SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Commission File No. 333-38838
AMENDMENT NO. 6 TO FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Starfest, Inc.
(Exact name of registrant as specified in its charter)
California 7372 95-4442384
-------------- ------------------------------ ----------------
(state of (Primary Standard Industrial (IRS Employer
incorporation) Classifaction Code Number) I.D. Number)
4602 East Palo Brea Lane
Cave Creek, AZ 85331
480-551-8280
(Address and telephone number of registrant's
principal executive offices)
Michael Huemmer
4602 East Palo Brea Lane
Cave Creek, AZ 85331
480-551-8280
(Name, address and telephone number of agent for service)
Copies to:
Thomas J. Kenan, Esq.
201 Robert S. Kerr Avenue, Suite 1000
Oklahoma City, OK 73102
Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Calculation of Registration Fee
TITLE OF PROPOSED PROPOSED
EACH CLASS MAXIMUM MAXIMUM
OF SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE FEE
---------------------------------------------------------------------------------
COMMON STOCK 96,957,713 $0.001 $32,320 $8.54(1)
(1) These 96,957,713 shares are to be offered in exchange for all the issued
and outstanding shares of capital stock of Concierge, Inc. in a proposed
merger. Concierge, Inc. has an accumulated capital deficit. The
registration fee is based upon one-third of the par value (96,957,713
shares times $0.001 par value times one-third) of the securities to be
received in the merger transaction.
Regulation 230.457(f)(2).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a)
may determine.
2
PROSPECTUS-PROXY STATEMENT
Starfest, Inc.
96,957,713 Shares of Common Stock
Starfest, Inc. offers these shares of common stock only to the stockholders of
Concierge, Inc. We propose that Concierge merge into our company.
-------------------
Our common stock trades on the OTC Bulletin Board. Its symbol is "SFST."
-------------------
The approval of the merger of Concierge Neither the Securities and Exchange
into our company is equivalent to a Commission nor any state securities
purchase of our securities. This involves or determined if this prospectus-
a high degree of risk. See "Risk Factors," proxy statement is truthful or
beginning on page 3. complete. Any representation to
the contrary is a criminal offense.
Starfest, Inc.
4602 East Palo Brea Lane
Cave Creek, AZ 85331
Telephone 480-551-8280
October , 2001
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TABLE OF CONTENTS
Page
----
Summary of Proposed Transaction 1
Risk Factors 3
Risks That Are Specific to the Concierge Stockholders
1. If you approve the merger, you will suffer
an immediate 19.2 percent dilution in your
percentage ownership and book value of
Concierge 3
2. Starfest could have unknown or contingent liabilities
not reflected in its financial statements 3
Risks That Are Specific to the Starfest Shareholders
3. Concierge lacks an operating history, has never
operated at a profit, has never generated any
significant revenues, has a limited operating
history, and has only limited cash available
for working capital 3
4. Starfest will lose most of the income tax benefits
of its net operating loss carryforward 4
5. Concierge's bylaws will become the bylaws of the
post-merger company. Certain of those bylaws
could adversely affect the Starfest shareholders 4
Risks That Apply to the Shareholders of Both Companies
6. The auditors of both Starfest and Concierge have added
a "going concern" paragraph to their most recent
audit reports 5
7. This registration of Starfest stock for the
proposed merger with Concierge will not
generate any proceeds to be used by
Starfest or the post-merger company in
furthering its business objectives 5
8. Neither Starfest nor Concierge has received
nor will receive an independent, expert
opinion on the fairness of the terms of
the proposed merger 5
9. The post-merger company proposes to
transact commerce on the Internet and
will be exposed to risks of loss associated
with credit card fraud 5
10. It is likely that trading in our stock will
be volatile and limited 5
11. Trading in the common stock of the post-merger
company will most likely be subject to the
inhibiting effects of the Commission's
"penny stock" trading rules 6
12. Concierge has contingent liability of $2,009,610
for possible violations of registration requirements
of the Securities Act and of state securities laws 6
13. The post-merger company is subject to a contingent
claim of a shareholder for the issuance to him of
an additional 3,961,835 shares of post-merger
common stock of the company. Such a claim, if
asserted and adjudged valid, would result in a
3.2 percent reduction in the equity of the
company for all other shareholders. 6
ii
14. The post-merger company may need additional funding 8
15. Our success depends on our ability to retain
Allen E. Kahn and other key personnel 8
16. Management and their affiliates will control all
matters submitted to shareholder votes 8
17. One year after the proposed merger should become
effective, certain trading restrictions will
be relaxed on the 48.3 percent interest in
the post-merger company to be owned by
Concierge's present affiliates. This will result
in a large block of stock being eligible for
unlimited sale into the trading market and
could exert downward pressure on the price
of the stock 8
18. The technology for Concierge's product, the
Personal Communications Attendant, is not
patented by Concierge and is available to
competitors. Strong competition is expected 9
19. Should a change in management seem necessary, it
will be difficult for the non-management
stockholders to do this 9
Terms of the Transaction 10
Material Conditions to the Merger 10
Terms of the Merger 10
Reasons for the Merger 12
Description of Securities 12
Common Stock 12
Voting Rights 12
Dividend Rights 12
Liquidation Rights 12
Preemptive Rights 13
Registrar and Transfer Agent 13
Dissenters' Rights 13
Change in Control 13
Preferred Stock 13
Differences Between Rights of Stockholders of
Starfest and of Concierge 13
Accounting Treatment of Proposed Merger 14
Federal Income Tax Consequences 14
The Merger 14
Stockholders of Concierge 14
Agreement of Merger 14
Pro Forma Financial Information and Dilution 19
Material Contacts Among the Companies 23
Background of the Transaction 23
Interests of Named Experts and Counsel 27
iii
Indemnification 28
Penny Stock Regulations 29
Information About Starfest 31
Business Development 31
Business of Starfest 32
Plan of Operation 33
Description of Property 34
Legal Proceedings 34
Market for Starfest's Common Stock and Related
Stockholder Matters 34
Rule 144 and Rule 145 Restrictions on Trading 34
Dividends 35
Reports to Stockholders 35
Registration Statement 36
Stock Certificates 36
Financial Statements 36
Management's Plan of Operation 36
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 36
Information About Concierge 39
Overview 39
Concierge's Plan of Operation 40
Description of the PCATM 40
The Market 41
Competition 42
Distribution Methods 42
Production Costs 43
Government Approval of Principal Products 44
Government Regulations 45
Properties 45
Dependence on Major Customers and Suppliers 45
Seasonality 45
Research and Development 45
Environmental Controls 45
Year 2000 Computer Problem 45
Number of Employees 45
Venue of Sales 45
Patents, Trademarks, Copyrights and Intellectual Property 45
Legal Proceedings 45
Concierge Management's Plan of Operation 45
Liquidity 46
Product Research and Development 47
Other Expected Developments 47
Market for Common Equity and
Related Stockholder Matters 48
Market Information 48
Holders 48
Dividends 48
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 48
iv
Financial Statements 49
Voting and Management Information 50
Date, Time and Place Information 50
Starfest 50
Concierge 50
Voting Procedure 50
Revocability of Proxy 51
Effect of the Merger 51
Dissenters' Rights of Appraisal 52
Persons Making the Solicitation 53
Voting Securities and Principal Holders Thereof 53
Security Ownership of Certain Beneficial Owners and
Management 54
Directors, Executive Officers and Significant Employees 57
Executive Compensation 59
Other Arrangements 59
Stock Options 60
Certain Relationships and Related Transactions 60
Transactions with Insiders and Promoters 60
Financial Statements Index 63
Appendix A - Amended Agreement of Merger A-1
v
SUMMARY OF PROPOSED TRANSACTION
Our company, Starfest, Inc., proposes to merge with another company,
Concierge, Inc. The merger will occur only if the holders of a majority of the
outstanding shares of common stock of each company approve it. A vote to approve
or reject the merger will be taken soon at special stockholders' meetings of
each company.
Starfest sold all its assets on December 31, 1999 and today has no
business. Concierge was organized in 1996, has not yet received any revenue from
its business, and is a development stage company. Both Starfest and Concierge
received opinions from their auditors noting facts that raise substantial doubts
about the companies' abilities to continue as going concerns. Starfest is a
company that files periodic reports with the Securities and Exchange Commission
and whose stock is publicly held and is listed on the OTC Bulletin Board.
Concierge is a closely-held private company whose stock is not listed on any
public stock exchange.
Concierge has developed computer software, called the "Personal
Communications AttendantTM," that responds to the user's spoken commands to
read, verbalize and manage e-mail traffic stored on the user's personal
computer. The spoken commands can be made from a remote telephone. Concierge
commenced initial delivery of its product during September 2000.
Should the stockholders of Starfest and Concierge approve the merger
between the two companies, Starfest will be the surviving entity but its
business and management will be that of Concierge. Starfest will change its name
to "Concierge Technologies, Inc." The surviving company will have Starfest's
articles of incorporation but Concierge's bylaws.
