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 March 31, 2003
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 May 12, 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 March 31, 2003 (Unaudited) 3
Statements of Operations Nine Month Periods Ended
March 31, 2003 and 2002 and the
Period from September 20, 1996 (Inception) to
March 31, 2003 (Unaudited) 4
Statements of Cash Flows Periods Ended March 31, 2003
and 2002 and the Period from September 20, 1996
(Inception) to March 31, 2003 (Unaudited) 5
Notes to Unaudited Financial Statements 6
2
CONCIERGE TECHNOLOGIES, INC.
(A development stage company)
BALANCE SHEET
MARCH 31, 2003
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash & cash equivalents $ 44
-------------
PREPAID EXPENSES 245,800
-------------
$ 245,844
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 356,414
Loans Payable-Shareholders 323,208
-------------
Total current liabilities 679,622
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 (2,796,697)
-------------
Total stockholders' deficit (2,363,678)
-------------
$ 245,844
=============
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 NINE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002 AND
THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO MARCH 31, 2003
(Unaudited)
Three month periods ended Nine month periods ended September 20,
March 31, March 31, March 31, March 31, 1996 (Inception)
2003 2002 2003 2002 to March 31, 2003
------------ ------------- ------------ ------------ ------------------
REVENUE $ - $ - $ - $ - $ -
COSTS AND EXPENSES
Product launch Expenses - - - - 1,077,785
General & Administrative
Expenses 6,499 43,308 37,332 88,800 1,352,385
------------- ------------- ------------ ------------ ------------
TOTAL COSTS AND EXPENSES 6,499 43,308 37,332 88,800 2,430,170
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 (6,499) 9,292 (37,332) (36,200) (2,512,570)
Provision of Income
Taxes - - 800 800 5,600
------------- ------------- ------------ ------------ ------------
NET INCOME (LOSS) $ (6,499) $ 9,292 $ (38,132) $ (37,000) $ (2,518,170)
============= ============= ============ ============ ============
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING,
BASIC AND DILUTED 126,292,749 120,057,713 125,725,219 120,057,713
============= ============= ============ ============
BASIC AND DILUTED NET LOSS
PER SHARE $ (0.00) $ 0.00 $ (0.00) $ (0.00)
============= ============= ============ ============
The accompanying notes are an integral part of these financial statements.
4
CONCIERGE TECHNOLOGIES, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002 AND
THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO MARCH 31, 2003
(Unaudited)
September 20,
March 31, March 31, 1996 (Inception)
2003 2002 to March 31, 2003
---------- ---------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (38,132) $ (37,000) $(2,518,170)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 903 1,551 12,910
Stock issued for services - - 280,352
Increase in current assets:
0 - - (245,800)
Increase in current liabilities:
Accrued expenses 7,618 25,078 271,882
--------- --------- ------------
Net cash used in operating
activities (29,611) (10,371) (2,198,826)
--------- --------- ------------
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 - 29,983 1,772,983
Costs and expenses of advance subscriptions - - (79,710)
Proceeds from (repayments of)
related party loans 19,000 (10,500) 41,500
--------- --------- ------------
Net cash provided by financing activities 29,000 19,483 2,311,780
--------- --------- ------------
NET INCREASE (DECREASE) IN CASH &
CASH EQUIVALENTS (611) 9,112 44
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 655 695 -
--------- --------- ------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 44 $ 9,807 $ 44
========= ========= ============
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 March 31, 2003 and
2002 include the accounts of the CI for the nine-month periods ended March 31,
2003 and 2002. 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 nine
months ended March 31, 2003 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 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
6
CONCIERGE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 adoption of SFAS 145 does not have a
material effect on the earnings or financial position of the Company.
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 planThe adoption of SFAS 146 does not have a material effect on the
earnings or financial position of the Company.
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 assetsThe adoption of SFAS 147 does not have a
material effect on the earnings or financial position of the Company.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
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,
2002The adoption of this pronouncement does not have a material effect on the
earnings or financial position of the Company.
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
7
CONCIERGE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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, 2003The adoption of SFAS 148 does not have a material effect
on the earnings or financial position of the Company.
