accrued expenses as of September 30, 2005.
14. ACQUISITION & IMPAIRMENT OF INTANGIBLE ASSET
On April 6, 2004 the Company and Planet Halo entered into Stock Purchase
agreement whereby, when consummated, the Company would purchase all of the
outstanding and issued shares of Planet Halo in exchange for 10 Million shares
of the Company's common stock valued at $500,000. On April 20, 2004 all of the
conditions of the acquisition were met apart from the issuance of the shares. On
May 5, 2004, the Company issued the shares on a ratio of 8.232 shares of the
Company to each share of Planet Halo stock. The shares were issued directly to
the shareholders of Planet Halo. The existing Planet Halo shares were retired
and cancelled. The Company is now a sole shareholder of Planet Halo, a Nevada
corporation. On May 5, 2004 the President of Planet Halo was officially
appointed to the Board of Directors of the Company along with one other Planet
Halo named appointee.
Planet Halo is a development stage company involved in the wireless
telecommunications industry through the design, manufacture, sale and
distribution of hardware and services that include a hand-held wireless Internet
12
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
appliance/cell phone known as the "Halo", and an integrated wireless gateway
interface to the Internet named "Halomail."
The purchase price was determined in arms-length negotiations between the
parties. The assets acquired in this acquisition include without limitation
computer hardware and goodwill. A summary of the Planet Halo assets acquired and
consideration for is as follows:
Allocated amount
----------------
Cash $ 2,912
Equipment, net 245
Goodwill 496,843
-------------
$ 500,000
Consideration paid
------------------
10,000,000 shares of common stock $ 500,000
=============
The Company evaluates intangible assets, goodwill and other long-lived assets
for impairment, at least on an annual basis and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable from its
estimated future cash flows. Recoverability of intangible assets, other
long-lived assets and, goodwill is measured by comparing their net book value to
the related projected undiscounted cash flows from these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss. Potential impairment of goodwill is being evaluated in
accordance with SFAS No. 142. The SFAS No. 142 is applicable to the financial
statements of the Company beginning July 1, 2002.
On December 31, 2004, the Company evaluated the valuation of goodwill based upon
the performance and market value of the acquisition. The Company determined the
goodwill is impaired and recorded the impairment of $496,843 in the accompanying
financial statements.
The Company evaluated value of its prepaid expenses during the year ended June
30, 2004 and based upon uncertainness surrounding the utilization of its
software for the "PCA" development, the Company has recorded an impairment of
the prepaid expense amounting $245,800.
15. FORMATION OF NEVADA SUBSIDIARY
On April 20, 2005, the Company formed a subsidiary corporation under the laws of
the State of Nevada. The subsidiary corporation, Concierge Technologies, Inc.
(Nevada) was formed for the purpose of re-domesticating the Company stock in the
State of Nevada and dissolving the California Corporation. The action was taken
pursuant to a vote in favor by a majority of shareholders of the Company. As of
September 30, 2005, a merger of the two corporations has not yet been effected.
13
Item 2. Plan of Operation
Our plan of operation for the next twelve months is to do the following:
o exploit the opportunities afforded us through our acquisition of
Planet Halo by implementing a sales strategy to deploy the
wireless gateway, Halomail, on synergistic networks,
o properly position the corporation and its structure to
accommodate a business combination with a funding partner,
o continue efforts to liquidate our existing, pre-paid, inventory
of the PCA product and utilize the proceeds for working capital.
On April 6, 2004, our company signed a definitive agreement to acquire the
privately-held company, Planet Halo, in a cash-free stock transaction. On April
20, 2004 the companies completed the necessary documentation to effect the
acquisition. On May 5, 2004 Concierge Technologies instructed its transfer agent
to issue the purchase price in shares of common stock to the shareholders of
Planet Halo. The transaction was officially closed and the shares considered
issued as of May 5, 2004.
Planet Halo is a development-stage company that has developed a prototype,
hand-held, wireless Internet appliance named the "Halo". The Halo is able to
send and receive email, short messages, run applications such as address book,
calculator, scheduler, etc and operates as a fully functional cellular
telephone. In addition to the Halo device Planet Halo also has an exclusive
license to deploy a proprietary wireless gateway in North America. The gateway,
named "Halomail", provides a secure interface for wireless access to the
Internet, and to the worldwide web. Users of the Halo or other wireless devices
may use Halomail as their email client, a secure connection for monetary
transactions, browse the worldwide web, connect to their own Intranets, and
essentially use the gateway as a secure on-ramp to the Internet in much the same
way as a wired connection operates. Concierge plans to move the Halo device into
production readiness and to seek partners for the launch of the Halomail gateway
on service provider networks.