Should each company approve the merger, each Concierge stockholder will
receive 67.5355 shares of Starfest common stock for each share owned of
Concierge's outstanding 1,435,655 shares of common stock. This amounts to
96,957,713 shares of Starfest stock and would represent 80.8 percent of the
outstanding stock after the merger. The Starfest stockholders will retain their
shares of stock in Starfest, without increase or decrease. Their 23,000,000
shares of Starfest common stock will represent 19.2 percent of the outstanding
stock after the merger.
Starfest's address and telephone number is on the cover page of this
Prospectus. The address and telephone number of Concierge is as follows:
Concierge, Inc.
6033 West Century Boulevard, Suite 1278
Los Angeles, CA 90045
Telephone 310-216-6334
The table below compares the values of a single share of common stock
and the aggregate value of all issued shares of common stock of each of Starfest
and Concierge on two dates:
1
o the last trading day before the public announcement of the proposed
merger, and
o the most recent date of financial statements of the two companies
included in this Prospectus-Proxy Statement:
Starfest Concierge
Market Value Book Value
------------ ----------
January 14, 2000 - the last
trading date preceding the
public announcement of the
proposed merger:
Per share $ 0.29 $
All issued shares $ 6,670,000 $ (4,610)
March 31, 2001 - the most
recent date of financial
statements of the two companies:
Per share $ 0.094 $ 0.17
All issued shares $ 2,167,000 $ 228,061
The market value of Starfest's common stock in the above table represents
the closing bid price of its common stock on the indicated dates as reported by
the OTC Bulletin Board. The book value of Concierge's common stock represents,
for all its issued shares, the value of total stockholders' equity as reflected
on its financial statements. The book value of a single share of Concierge
common stock represents total stockholders' equity divided by the number of
shares outstanding on the indicated dates.
A majority vote of all outstanding shares by each company is required for
approval of the proposed merger. The percentage of outstanding shares of each
company that its directors, executive officers and their affiliates are entitled
to vote are as follows:
Starfest Concierge
-------- ---------
3.7% 62.1%
The directors, executive officers and affiliates of Starfest have agreed to
vote in favor of the merger. Concierge's directors, executive officers and their
affiliates have agreed to vote in favor of the merger only if the other
Concierge shareholders, by their majority vote, vote in favor of the merger.
There are no federal or state regulatory requirements that must be complied
with or approval obtained in connection with the proposed merger.
Dissenters' rights of appraisal exist for the stockholders of each of the
two companies. See "Voting and Management Information - Dissenters' Rights of
Appraisal."
2
Based upon the opinion or our tax counsel, Thomas J. Kenan of Oklahoma
City, Oklahoma, it is our opinion that the merger will qualify as a tax-free
reorganization under Section 368 of the Internal Revenue Code and, accordingly,
there are no adverse federal income tax consequences to stockholders of either
company should the merger be approved. Mr. Kenan's opinion is filed as Exhibit 8
to the Form S-4 registration statement of which this Prospectus-Proxy Statement
is a part.
RISK FACTORS
Approval of the merger involves certain risks specific to Starfest
shareholders and other risks specific to Concierge shareholders. There are
additional risks that both companies' shareholders are exposed to. Voting to
approve the merger is an investment decision that involves a high degree of
risk. You should carefully consider the following risk factors as well as the
terms of the merger in determining whether to approve the merger:
Risks That Are Specific to the Concierge Stockholders.
1. If you approve the merger, you will suffer an immediate 19.2 percent
dilution in your percentage ownership and book value of Concierge.
The Starfest shareholders own 23 million shares of common stock and
will continue to own these shares after the merger. Concierge shareholders
will convert their 1,435,655 Concierge shares, pro rata, into 96,957,713
shares of Starfest common stock, or 80.8 percent of the outstanding shares
after the merger. This 19.2 percent dilution -
o purchases no tangible assets,
o acquires no additions to management, and
o adds nothing to Concierge's business.
2. Starfest could have unknown or contingent liabilities not reflected
in its financial statements.
Starfest has been an operating company. It failed in its business
endeavors. Starfest's present management believes that its financial statements
accurately reflect Starfest's liabilities at $407,893 on December 31, 2000.
Nevertheless, there is always the possibility that a dormant corporation, such
as Starfest, that earlier operated as a business concern may have real or
contingent liabilities that are not known to its present management and that
could surface once the company becomes viable. Your investment in Concierge is
exposed to this risk if the merger is approved.
Risks That Are Specific to the Starfest Shareholders.
3. Concierge lacks an operating history, has never operated at a profit,
has never generated any significant revenues, has a limited operating history,
and has only limited cash available for working capital.
3
Concierge was incorporated in the state of Nevada on September 20, 1996
and commenced operations on that date. It devoted its activities primarily to
product development and has only recently begun selling its product. It has lost
$1,725,412 from inception through December 31, 2000, which is the amount of its
accumulated deficit. Sales and shipment of its initial product commenced in
September 2000. It had available on December 31, 2000, for working capital, cash
of approximately $3,356 and prepaid expenses of $245,800, representing prepaid
royalties and product manufacturing expense. On December 31, 2000, it had
current liabilities of $68,359 and contingent liabilities of $2,009,610 for
possible violations of the securities laws regarding the registration of
securities.
4. STARFEST WILL LOSE MOST OF THE INCOME TAX BENEFITS OF ITS NET OPERATING
LOSS CARRYFORWARD.
Starfest had a net operating loss carryforward of $3,055,206 at December
31, 2000. This may be used to offset otherwise taxable income for several years
in the future. However, under present tax laws if the ownership of more than 50
percent in value of the stock of Starfest changes during a three-year period,
this limits severely the amount of taxable income of any "post-change year" that
may be offset using "pre-change losses." The merger with Concierge will effect
an immediate 80.8 percent change in such ownership and will of itself trigger
such a restriction. Virtually all of the benefits of offsetting future taxable
income against the $3,055,206 operating loss carryforward will be lost.
5. CONCIERGE'S BYLAWS WILL BECOME THE BYLAWS OF THE POST-MERGER COMPANY.
CERTAIN OF THOSE BYLAWS COULD ADVERSELY AFFECT THE STARFEST SHAREHOLDERS.
The ability of the shareholders to call special meetings will be
Adversely affected. Starfest's bylaws provide that the record holders of ten
percent of the outstanding shares can call a special meeting of the
shareholders. Concierge's bylaws require 25 percent.
Directors will become able to be removed for cause by action of the
other directors, which is in addition to the shareholders' right of removal by a
majority vote.
The obligatory indemnification of directors, officers and agents of
The corporation, against their reasonable expenses in defending themselves in
actions brought against them, will increase significantly. Starfest limits this
to instances where an agent of the company has been successful on the merits in
defense of such a proceeding. Concierge's bylaws provide for this
indemnification in all instances except where the agent actually is adjudged to
be liable for gross negligence or misconduct in the performance of his duties.
Risks That Apply to the Shareholders of Both Companies.
4
6. THE AUDITORS OF BOTH STARFEST AND CONCIERGE HAVE ADDED A "GOING
CONCERN" PARAGRAPH TO THEIR MOST RECENT AUDIT REPORTS.
Starfest sold all its assets on December 31, 1999 and has no
business. Concierge has not yet received any significant revenue from its
business. Both companies' auditors have added a "going concern" paragraph to
their most recent audit reports. A "going concern" paragraph with an audit
opinion means that the auditor has identified certain conditions or events that
indicate there could be reasonable doubt about the company's ability to continue
as a going entity for a period of one year from the date of the financial
statements.
7. THIS REGISTRATION OF STARFEST STOCK FOR THE PROPOSED MERGER WITH
CONCIERGE WILL NOT GENERATE ANY PROCEEDS TO BE USED BY STARFEST OR THE
POST-MERGER COMPANY IN FURTHERING ITS BUSINESS OBJECTIVES.
Should the proposed merger be effected, the post-merger company
must file an appropriate registration statement with the Commission if it is to
generate proceeds in a public offering.
8. NEITHER STARFEST NOR CONCIERGE HAS RECEIVED, NOR WILL RECEIVE, AN
INDEPENDENT, EXPERT OPINION ON THE FAIRNESS OF THE TERMS OF THE PROPOSED MERGER.
The terms of the proposed merger were negotiated by the
management of the two companies without the benefit of a "fairness opinion" by
expert and independent investment brokers. Accordingly, the shareholders of each
company face the risk that the terms of the merger may unfairly favor the
shareholders of the other company, as measured by traditional investment banking
analysis.
9. THE POST-MERGER COMPANY PROPOSES TO TRANSACT COMMERCE ON THE INTERNET
AND WILL BE EXPOSED TO RISKS OF LOSS ASSOCIATED WITH CREDIT CARD FRAUD.
There are persons in our society that misappropriate credit card
numbers, order goods on the telephone or Internet for delivery, receive the
goods and move on before the credit card owner receives the monthly statement
for the card. Concierge currently carries no insurance to protect itself from
losses that could arise from such practices or other forms of credit card fraud
on the Internet.