On April 30, the FASB issued FASB Statement No. 149 (FAS 149), Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. FAS 149 amends
and clarifies the accounting guidance on (1) derivative instruments (including
certain derivative instruments embedded in other contracts) and (2) hedging
activities that fall within the scope of FASB Statement No. 133 (FAS 133),
Accounting for Derivative Instruments and Hedging Activities. FAS 149 also
amends certain other existing pronouncements, which will result in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. FAS 149 is
effective (1) for contracts entered into or modified after June 30, 2003, with
certain exceptions, and (2) for hedging relationships designated after June 30,
2003. The guidance is to be applied prospectively. The Company does not expect
the adoption of SFAS No. 149 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 March 31, 2003 and the Company has incurred net losses
from inception to March 31, 2003 of $2,796,697 including a net loss of $38,132
during the nine month period ended March 31, 2003. The continuing losses have
adversely affected the liquidity of the Company. Losses are expected to
continue for the immediate future. The Company faces continuing significant
business risks, including but not limited to, its ability to maintain vendor and
supplier relationships by making timely payments when due.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
from inception through the period ended March 31, 2003, 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 and $18,000 due
on demand, 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 March 31, 2003, 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 March 31, 2003. 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 March 31, 2003 and 2002 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
March 31, 2003 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 March 31, 2003.
9. COMMON STOCK
During the nine-month period ended March 31, 2003, 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 nine-month period ended March 31, 2003, 73,017 shares, which were
issued in error, were cancelled.
10. SHARES TO BE ISSUED
During the nine month period ended March 31, 2003, 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 nine months periods ended March 31,
2003 and 2002. The Company paid $0 for interest during the nine months periods
ended March 31, 2003 and 2002. 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 nine month periods
ended March 31, 2003 and 2002, 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 nine month period ended March 31, 2002.
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.
11
Item 2. Plan of Operation
Our plan of operation for the next twelve months involves three strategic
initiatives. (1) We hope to source and secure a development partner to upgrade
the PCA to modern operating systems, including a server-based multi-user
platform. The final nature of the proposed relationship between us and any
development partner is yet to be determined. (2) We are also attempting to sell
our remaining inventory of approximately 14,000 PCAs via a bulk sale to a mass
marketing company in the retail channel. Our management believes that funds from
such a sale will be sufficient to eliminate storage costs, pay down accrued
expenses, repay outstanding loans, and provide a measure of working capital for
the balance of the year. (3) We are aggressively looking for development stage
companies in the personal communications space with whom we can align ourselves
via either a merger, cross channel marketing scheme, or other synergistic
business combination.
Through a combination of product offerings including wireless airtime,
wireless Internet access, software offerings (such as the upgraded PCA product),
and subscription services, we hope to build a vertically integrated company able
to respond in timely fashion to the consumer demand for communications services.
In preparation for this next phase of anticipated restructuring and possible
refinancing, it is management's intention to resolve outstanding issues of debt
and other liabilities through sale of our existing inventory. If the strategy
proves successful, management believes such a vertically integrated company will
be worth, as a whole, more than the sum of the otherwise separate entities. As
such, we anticipate a resulting consolidated company may 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.
As of March 31, 2003, 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 own no office fixtures,
furniture or appliances. Our president, CEO and directors have been providing
their services without compensation; however, there is no certainty as to how
long such an arrangement may continue. Furthermore, although we have not accrued
any ongoing salary or employee expenses and there is no arrangement to do so, we
12
expect that upon conclusion of a successful funding exercise that some
compensation shall be agreed upon for our officers.
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 market the remaining inventory of the PCA product.
Management hopes to source the needed funds through a bulk sale of the PCA to
one customer, who in turn will mass market the product for their own benefit.
Debt financing of the acquisitions targeted for this year may also be possible;
however, until such time as definitive documentation is agreed upon, such a
financing remains speculative. 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 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. 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.
13
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.*
99 - 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.
99.1 - 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.
14
(B) Forms 8-K
None
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: May 15, 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
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: May 15, 2003 /s/ Allen E. Kahn
---------------------------------------
Allen E. Kahn
Chief Executive Officer
16
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
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: May 15, 2003 /s/ Allen E. Kahn
---------------------------------------
Allen E. Kahn
Chief Financial Officer
17
CONCIERGE TECHNOLOGIES, INC.
Commission File No. 000-29913
Index to Exhibits to Form 10-QSB 03-31-03
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.*
99 - 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.
99.1 - 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.