Planet Halo will continue to be operated by its President, Marc Angell,
from his offices located in Ventura, California. Concierge Technologies has not
approved an operating budget for Planet Halo and is currently reliant upon Marc
Angell to continue providing his services, including operating expenses, for the
near term. There is no assurance that this situation will endure for the long
term, or that Concierge will not be required to fund its operations in the near
future.
On June 17, 2002, David W. Neibert became our President and Chief
Operations Officer. Upon assuming that role, he moved the general accounting and
administrative offices of our company to a co-location with his firm, The Wallen
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Group. We do not currently pay rent and have no lease for the facilities being
provided by Mr. Neibert.
As of September 30, 2005, we had no employees and no fixed overhead other
than the variable cost of web hosting, legal and professional fees, fees charged
by our transfer agent and minimum tax payments. We have a limited amount of
office fixtures, furniture and computer equipment acquired with the Planet Halo
transaction. Our president, the president of Planet Halo, our CEO and directors
are continuing to provide services without cash compensation; however, there are
no assurances that this situation will continue for the indefinite future. In
the event our President is unwilling to continue in his capacity without
compensation, we expect that our CEO and/or the President of Planet Halo will
assume those duties on behalf of the Company.
Liquidity
Our primary source of operating capital has been funding sourced through
insiders or shareholders under the terms of unsecured promissory notes. In two
instances we have sold shares of our common stock in exchange for cash. The
amount of borrowed funds and funds from equity sales has been sufficient to pay
the cost of legal and accounting fees as necessary to maintain a current
reporting status with the Securities and Exchange Commission. However,
sufficient funds have been unavailable to significantly pay down commercial and
vendor accounts payable. We have also been unable to pay salaries to our
officers and several of our outside consultants who had performed services
during the past and present fiscal years.
Although our management is continuing to provide services to the Company
for the near term without cash compensation, we will still require additional
funding to maintain the corporation and market the remaining inventory of the
PCA product. With the acquisition of Planet Halo there are added demands for
operating capital. The Company has been aggressively pursuing financing for the
funding of the Halo device project, however the financial advisor retained to
assist with the effort has not produced a satisfactory result. Until such time
as definitive agreements are reached with investors, such a financing remains
speculative. If the financing is not available, the Halo may not be put into
production. In the event the financing is not completed, our funds and inventory
assets will be exhausted at some point and continuing operations may be
impossible.
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures. The Company's management,
with the participation of the Company's Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the Company's disclosure
controls and procedures as of September 30, 2005. Based on this evaluation, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed, by incorporation by reference, as part of
this Form 10-QSB:
Exhibit Item
------- ----
2 - Stock Purchase Agreement of March 6, 2000 between Starfest, Inc.
and MAS Capital, Inc.*
3.1 - Certificate of Amendment of Articles of Incorporation of
Starfest, Inc. and its earlier articles of incorporation.*
3.2 - Bylaws of Concierge, Inc., which became the Bylaws of Concierge
Technologies upon its merger with Starfest, Inc. on March 20,
2002.*
3.5 - Articles of Merger of Starfest, Inc. and Concierge, Inc. filed
with the Secretary of State of Nevada on March 1, 2002.**
3.6 - Agreement of Merger between Starfest, Inc. and Concierge, Inc.
filed with the Secretary of State of California on March 20,
2002.**
10.1 - Agreement of Merger between Starfest, Inc. and Concierge, Inc.*
14 - Code of Ethics for CEO and Senior Financial Officers.***
31 - Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.1 - Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 - Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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32.1 - Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
*Previously filed with Form 8-K12G3 on March 10, 2000; Commission File No.
000-29913, incorporated herein.
**Previously filed with Form 8-K on April 2, 2002; Commission File No.
000-29913, incorporated herein.
***Previously filed with Form 10-K FYE 06-30-04 on October 13, 2004; Commission
File No. 000-29913, incorporated herein.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the Registrant
has caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Dated: November 8, 2005
CONCIERGE TECHNOLOGIES, INC.
By /s/ David W. Neibert
----------------------------
David W. Neibert, President
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