10. IT IS LIKELY THAT TRADING IN OUR STOCK WILL BE VOLATILE AND LIMITED.
The OTC Bulletin Board trading in Starfest's common stock has
always been limited and volatile. During 1998 and the first two months of 1999,
Starfest conducted no business and there was virtually no trading in its stock.
The following table shows the high and low bid and asked prices, as reported by
the OTC Bulletin Board, for 1998, 1999 2000. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
5
AVERAGE DAILY
HIGH LOW SHARES TRADED
---- --- ---------------
1998:
1ST QTR. 0.02 0.005 12,592
2ND QTR. 0.01 0.005 1,675
3RD QTR. 0.03 0.005 22,348
4TH QTR. 0.021 0.01 24,909
1999:
1ST QTR. 0.1000 0.0050 108,072
2ND QTR. 0.5938 0.0200 138,705
3RD QTR. 0.2000 0.0600 105,733
4TH QTR. 0.1050 0.0450 95,998
2000:
1ST QTR. 2.3125 0.075 852,552
2ND QTR. 2.9688 0.3700 215,654
3RD QTR. 0.7813 0.35 108,162
4TH QTR. 0.41 0.09375 186,584
2001:
1ST QTR. 0.195 0.08 81,219
The computer software industry, in which Concierge will operate,
is also volatile. For instance, the Computer Technology Index ("XCI") closed on
November 16, 2000 at 1,160. During the 52 weeks prior to this date, the closing
price of this index ranged from 1,078 to 1,820. The Computer Technology Index is
a widely recognized and used index. It is compiled by the American Stock
Exchange and represents a cross section of widely-held corporations involved in
various phases of the computer industry. It is market-value weighted, based on
the aggregate market value of its 27 component stocks.
11. TRADING IN THE COMMON STOCK OF THE POST-MERGER COMPANY WILL MOST
LIKELY BE SUBJECT TO THE INHIBITING EFFECTS OF THE COMMISSION'S "PENNY STOCK"
TRADING RULES.
Stocks that trade on the OTC Bulletin Board, such as Starfest's,
are subject to the Commission's Penny Stock Suitability Rule and Penny Stock
Disclosure Rule. These rules apply to OTC Bulletin Board stocks that trade at
less than $5 a share. These rules prescribe certain procedures a broker-dealer
must follow before a broker-dealer can recommend these stocks to their
customers. These procedures require that the broker-dealer -
o obtain information from the customer concerning the customer's
financial situation, investment experience and investment objectives,
o determine that transactions in penny stocks are suitable for the
customer and that the customer is capable of evaluating the risks in
penny stocks,
6
o furnish the customer a written statement setting forth the basis for
the broker's determination of suitability,
o obtain from the customer a written agreement to purchase the penny
stock and the number of shares to be purchased, and
o furnish the customer with a "risk disclosure document" prescribed by
federal regulation and that describes certain risks associated with
trading in penny stocks.
These rules prevent broker recommendations of a penny stock in
many instances and may operate to delay the execution of "buy" orders of penny
stocks when they are recommended by the broker-dealers. Starfest's common stock
is a "penny stock" and may remain so for an indeterminate time after the merger
should the merger with Concierge be effected.
12. CONCIERGE HAS CONTINGENT LIABILITY OF $2,009,610 FOR POSSIBLE
VIOLATIONS OF REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF STATE
SECURITIES LAWS.
After Starfest filed on June 8, 2000, the registration statement
of which this Prospectus-Proxy Statement is a part, Concierge, Inc., with whom
Starfest proposes to merge, sold $142,500 worth of its common stock to eight
persons. Concierge believed that such sales were exempt from registration under
Section 5 of the Securities Act of 1933 (the "Act") by reason of the provisions
of Section 4(2) of the Act and Regulation D, Rule 506 thereunder. It is possible
- but not conceded by either Starfest or Concierge - that such exemptions from
registration were not available to Concierge because of the public nature of the
registration statement and also because the relationships between Concierge and
some of the purchasers in such offering may not have satisfied the requirement
of the Commission that such relationships be of a pre-existing, substantive
nature.
Should no exemption from Section 5 registration have been
available for such offering, Concierge - and Starfest, should the proposed
merger be approved and effected - as well as the persons controlling Concierge
at the time of such sales of securities could be held liable for violation of
the registration provisions of the federal and state securities laws. Further,
they could be liable not only to the purchasers of such $142,500 amount of
common stock for their purchase prices, with interest thereon, less any income
received thereon, upon the tender of their shares of common stock, or for
damages if they no longer own the securities but to all persons that bought
Concierge securities in offerings that could be "integrated" with the offering
in which the $142,500 amount of Concierge common stock was sold. Concierge
believes, but does not concede, that the maximum amount of such "integrated
sales" is $2,009,610. Such an action would have to be brought in a court within
one year after the purchase of the securities for violations of the federal
Securities Act but within two to three years after purchase of the securities
for violations of state securities laws. Most states allow, in addition to the
damages provided by federal law, a successful litigant to collect interest and
attorney fees.
7
To the extent that any such actions should be filed and
successfully litigated, Concierge's and, should the merger be approved and
effected, Starfest's operations, plans and ability to finance business
operations would be adversely affected.
13. THE POST-MERGER COMPANY IS SUBJECT TO A CONTINGENT CLAIM OF A
SHAREHOLDER FOR THE ISSUANCE TO HIM OF AN ADDITIONAL 3,961,835 SHARES OF
POST-MERGER COMMON STOCK OF THE COMPANY. SUCH A CLAIM, IF ASSERTED AND ADJUDGED
VALID, WOULD RESULT IN A 3.2 PERCENT REDUCTION IN THE EQUITY OF THE COMPANY FOR
ALL OTHER SHAREHOLDERS.
The president of Concierge unilaterally reduced the shares of
Concierge common stock of a shareholder from 60,801 shares to 2,129 shares
without the shareholder's consent and after the shareholder had agreed to reduce
his shareholdings from 75,000 shares to 60,801 shares. The law may regard the
earlier agreed reduction from 75,000 shares to 60,801 shares as a compromise and
settlement of any dispute regarding the correct number of shares owed to the
shareholder for his services. The terms of the proposed merger with Starfest
provide that each share of Concierge common stock will convert into 67.5355
shares of the post-merger company. Thus, the unilateral 58,672-share reduction
in Concierge shares for this shareholder raises the contingency that the
shareholder may be entitled to an additional 3,961,335 post-merger shares.
14. THE POST-MERGER COMPANY MAY NEED ADDITIONAL FUNDING.
Should the proposed merger be approved, the post-merger company
may require additional funding to achieve its plan of operations for the next
twelve months. Even should Concierge's operations - which will become the
operations of the post-merger company - become profitable, Concierge's
contingent liability of $2,009,610 for possible violations of the registration
requirements of the Securities Act of 1933 and state securities laws could
impose a future requirement for additional funding. If additional funding is
needed, whether during the next twelve months or later, the source for this
funding has not been identified or committed, and no assurance can be given that
the needed funds could be obtained. Failure to obtain the funds could result in
a contraction of future advertising, an inability to fill orders for
merchandise, a loss of sales, poor relations with business customers and
possible failure of the business. See "Information About Concierge - Concierge
Management's Plan of Operation; - Liquidity."
15. OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN ALLEN E. KAHN AND OTHER
KEY PERSONNEL.
Should the merger occur, the post-merger company will be reliant
on the continued services of several key personnel. The loss of any of them
could adversely affect future operations. These persons are Allen E. Kahn, chief
executive officer of Concierge; and F. Patrick Flaherty, executive vice
president. Concierge has no employment agreements with any of these persons.
16. MANAGEMENT AND THEIR AFFILIATES WILL CONTROL ALL MATTERS SUBMITTED
TO SHAREHOLDER VOTES.
8
Should the merger be approved, the post-merger company's
management and their affiliates will own approximately 50.2 percent of the
company's common stock. They will be able to elect all of the directors. They
will also control all other matters submitted to the shareholders for a vote,
such as -
o potential mergers,
o increases in the authorized capital,
o the sale of all or substantially all of the company's assets, and
o the liquidation of the company.
17. ONE YEAR AFTER THE PROPOSED MERGER SHOULD BECOME EFFECTIVE, CERTAIN
TRADING RESTRICTIONS WILL BE RELAXED ON THE 50.2 PERCENT INTEREST IN THE
POST-MERGER COMPANY TO BE OWNED BY CONCIERGE'S PRESENT AFFILIATES. THIS WILL
RESULT IN A LARGE BLOCK OF STOCK BEING ELIGIBLE FOR UNLIMITED SALE INTO THE
TRADING MARKET AND COULD EXERT DOWNWARD PRESSURE ON THE PRICE OF THE STOCK.
All shareholders of Concierge will convert their shares of
Concierge common stock into shares of Starfest common stock that will have been
registered with the Commission. Despite this registration, the Commission's Rule
145 imposes trading restrictions on the post-merger shares of those persons who
are affiliates of Concierge at the time Concierge votes on the merger.
