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, 2006
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 5, 2006, 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]
1
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 15
Item 3. Controls and Procedures 16
PART II - Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Balance Sheet March 31, 2006 (Unaudited) 4
Consolidated Statements of Operations For The Three Month
And Nine Month Periods Ended March 31, 2006 and 2005 and the
Period from September 20, 1996 (Inception) to
March 31, 2006 (Unaudited) 5
Statements of Cash Flows For The Nine Month Periods Ended March 31, 2006
and 2005 and the Period from September 20, 1996
(Inception) to March 31, 2006 (Unaudited) 6
Notes to Unaudited Financial Statements 7
3
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2006
(UNAUDITED)
ASSETS
------
CURRENT ASSETS:
Cash & cash equivalents $ 3,872
Due from related party 3,630
-----------
$ 7,502
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 385,242
Notes payable - related parties 121,251
-----------
Total current liabilities 506,493
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 3,246,834
Deficit accumulated during the development stage (3,888,118)
-----------
Total stockholders' deficit (498,991)
-----------
$ 7,502
===========
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 AND NINE MONTH PERIODS ENDED MARCH 31, 2006 AND 2005
AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO MARCH 31, 2006
(UNAUDITED)
For the Period
Three Month Periods Ended Nine Month Periods Ended From September 20,
March 31, March 31, 1996 (Inception)
2006 2005 2006 2005 to March 31, 2006
------------- ------------- ------------- ------------- ------------------
COSTS AND EXPENSES
Product Launch Expenses $ -- $ -- $ -- $ -- 1,077,785
Impairment of Assets -- -- -- 496,843 988,443
General & Administrative Expenses 7,368 9,973 21,756 34,667 1,450,646
------------- ------------- ------------- ------------- ------------------
TOTAL COSTS AND EXPENSES 7,368 9,973 21,756 531,510 3,516,874
OTHER INCOME (EXPENSES)
Other Income -- -- -- -- 85
Settlement Income -- -- -- -- 52,600
Litigation Settlement -- -- -- -- (135,000)
------------- ------------- ------------- ------------- ------------------
TOTAL OTHER INCOME (EXPENSES) -- -- -- -- (82,315)
------------- ------------- ------------- ------------- ------------------
NET LOSS BEFORE INCOME TAXES (7,368) (9,973) (21,756) (531,510) (3,599,189)
Provision of Income Taxes -- -- 1,600 1,600 10,400
------------- ------------- ------------- ------------- ------------------
NET LOSS $ (7,368) $ (9,973) $ (23,356) $ (533,110) (3,609,589)
============= ============= ============= ============= ==================
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING, BASIC AND DILUTED 142,292,747 142,292,747 142,292,747 142,292,747
============= ============= ============= =============
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.
5
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTH PERIODS ENDED MARCH 31, 2006 AND 2005
AND THE PERIOD FROM SEPTEMBER 20, 1996 (INCEPTION) TO MARCH 31, 2006
(UNAUDITED)
September 20, 1996
March 31, March 31, (inception) to
2006 2005 March 31, 2006
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (23,356) $ (543,083) $ (3,609,589)
Adjustments to reconcile net loss to net cash used in
operating activities:
Impairment of asset -- 496,843 742,643
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 (11,732) 18,546 300,708
------------------ ------------------ ------------------
Net cash used in operating activities (35,088) (27,449) (2,302,531)
------------------ ------------------ ------------------
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 61 -- (3,630)
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 38,251 (75,000) 129,751
------------------ ------------------ ------------------
Net cash provided (used) by financing activities 38,312 (75,000) 2,416,401
------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 3,224 (102,449) 3,872
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 648 103,766 --
------------------ ------------------ ------------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 3,872 $ 1,317 $ 3,872
================== ================== ==================
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 nine months ended March 31, 2006
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 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.
In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
or issued after the beginning of the Company's first fiscal year that begins
after September 15, 2006.
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 first quarter of fiscal 2006.
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.
In March 2006 FASB issued SFAS 156 `Accounting for Servicing of Financial
Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities. This Statement:
1. Requires an entity to recognize a servicing asset or servicing
liability each time it undertakes an obligation to service a financial
asset by entering into a servicing contract.
2. Requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable.
3. Permits an entity to choose `Amortization method' or `Fair value
measurement method' for each class of separately recognized servicing
assets and servicing liabilities.
8
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the
treatment of other available-for-sale securities under Statement 115,
provided that the available-for-sale securities are identified in some
manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to
subsequently measure at fair value.
5. Requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately
recognized servicing assets and servicing liabilities.
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
$3,888,118 including a net loss of $23,356 during the nine month period ended
March 31, 2006. 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, 2006, 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.
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 March 31, 2006, $3,630 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.
9
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Notes payable to related parties consisted of the following at March 31, 2006:
Note payable to shareholder, non interest bearing, unsecured,
and due on demand $ 3,251
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 $ 121,251
==========
The Company has recorded interest expense payable to related parties, amounting
to $7,638 and $4,786 for the nine month periods ended March 31, 2006 and 2005,
respectively.
6. 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.
10
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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.
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.
7. 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.
8. 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
11
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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.
9. 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
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.
10. 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.
During the nine months ended March 31, 2006, the Company paid all tax
liabilities outstanding with the Franchise Tax Board of the State of California
for the fiscal years ended June 30, 2003, 2004 and 2005, including all
calculated penalties and interest, totaling $3,322.97. The amount reserved for
income tax in the accompanying financial statements as been appropriately
adjusted to reflect the current status. The Company paid $0 for interest during
the nine month periods ended March 31, 2006 and 2005.
11. COMMITMENT
The Company is co-located with the president of the Company and pays no rent.
Rent expense was $0 for the nine month periods ended March 31, 2006 and 2005.
12. 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 March 31, 2006.
13. 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
12
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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
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.
14. 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. On
March 2, 2006, the Company filed articles of merger with the Secretary of State
in Nevada effectuating the merger of Concierge Technologies, Inc. of California
into the Nevada subsidiary. In order to dissolve the California corporation, the
Secretary of State in California requires a Certificate of Tax Clearance from
the Franchise Tax Board. Although the Company has paid its tax obligations and
13
CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARY
(A development stage company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
has a letter of good standing from the Franchise Tax Board, the Tax Clearance
Certificate may not be forthcoming until as late as December 2006. Until that
time, the State of California considers the merger as pending. When the
documents are produced the Company will dissolve its California corporation,
which is now inactive.
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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 by
relocating the corporation to Nevada,
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 continues 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
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administrative offices of our company to a 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, 2006, 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 Halomail service implementation, 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, then Halomail may not be
put into service. 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 March 31, 2006. 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: May 10, 2006
CONCIERGE TECHNOLOGIES, INC.
By /s/ David W. Neibert
----------------------------
David W. Neibert, President
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