Generally, these trading restrictions are the same as those of Rule 144 and, in
particular, limit for one year the amount of shares that can be sold into the
open market by any such person during any three-month period. These restrictions
apply for one year even if such an affiliate is no longer an affiliate of the
post-merger company. To the extent any of Concierge's affiliates at the time of
the vote on the merger are no longer affiliates of the post-merger company one
year after the merger becomes effective, a large block of stock could become
eligible for unlimited sale into the trading market of the company's shares. See
"Rule 144 and Rule 145 Restrictions on Trading" on page 33.
18. THE TECHNOLOGY FOR CONCIERGE'S PRODUCT, THE PERSONAL COMMUNICATIONS
ATTENDANT, IS NOT PATENTED BY CONCIERGE AND IS AVAILABLE TO COMPETITORS. STRONG
COMPETITION IS EXPECTED.
The essential speech recognition and text-to-speech technology
for Concierge's product is patented by Motorola and fonix Corp., to whom
Concierge will pay royalties and who license this technology to other companies.
19. SHOULD A CHANGE IN MANAGEMENT SEEM NECESSARY, IT WILL BE DIFFICULT
FOR THE NON-MANAGEMENT STOCKHOLDERS TO DO THIS.
9
Should the proposed merger be approved, the company's officers
and directors and their affiliates will own approximately 50.2 percent of the
common stock of the company. This amount may enable them to determine the
outcome of any vote affecting the control of the company.
TERMS OF THE TRANSACTION
MATERIAL CONDITIONS TO THE MERGER.
--------------------------------------
Starfest and Concierge have entered into an agreement of merger between
Starfest and Concierge. For the merger to occur, each of the following must
occur:
o Registration statements must be filed with and become effective
at the Securities and Exchange Commission and appropriate state
securities regulatory agencies. The registration statements cover
the following:
o the 96,957,713 merger shares - the shares Starfest offers
to the stockholders of Concierge.
o The stockholders of each of Starfest and of Concierge must, by a
majority vote of the shares outstanding, approve the merger. In
this regard, the Concierge directors, officers and other
affiliates, who will be able to vote 63.6 percent of the
outstanding Concierge shares at the Concierge stockholders'
meeting, have agreed that they will vote their shares in
accordance with the outcome of the vote of the other
shareholders.
Terms of the Merger.
-----------------------
The terms of the proposed merger are as follows:
1. Concierge shall merge into Starfest.
2. Each share of Concierge's 1,435,655 outstanding shares of common
stock shall be converted into 67.5355 shares of common stock of Starfest. The
96,957,713 Starfest merger shares shall be distributed to the Concierge
shareholders on a pro-rata basis.
3. There shall be no fractional shares issued. Otherwise fractional
shares shall be rounded up or down to the nearest whole number.
4. The present business of Concierge shall be conducted after the merger
by Starfest, into which Concierge shall have merged. However, Concierge's
management and directors shall become the management and directors of the
combined company.
5. The articles of incorporation of Starfest will be amended to provide
the following:
o Its name will be changed to "Concierge Technologies, Inc."
10
o Its authorized capital will be increased from 65 million shares of
Common Stock, no par value, to 190 million shares of Common Stock,
$0.001 par value, and 10 million shares of Preferred Stock, $0.001
par value.
There will be approximately 120 million shares of common stock
outstanding after the merger. The board of directors will have the authority to
issue the remaining 70 million authorized but unissued shares of common stock
without shareholder approval. The issuance of all of these common shares would
result in a 58 percent dilution in the present ownership of each shareholder,
although the amount, if any, of any economic dilution to existing shareholders
would depend upon the consideration received for the issuance of the additional
shares.
Similarly, the issuance of the newly authorized 10 million shares
of preferred stock poses a potential percent dilution in book value for existing
shareholders, although the economic dilution, if any, would depend upon the
consideration received for the preferred shares.
The fact that there will be 70 million shares of common stock and
10 million shares of preferred stock available for issuance by the post-merger
board of directors has an anti-takeover impact. Any corporation or persons
considering making a tender offer for the post-merger company's shares will be
inhibited by the recognition that the issuance of these authorized but unissued
shares could increase the total cost of a tender offer and even defeat it.
The class of preferred stock that will be authorized will have no
stated or defined preferences. Rather, the board of directors will be able, by
board resolution to be filed with the Secretary of State of California, to
designate series of the preferred stock with specific preferences or attributes.
Examples of preferences or stock attributes could be -
o a series of the preferred stock could be preferred over the
common stock or other series of preferred stock in the event of
the liquidation of the company,
o a series of the preferred stock could be preferred over the
common stock in the company's declaration and payment of
dividends,
o a series of the preferred stock could be convertible into common
stock at a stated conversion price,
o a series of the preferred stock could be given the right to elect
a majority of the members of the board of directors in the event
of the non-payment of dividends to the holders of the preferred
stock, or
o combinations of the above or other preferences.
11
6. The Bylaws of the post-merger company will be the Bylaws of
Concierge. Although not a term of the merger, Concierge seeks approval of its
shareholders to amend its bylaws to increase the number of its directors to
eleven.
7. Should the stockholders of Concierge not approve the merger, neither
of Starfest or Concierge shall be liable to the other.
Reasons for the Merger.
--------------------------
The Starfest stockholders will benefit by becoming, once again, an
operating company with a business. The directors of Starfest believe that the
unified messaging product of Concierge has great potential due to the increasing
number of mobile-based e-mail users both domestically and globally.
Concierge's stockholders will benefit from converting their present
stock in a closely-held corporation to stock of a corporation for which there is
a public market for their stock. Concierge could register its own common stock
with the Securities and Exchange Commission and then seek an NASD member firm to
apply to the OTC Bulletin Board for trading privileges for its stock.
Concierge's management feels, however, that its shareholders will benefit from
the broader shareholder base and considerably larger public float - 58,201,856
shares immediately after the merger - to be obtained from the merger with
Starfest.
Finally, the management of both Starfest and Concierge believe that the
existence of a public market will facilitate the raising of expansion funds for
the post-merger company. There is no assurance that such will occur.
Effectively, the stockholders of Concierge will suffer a 19.2 percent
dilution in their equity in Concierge solely for the perceived, but not assured,
benefits of having a public market for their securities.
Description of Securities.
----------------------------
Common Stock. Starfest is a California corporation, and Concierge is a
Nevada corporation. Starfest is authorized to issue 65 million shares of common
stock. It has 23 million shares of common stock now issued and outstanding.
Concierge is authorized to issue 10 million shares of common stock. It has
1,435,655 shares of its common stock now issued and outstanding. There are no
material differences in the common stock of our two companies.
Voting rights. Stockholders have one vote a share on all matters
submitted to a vote of the stockholders. Shares of common stock do not have
cumulative voting rights. This means that the holders of a majority of the
shares voting for the election of the board of directors are able to elect all
members of the board of directors.
Dividend rights. Stockholders receive dividends when and if
declared by the board of directors out of funds of the corporation legally
available therefor.
12
Liquidation rights. Upon any liquidation, dissolution or winding
up, stockholders receive pro rata all of the assets of the corporation available
for distribution to stockholders, subject to the prior satisfaction of the
liquidation rights of the holders of outstanding shares of preferred stock.
Preemptive rights. Stockholders do not have preemptive rights to
subscribe for or purchase any stock, obligations or other securities of the
corporation.
Registrar and transfer agent. Nevada Agency and Trust Company,
50 West Liberty Street, Suite 880, Reno, Nevada 89501, is the transfer agent and
registrar of the common stock of Starfest. Concierge serves as its own
registrar and transfer agent.
Dissenters' rights. A stockholder has "dissenters' rights" which,
if properly exercised, may require the corporation to repurchase its shares.
Dissenters' rights commonly arise in extraordinary transactions such as mergers,
consolidations, reorganizations, substantial asset sales, liquidating
distributions, and certain amendments to the corporation's certificate of
incorporation.
Change in Control. There are no provisions in the articles of
incorporation or bylaws that would delay, defer or prevent a change in control
of either Starfest or Concierge.
Preferred Stock. The post-merger company will be authorized to issue 10
million shares of preferred stock. The preferred stock may be issued from time
to time by the directors as shares of one or more series. The description of
shares of each series of preferred stock, including any preferences, conversion
and other rights, voting powers, and conditions of redemption must be set forth
in resolutions adopted by the directors.
There are no presently outstanding shares of preferred stock of
Starfest.
Differences Between Rights of Stockholders of Starfest and of Concierge.
--------------------------------------------------------------------------------
There are several material differences between the bylaws of Starfest
and of Concierge. The bylaws of Concierge will become the bylaws of the
surviving company. The material differences are -
o A Concierge bylaw provides that special meetings of the shareholders can
be called at the request of 25 percent of the shares then outstanding. A
Starfest bylaw designates 10 percent of the shares then outstanding for
this same purpose.
o A Concierge bylaw provides that there shall be five directors. A
Starfest bylaw designates not less than four nor more than five
directors. At the special meeting of Concierge shareholders called to
approve or disapprove the proposed merger with Starfest, the Concierge
shareholders will also consider a proposal of its directors to increase
to eleven the number of its directors.
13
o A Concierge bylaw provides that special meetings of the directors can be
called on one day's actual notice by any director or the president. A
Starfest bylaw provides that special directors' meetings can be called
on two-days' actual notice by two directors, the president, any vice
president or the secretary.
o A Concierge bylaw provides that any director may be removed for cause by
action of the board of directors. No Starfest bylaw provides for removal
of directors by the board of directors.
o A Concierge bylaw provides that any director, officer or employee shall
be indemnified by the company against the reasonable expenses incurred
in the defense of any proceeding brought against him by reason of his
being a director, officer or employee except in instances where he
actually is adjudged to be liable for gross negligence or misconduct in
the performance of his duties. A Starfest bylaw authorizes
indemnification but limits obligatory indemnification to instances where
an agent of the company has been successful on the merits in defense of
any such proceeding.
Accounting Treatment of Proposed Merger.
--------------------------------------------
The transaction will be accounted for as a reverse acquisition - that
is, the acquisition of Starfest by Concierge as Concierge will have the
controlling votes of the combined entities.
Federal Income Tax Consequences of the Transaction.
---------------------------------------------------------
The Merger. The merger will qualify as a type "A" tax free
reorganization for both corporations under Section 368(a)(1) of the Internal
Revenue Code.
Stockholders of Concierge. There will be no recognition of
taxable gain or loss to the stockholders of Concierge by reason of the merger.
Each stockholder of Concierge will have a carryover tax basis and a tacked
holding period for the Starfest securities received in the merger.
Concierge itself will not recognize any taxable gain or loss,
because its liabilities are not in excess of the tax basis of its assets.
The above discussion is not based upon an advance ruling by the
Treasury Department but upon an opinion of Thomas J. Kenan, esquire, in his
capacity as tax counsel to Starfest (which tax opinion is one of the exhibits to
the registration statement of which this Prospectus-Proxy Statement is a part).
Mr. Kenan's opinion is based upon U.S. federal income tax law, including
legislation, regulations, administrative rulings and court decisions.
14
Agreement of Merger.
----------------------
The Agreement of Merger between Starfest and Concierge appears herein as
"Appendix A - Agreement of Merger."
In addition to the terms of the merger described earlier under "Terms of
the Transaction - Terms of the Merger," the Agreement of Merger contains the
following principal provisions:
Representations by Starfest. Starfest makes representations to
Concierge in regard to -
o its good standing in California and in each state where it is
required to obtain authorization to transact business,
o its right, power, legal capacity and authority to enter into the
Agreement of Merger and to perform its obligations under the
agreement,
o the validity of all documents, instruments and certificates
delivered pursuant to the agreement's terms,
o the consummation of the merger not resulting in a breach or
violation by it of its corporate charter or any agreements to
which it is a party,
o the accuracy of its financial statements,
o the non-existence of any person's right to acquire capital stock
of Starfest other than as disclosed in the agreement,
o the disclosure of all material liabilities of it not reflected on
the financial statements,
o the disclosure of any material claims against it,
o the filing by it of all tax returns required to be filed by it,
o its compliance with all federal, state or local laws and
ordinances,
o the non-existence of any employee pension benefit plan,
o its non-infringement of any patents, trademarks, service marks or
trade names,
o the non-existence of any collective bargaining agreement,
o the legality of its earlier issuance of unrestricted shares
pursuant to Regulation D, Section 504.
15
Representations by Concierge. Concierge makes the same
representations to Starfest as those described above that Starfest makes to
Concierge.
Conditions Precedent to Starfest's Obligation to Consummate the Merger. The
obligation of Starfest to consummate the merger is subject to its satisfaction
that the following conditions have been met:
o Concierge shall have performed all of the following covenants,
conditions and obligations required of it to be performed by the
closing date:
o Concierge will have filed all income, franchise, property,
sales, employment and other tax returns required of it by
any taxing authority and will have paid or accrued all
taxes required to be paid by it,
o there shall be no undisclosed claims against Concierge or
affecting its business and no undisclosed pending or
threatened proceedings or governmental investigations
involving Concierge, its assets or its business,
o Concierge shall have obtained all permits or other
authorizations necessary for the conduct of its business
and shall not be in violation of any such permit or other
authorization,
o all parties to all material contracts to which Concierge
is a party are in compliance in all material respects with
the terms of the contracts, and
o Concierge has never infringed any patents, trademarks,
service marks or trade names used by it in its business
nor has it claimed any such infringement.
o all representations made by Concierge shall be materially true,
correct and complete,
o prior to closing the merger, Concierge shall have suffered no
material adverse change affecting it or sustained any loss that
materially affects its ability to conduct its business,
o there shall be no pending legal proceeding seeking to restrain or
prohibit or to obtain damages or other relief in connection with
the merger,
o a majority of the Starfest shareholders shall have approved
o the merger,
o the change of name of Starfest to "Concierge Technologies,
Inc."
16
o the change of management to that of Concierge's
management, and
o an increase in the authorized capital to 190 million
shares of common stock and 10 million shares of preferred
stock,
o Concierge shall have obtained any consents necessary to perform
its obligations under the Agreement of Merger, and
o Starfest shall have obtained all required approvals under the
securities laws to issue the merger shares to Concierge's
shareholders.
Conditions Precedent to Concierge's Obligation to Consummate the Merger. The
obligation of Concierge to consummate the merger is subject to its satisfaction
that Starfest has met the same conditions as those listed above and imposed on
Concierge that are conditions precedent to Starfest's obligation to consummate
the merger.
The Closing. At the closing of the merger transaction, the following shall
occur:
o each party shall deliver to the other party certificates of good
standing from the states where each is required to be qualified
to do business,
o each company's secretary shall deliver to the other company a
secretary's certificate certifying that all necessary corporate
action has taken place to approve the merger,
o Starfest shall deliver the necessary documents needed to be filed
with the Secretaries of State of California and Nevada to effect
the merger, and the officers of the two companies shall execute
the documents and deliver them for filing to the Secretaries of
State, and
o Concierge shall deliver to Starfest a list of Concierge
shareholders, certified by Concierge's secretary, setting forth
the names, addresses and number of shares of Starfest each is to
receive in the merger, and Starfest shall send the list to
Starfest's stock transfer agent with instructions to issue the
96,957,713 merger shares to the Concierge shareholders in
accordance with the list.
Termination of the Agreement of Merger. The agreement may be terminated prior to
closing by either party if any one or more of the conditions to its obligation
to close have not been fulfilled, or by mutual agreement of the parties.
Survival of Representations and Indemnification. The representations of the
parties to the agreement shall survive the closing for two years. Each party
indemnifies the other party against its loss arising from breaches of
representations, but only if the losses exceed $10,000 and the total
indemnification obligation shall not exceed $200,000.
17
Post-Closing Covenants. The post-merger company shall not reverse split its
stock for at least two years without the written consent of Gary Bryant of
Indian Wells, California, who will represent the interests of the present
Starfest shareholders. Mr. Bryant is the record owner of 1,310,000 shares of
Starfest common stock and will receive an additional 143,783 shares of its
common stock, through his ownership of 2,129 shares of Concierge common stock,
should the merger be approved. Mr. Bryant's shareholdings represent 5.7 percent
of Starfest's presently outstanding shares and 0.15 percent of Concierge's
presently outstanding shares. Should the merger be approved, he will own 1.3
percent of the outstanding shares of the post-merger company. He will be the
owner of the largest number of shares of the post-merger company of any present
Starfest shareholder. For this reason, he was chosen by the Starfest directors
to represent the interests of the present Starfest shareholders in regard to
possible reverse stock splits that might be proposed by the post-merger
directors.
18
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2001
(UNAUDITED)
The following unaudited Pro Forma Statements have been derived from the
unaudited financial statements of Starfest, Inc. (A) for the year ended June 30,
2001 and the audited financial statements of Concierge, Inc. (B) for the year
ended June 30, 2001. The unaudited Pro Forma Statements of Operations and
financial conditions reflect the acquisition of A (a reporting company) by B (a
previously non public company) in a reverse merger using purchase method of
accounting and assume that such acquisition was consummated as of July 1, 2000.
The merger transaction is considered to be a capital transaction (i.e. issuance
of stock by Starfest, Inc. accompanied by a recapitalization).
The unaudited Pro Forma Statements of Operations and financial conditions should
be read in conjunction with the Financial Statements of A, the Financial
Statements of B and the Notes to the financial statements. The Pro Forma
Statement of Operations does not purport to represent what the Company's results
of operations would actually have been if the acquisition of A had occurred on
the date indicated or to project the company's results of operations for any
future period or date. The Pro Forma adjustments, as described in the
accompanying data, are based on available information and the assumption set
forth in the foot notes below, which management believes are reasonable.
Starfest Inc. Concierge Inc. Pro Forma Pro Forma
(Historical) (Historical) Adjustment Combined
------------- -------------- ----------- ------------
Sales $ - $ - $ - $ -
Cost of Sales - - - -
Gross profit - - - -
Operating expenses 127,653 543,280 - 670,933
Loss from operations (127,653) (543,280) - (670,933)
------------ ------------ ---------- ------------
Provision for taxes 800 800 - 1,600
------------ ------------ ---------- ------------
NET INCOME (LOSS) $ (128,453) $ (544,080) $ - $ (672,533)
============ ============ ========== ============
EARNINGS PER SHARE
Weighted-average
number of shares
outstanding 22,914,637 96,957,713 8,056,250 (3) 127,928,600
============ ============ ============
Loss per share $ (0.01) $ (0.01) $ $ (0.01)
============ ============ ========== ============
NOTES:
(1) Earnings per share data shown above are applicable for both primary and
fully diluted.
(2) Weighted-average number of shares outstanding for the combined entity
includes all shares issued as of June 30, 2001 as if outstanding as of
the beginning of the period.
(3) Weighted average number of shares outstanding for combined entity includes
22,914,637 shares of Starfest, Inc., 96,957,713 shares to be issued
to the shareholders of Concierge, Inc., 5,928,750 shares to be issued in
lieu of advance subscription received by Concierge, Inc. at June 30, 2000
and 2,127,500 shares for advance subscription received from July 1,
2000 through September 15, 2000.
19
PRO FORMA STATEMENT OF FINANCIAL CONDITIONS
AS OF JUNE 30, 2001
(UNAUDITED)
Starfest Inc. Concierge Inc. Pro Forma Pro Forma
(Historical) (Historical) Adjustment Combined
------------- -------------- ----------- ------------
ASSETS
Current Assets $ 644 $ 346,495 $ (100,000)(1) $ 247,139
Property & equipment, net - 2,110 - 2,110
---------- ------------- ------------- ---------
TOTAL ASSETS $ 644 $ 348,605 $ (100,000) $ 249,249
========== ============= ============= =========
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities $ 427,140 $ 112,743 $ (100,000)(1) $ 439,883
Long term liabilities - - - -
---------- ------------- ------------- ---------
Total liabilities 427,140 112,743 (100,000) 439,883
---------- ------------- ------------- ---------
Stockholders' equity;
Common stock 2,711,751 6,959 (6,959)(2) 2,816,765
96,958 (3)
8,056 (4)
Additional paid-in
capital - 300,812 6,959 (2) 0
(96,958)(3)
1,921,844 (4)
(3,138,247)(5)
1,005,590 (6)
Subscription received
for common stock
subject to
contingency &
common stock issued
subject to
contingency - 1,929,900 (1,929,900) (4) 0
Retained earnings
(deficit) (3,138,247) (2,001,809) 3,138,247 (5)(3,007,399)
(1,005,590) (6)
---------- ------------- ------------- ---------
Total stockholders'
equity (426,496) 235,862 0 (190,634)
---------- ------------ ----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 644 $ 348,605 $ (100,000) $ 249,249
========== ============ ============ =============
NOTES:
(1) Elimination of inter-company loan upon merger
(2) Elimination of Common stock of Concierge, Inc. before merger
(3) Issuance of 96,957,713 shares of Common stock of $.001 par value to
shareholders of Concierge, Inc.
(4) Conversion of "subscription received for common stock subject to
contingency" 8,056,250 shares in to capital of the merged Company
(5) Elimination of pre-merger retained earnings of Starfest, Inc.
(6) Elimination of negative balance in Additional Paid-in-Capital
20
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
(UNAUDITED)
The following unaudited Pro Forma Statements have been derived from the
unaudited financial statements of Starfest, Inc. (A) for the year ended June 30,
2000 and the audited financial statements of Concierge, Inc. (B) for the year
ended June 30, 2000. The unaudited Pro Forma Statements of Operations and
financial conditions reflects the acquisition of A (a reporting company) by B (a
previously non public company) in a reverse merger using purchase method of
accounting and assumes that such acquisition was consummated as of July 1, 1999.
The merger transaction is considered to be a capital transaction (i.e. issuance
of stock by Starfest, Inc accompanied by a recapitalization).
The unaudited Pro Forma Statement of Operations and financial conditions should
be read in conjunction with the Financial Statements of A, the Financial
Statements of B and the Notes to the financial statements. The Pro Forma
Statement of Operations does not purport to represent what the Company's results
of operations would actually have been if the acquisition of A had occurred on
the date indicated or to project the company's results of operations for any
future period or date. The Pro Forma adjustments, as described in the
accompanying data, are based on available information and the assumption set
forth in the foot notes below, which management believes are reasonable
Starfest Inc. Concierge Inc. Pro Forma Pro Forma
(Historical) (Historical) Adjustment Combined
------------- -------------- ----------- ------------
Sales $ - $ - $ - $ -
Cost of Sales - - - -
------------ ------------ ------------ -----------
Gross profit - - - -
Operating expenses 611,440 986,186 - 1,597,626
------------ ------------ ------------ -----------
Loss from operations (611,440) (986,186) - (1,597,626)
Provision for taxes 800 800 - 1,600
------------ ------------ ------------ -----------
NET INCOME (LOSS) $ (612,240) $ (986,986) $ - $(1,599,226)
============ ============ ============ ===========
EARNINGS PER SHARE
Weighted-average
number of
shares outstanding 22,914,637 96,957,713 8,056,250(3) 127,928,600
============ ============ ============
Loss per share $ (0.03) $ (0.01) $ $ (0.01)
============ ============ ============
NOTES:
(1) Earnings per share data shown above are applicable for both primary and
fully diluted.
(2) Weighted-average number of shares outstanding for the combined entity
includes all shares issued as of June 30, 2000 as if outstanding as of the
beginning of the period.
(3) Weighted average number of shares outstanding for combined entity includes
22,914,637 shares of Starfest, Inc., 96,957,713 shares to be issued
to the shareholders of Concierge, Inc., 5,928,750 shares to be issued in
lieu of advance subscription received by Concierge, Inc. at June 30, 2000
and 2,127,500 shares for advance subscription received from July 1,
2000 through September 15, 2000.
21
PRO FORMA STATEMENT OF FINANCIAL CONDITIONS
AS OF JUNE 30, 2000
(UNAUDITED)
Starfest Inc. Concierge Inc. Pro Forma Pro Forma
(Historical) (Historical) Adjustment Combined
------------- -------------- ----------- ------------
ASSETS
Current Assets $ 1,105 $ 430,905 $ (100,000)(1) $ 332,010
Property & equipment,
net - 4,692 - 4,692
------------ ------------- ----------- -----------
TOTAL ASSETS $ 1,105 $ 435,597 $ (100,000) $ 336,702
============ ============= =========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities $ 363,546 $ 143,155 $ (100,000)(1) $ 406,701
Long term liabilities - - - -
------------ ------------- ----------- -----------
Total liabilities 363,546 143,155 (100,000) 406,701
------------ ------------- ----------- -----------
Stockholders' equity;
Common stock 2,647,353 6,959 (6,959)(2) 2,750,240
96,958 (3)
5,929 (4)
Additional paid-in
capital - 300,812 6,959 (2) 0
(96,958)(3)
1,436,471 (4)
(3,009,794)(5)
1,362,510 (6)
Subscription received
for common stock
subject to contingency
& common stock issued
subject to contingency - 1,442,400 (1,442,400)(4) 0
Retained earnings
(deficit) (3,009,794) (1,457,729) 3,009,794 (5) (2,820,239)
(1,362,510)(6)
------------ ------------- ----------- ----------
Total stockholders'
equity (362,441) 292,442 0 (69,999)
------------ ------------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,105 $ 435,597 $ (100,000) $ 336,702
============ ============= =========== ===========
NOTES:
(1) Elimination of inter-company loan upon merger
(2) Elimination of Common stock of Concierge, Inc. before merger
(3) Issuance of 96,957,713 shares of Common stock of $.001 par value to
shareholders of Concierge, Inc.
(4) Conversion of advance subscription to 5,928,750 shares capital of the merged
Company
(5) Elimination of pre-merger retained earnings of Starfest, Inc.
(6) Elimination of negative balance in Additional Paid-in-Capital
22
MATERIAL CONTACTS BETWEEN STARFEST AND CONCIERGE
Background of the Transaction.
---------------------------------
During the fall of 1999, Allen Kahn, the president of Concierge, had
several conversations concerning the development of Concierge's unified
messaging product with an old acquaintance, Patrick Flaherty, then the western
regional manager for Flynn & Associates, a computer mainframe software publisher
and vendor. In early December 1999 Mr. Flaherty introduced Mr. Kahn to John
Everding, a self-employed person whose primary occupation is raising capital in
California for private companies. On occasion he does so with the assistance of
Gary Bryant and Mr. Bryant's financial consulting company, Newport Capital
Consultants, Inc. The purpose of the introduction and telephone conversations
among Kahn, Flaherty, Everding and Bryant was to explore whether Mr. Everding
could assist Concierge in raising working capital and product development
capital for the company. Also discussed was the possibility of effecting a
"reverse merger" between Concierge and a public company in order to obtain a
security that trades in the stock market, which the group believed would assist
any capital-raising efforts.
On December 6, 1999, at the initiation of John Everding and Gary Bryant, a
meeting was held in Irvine, California in the offices of Grant Bettingen
Company, an NASD broker-dealer firm. Mr. Bettingen did not participate in the
meeting. His role was limited to providing a conveniently situated conference
room for the meeting, in response to Gary Bryant's request for the use of the
room. Attending the meeting were John Everding, Gary Bryant, and three
representatives of Concierge - Allen Kahn, Patrick Flaherty and James Kirk,
Concierge's general counsel and corporate secretary.
The subjects discussed at the meeting were a merger between Concierge and
Starfest proposed by John Everding and Gary Bryant, the business plans of
Concierge as revealed by Allen Kahn and Patrick Flaherty, Starfest's history as
revealed by Gary Bryant, how the equity of such a post-merger company would be
allocated between the shareholders of Starfest and Concierge and how Gary Bryant
and John Everding would be compensated if such a merger should occur. Mr.
Bryant proposed that the equity of the post-merger company be allocated in the
manner set forth in this Prospectus-Proxy Statement. Allen Kahn and Patrick
Flaherty indicated that they would seek the approval of the Concierge directors
to the merger and to this allocation. On December 8, 1999 Concierge's board of
directors approved of the merger in principle and directed Mr. Kahn to proceed
to the drafting of a merger agreement and its execution.
The subject of compensation to Gary Bryant and John Everding was deferred
to a later date. Grant Bettingen asked for no compensation for providing a
meeting place for the December 6, 1999 meeting, and he is to receive no
compensation. Gary Bryant asked to be compensated for bringing Starfest to the
proposed transaction. John Everding asked to be compensated for assisting
Concierge in locating prospective investors in Concierge.
23
The directors of Concierge and Starfest each met and approved the proposed
merger and its terms. An agreement of merger was drafted by Starfest's counsel
and was executed on January 26, 2000 by the officers of Starfest and Concierge.
No joint meeting of the directors of the two companies was ever held.
Newport Capital Consultants has no relationship with Concierge other than
as described in this Prospectus - Proxy Statement as a consultant and finder who
is being compensated for advising Concierge's management on matters involving
mergers and for bringing to Concierge the proposed merger with Starfest and the
acquisition in early March 2000 of a reporting shell corporation, MAS
Acquisition XX Corp.
Matters Concerning Compensation for Consultants.
----------------------------------------------------
The matter of compensation to be paid to Gary Bryant and John Everding was
raised several times in telephone conversations with Allen Kahn initiated by
either John Everding or Gary Bryant. Mr. Bryant asked that he be paid $25,000
in December 1999, be paid an additional $25,000 when the merger with Starfest
should be effected, and be issued 150,000 shares of common stock upon completion
of the merger. Mr. Everding asked that he be paid a consulting fee for a period
of two years - $9,500 a month from December 1999 until the merger is effected
and $12,500 a month for the balance of the two years, that he be reimbursed
out-of-pocket expenses incurred on behalf of Concierge, and that he be issued
75,000 shares of common stock. Mr. Kahn initially agreed to these requests for
compensation, but it soon became clear that the parties were miscommunicating
concerning the number of shares involved in the requests. Mr. Bryant and Mr.
Everding understood the 150,000 shares and 75,000 shares each, respectively, was
to receive would be shares of Concierge common stock and would be converted in
the merger to shares of the post-merger company at whatever conversion ratio
would apply for such conversion. Mr. Kahn understood that the 150,000 shares
and 75,000 shares would be the number of post-merger shares Mr. Bryant and Mr.
Everding, respectively, would receive.
Finally, on May 5, 2000 the directors of Concierge agreed to a compromise
proposed by Gary Bryant and John Everding - 75,000 shares of pre-merger common
stock of Concierge to Gary Bryant - which would convert into 5,186,183 shares of
post-merger Starfest common stock - and 37,500 shares of pre-merger Concierge
common stock to John Everding - which will convert into 2,593,091 shares of
post-merger Starfest common stock. The 75,000 shares of Concierge common stock
that were issued to Gary Bryant were valued by Concierge's directors at $24,000,
the book value of the shares when they were issued. The 37,500 shares of
Concierge common stock that were issued to John Everding were valued by
Concierge's directors at $12,000, the book value of the shares when they were
issued. Subsequently, on September 12, 2000, Mr. Bryant contributed to
Concierge 14,199 of his 75,000 shares, thereby reducing to 60,801 the number of
shares of Concierge common stock he owned. These 60,801 shares would convert
into 4,105,618 shares of the post-merger company should the merger be approved.
24
However, in April 2001, Allen Kahn, the president of Concierge, determined
that Mr. Bryant should not receive such a large number of shares on the ground
that the original agreement between Concierge and Mr. Bryant was clear in its
intention that Mr. Bryant receive 150,000 shares of Concierge common stock
calculated after the merger with Starfest, not before the merger. Mr. Kahn
unilaterally reduced Mr. Bryant's shareholdings of Concierge stock from 60,801
shares to 2,129 shares, a difference to Mr. Bryant of 3,961,835 shares of
post-merger stock and a reduction that Mr. Bryant has not agreed to.
Accordingly, Mr. Bryant could possibly assert a claim against Concierge after
the merger over the issuance to him of an additional 3,961,835 shares of common
stock of the post-merger company - an amount equal to 3.3 percent of the
119,957,713 shares to be outstanding after the merger should be effected and a
reduction of 3.2 percent in the equity of each of the other shareholders of the
post-merger company should such a claim be made and established by Mr. Bryant.
There is no provision for delayed vesting of the issued shares, repurchase
rights or other mechanisms whereby Concierge may recover its fee paid to Bryant
and Everding in the event the proposed transaction with Starfest is not approved
by the shareholders of either company.
The 14,199 shares of Concierge stock contributed in May 2000 by Mr. Bryant
to Concierge were reissued by Concierge on September 12, 2000 to nine purchasers
of "advance subscriptions" securities of Concierge for a cash consideration of
$210,000. Mr. Bryant received no consideration for his contribution to
Concierge of the 14,199 shares of Concierge stock or for the reduction in April
2001 from 60,801 shares to 2,129 shares that Mr. Kahn unilaterally effected. As
of the date of this Prospectus - Proxy Statement, Mr. Bryant has received from
Concierge $25,000 in cash and the reduced amount of 2,129 shares of Concierge
common stock. He anticipates receiving an additional $25,000 from Concierge
when the merger with Starfest should occur.
Through March 1, 2001, Concierge has paid $243,630 to John Everding and
issued him 37,500 shares of Concierge common stock. The cash payments represent
a $9,500 a month consulting fee, reimbursement of out-of-pocket expenses, and an
additional $82,630 as an advance payment against future monthly consulting fees,
which advance payment Mr. Everding requested with regard to a recurring illness
associated with his having been in contact with Agent Orange during the Vietnam
conflict. Assuming the merger with Starfest had been effected on March 1, 2001,
Mr. Everding's monthly consulting fees for the two-year period to end December
1, 2001 would amount to $254,000 plus reimbursement of out-of-pocket expenses.
Starfest's Acquisition of an S.E.C. Reporting Company.
------------------------------------------------------------
At the time the agreement of merger was executed on January 26, 2000,
Starfest's common stock was traded through the OTC Bulletin Board. However, it
was subject to delisting if Starfest did not register its common stock with the
Securities and Exchange Commission by April 2000 and become a "reporting
company" - a company obligated to file periodic reports with the Commission.
Starfest's counsel, who was drafting the registration statement for the merger,
25
advised the officers of Starfest and of Concierge, Gary Bryant and John Everding
that the registration statement would not be able to be filed and processed by
the Commission's staff prior to the April 2000 deadline and that it therefore
faced delisting from the OTC Bulletin Board.
In early March 2000 Gary Bryant advised Michael Huemmer, the president of
Starfest; Allen Kahn, the president of Concierge; and Thomas Kenan, Starfest's
counsel who was drafting the registration statement for the merger shares, that
he had been advised by a friend, Jim Stubler of Capistrano Beach, California
that a certain Aaron Tsai of Evansville, Indiana, had registered with the
Commission at least twenty startup, no-operations, shell corporations for the
purpose of enabling companies, such as Starfest, that were facing delisting from
the Bulletin Board, to take advantage of the Commission's Rule 12g(3). This
rule provides, generally, that a corporation that acquires a reporting
corporation, by purchase, merger or otherwise, also acquires the legal
obligation to file periodic reports with the Commission for the combined
companies. Mr. Bryant stated that one of these reporting shell corporations of
Mr. Tsai, a company named MAS Acquisition XX Corp., was available for purchase
by Starfest for $100,000 cash and 150,000 shares of common stock of Starfest.
This consideration was to be divided between Mr. Tsai and Mr. Stubler in some
proportion known only to them.
The acquisition by Starfest of Mr. Tsai's 96.83 percent of the outstanding
shares of MAS Acquisition XX Corp. would enable Starfest to become a reporting
company upon filing a proper Form 8-K with the Commission to report the
acquisition. This would avoid Starfest's delisting from the OTC Bulletin
Board. Mr. Bryant maintained that such a delisting would result in Starfest's
common stock being reduced to trading through the Pink Sheets, a trading medium
inferior to that of the Bulletin Board, and that such would almost inevitably
result in a lower market value of Starfest's common stock. He argued that the
likelihood of obtaining approval of the merger by Concierge's shareholders would
be lessened if Starfest were a "Pink Sheet company," that the payment of 150,000
shares of Starfest and $100,000 cash was justified when measured against the
approximately 120 million shares to be outstanding of the post-merger company
should the merger occur and the lost time and costs of processing the proposed
merger to a vote of shareholders that would vote against the proposed merger
because of the Pink Sheet status of Starfest.
Mr. Bryant's arguments were accepted by the management of Starfest and
Concierge. Starfest did not have $100,000 to pay to Mr. Tsai and Mr. Stubler
and could not issue any additional common stock by reason of its merger
agreement with Concierge. Concierge loaned the $100,000 to Starfest, and
Starfest's president, Michael Huemmer, contributed the 150,000 shares of
Starfest common stock needed for the transaction. Starfest's counsel drafted an
acquisition agreement, which agreement was executed on March 6, 2000. The
required consideration was paid and delivered, and on March 10, 2000 Starfest
filed a Form 8-K12G3 with the Commission reporting its acquisition of 96.83
percent of the outstanding shares of common stock of MAS Acquisition XX Corp.
and Starfest's assumption of the obligation to file future reports with the
Commission. Starfest was not delisted from the OTC Bulletin Board.
26
As stated, the $100,000 cash portion of the consideration paid to acquire
MAS Acquisition XX Corp. was loaned to Starfest by Concierge. This loan is
carried on Starfest's balance sheet as a "related party note payable." It is
payable on demand and is interest-free. Should the merger occur, the obligor
and the obligee of the loan will have merged into the same person, an event
which will extinguish the obligation. Should the merger not occur, Starfest
will owe Concierge $100,000 on demand.
Other than having an interest in the proposed merger by reason of (1) his
or her ownership of common stock of Starfest or Concierge or (2) election to
office of the surviving company, there is no substantial interest in the merger,
direct or indirect, of any Starfest or Concierge director or executive officer
since the beginning of the last fiscal year, nominee for election as a director
or associate of any of the foregoing persons.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Thomas J. Kenan, Esquire, counsel to Starfest, is named in this
Prospectus-Proxy Statement as having given an opinion on legal matters
concerning the registration or offering of the securities described herein.
From February 17, 1999 until April 6, 1999, Mr. Kenan was the sole officer and
director of Starfest. Mr. Kenan's spouse, Marilyn C. Kenan, is the trustee and
sole beneficiary of the Marilyn C. Kenan Trust, a testamentary trust that
presently owns 760,000 shares of common stock of Starfest. Mr. Kenan disclaims
any beneficial ownership in the securities beneficially owned by his spouse's
trust. Mr. Kenan owns, in his own name, 600,000 shares of common stock of
Starfest and 2,840 shares of common stock of Concierge which shares of Concierge
he received as compensation for his legal services and counsel in connection
with the negotiation and preparation of the agreement of merger, his legal
services in the negotiation and drafting of a Stock Purchase Agreement dated
March 6, 2000 with the controlling shareholder of MAS Acquisition XX Corp. and
Mr. Kenan's subsequent drafting of a Form 8-K12G3 filed with the Commission on
March 10, 2000, his drafting of Starfest's annual Form 10-KSB, and the drafting
of the registration statement of which this Prospectus-Proxy Statement is a
part.
27
INDEMNIFICATION
Starfest, a California corporation, will be the surviving corporation to
the merger. Under California corporation law, a corporation is authorized to
indemnify officers, directors, employees and agents who are parties or
threatened to be made parties to any civil, criminal, administrative or
investigative suit or proceeding by reason of the fact that they are or were a
director, officer, employee or agent of the corporation or are or were acting in
the same capacity for another entity at the request of the corporation. Such
indemnification includes reasonable expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement if they acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests of
the corporation.
With respect to any criminal action or proceeding, these same
indemnification authorizations apply if these persons had no reasonable cause to
believe their conduct was unlawful.
In the case of any action by the corporation against such persons involving
a breach of duty to the corporation or its shareholders, California law
authorizes the corporation to provide similar indemnification but only if -
o the articles of incorporation authorize such, or
o the court conducting the proceeding determines that such persons are
nevertheless fairly and reasonably entitled to indemnification. Starfest's
articles of incorporation do not authorize such indemnification for acts of
directors and officers involving a breach of duty to the corporation or its
shareholders.
To the extent any such persons are successful on the merits in defense of
any such action, suit or proceeding, California law provides that they shall be
indemnified against reasonable expenses, including attorney fees. A corporation
is authorized to advance anticipated expenses for such suits or proceedings upon
an undertaking by the person to whom such advance is made to repay such advances
if it is ultimately determined that such person is not entitled to be
indemnified by the corporation.
Indemnification and payment of expenses provided by California law are not
deemed exclusive of any other rights by which an officer, director, employee or
agent may seek indemnification or payment of expenses or may be entitled to
under any by-law, agreement, or vote of stockholders or disinterested directors.
In such regard, a California corporation may purchase and maintain liability
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation.
As a result of such corporation law, the post-merger company may, at some
future time, be legally obligated to pay judgments (including amounts paid in
settlement) and expenses in regard to civil or criminal suits or proceedings
28
brought against one or more of the officers, directors, employees or agents, as
such, of either of the two pre-merger companies with respect to matters
involving the proposed merger or, should the merger be effected, matters that
occurred prior to or after the merger.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
company pursuant to the foregoing provisions or otherwise, the company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
PENNY STOCK REGULATIONS
There is no way to predict a price range within which Starfest's common
stock would trade after the proposed merger. It presently trades on the OTC
Bulletin Board at a price less than $5 a share and is subject to the rules
governing "penny stocks."
A "penny stock" is any stock that:
o sells for less than $5 a share.
o is not listed on an exchange or authorized for quotation on The
Nasdaq Stock Market, and
o is not a stock of a "substantial issuer." Starfest is not now a
"substantial issuer" and cannot become one until it has net tangible
assets of at least $2 million, which it does not now have and will
not have solely as a result of the proposed merger with Concierge.
There are statutes and regulations of the Securities and Exchange
Commission (the "Commission") that impose a strict regimen on brokers that
recommend penny stocks.
The Penny Stock Suitability Rule
------------------------------------
Before a broker-dealer can recommend and sell a penny stock to a new
customer who is not an institutional accredited investor, the broker-dealer must
obtain from the customer information concerning the person's financial
situation, investment experience and investment objectives. Then, the
broker-dealer must "reasonably determine" (1) that transactions in penny stocks
are suitable for the person and (2) that the person, or his advisor, is capable
of evaluating the risks in penny stocks.
After making this determination, the broker-dealer must furnish the
customer with a written statement setting forth the basis for this suitability
determination. The customer must sign and date a copy of the written statement
and return it to the broker-dealer.
29
Finally the broker-dealer must also obtain from the customer a written
agreement to purchase the penny stock, identifying the stock and the number of
shares to be purchased.
The above exercise delays a proposed transaction. It causes many
broker-dealer firms to adopt a policy of not allowing their representatives to
recommend penny stocks to their customers.
The Penny stock Suitability Rule, described above, and the Penny Stock
Disclosure Rule, described below, do not apply to the following:
o transactions not recommended by the broker-dealer,
o sales to institutional accredited investors,
o transactions in which the customer is a director, officer, general
partner, or direct or indirect beneficial owner of more than 5
percent of any class of equity security of the issuer of the penny
stock that is the subject of the transaction, and
o transactions in penny stocks by broker-dealers whose income from
penny stock activities does not exceed five percent of their total
income during certain defined periods.
The Penny Stock Disclosure Rule
-----------------------------------
Another Commission rule - the Penny stock Disclosure Rule - requires a
broker-dealer, who recommends the sale of a penny stock to a customer in a
transaction not exempt from the suitability rule described above, to furnish the
customer with a "risk disclosure document." This document is set forth in a
federal regulation and contains the following information:
o A statement that penny stocks can be very risky, that investors often
cannot sell a penny stock back to the dealer that sold them
the stock,
o A warning that salespersons of penny stocks are not impartial
advisers but are paid to sell the stock,
o The statement that federal law requires the salesperson to tell the
potential investor in a penny stock -
o the "offer" and the "bid" on the stock, and
o the compensation the salesperson and his firm will receive for
the trade,
o An explanation that the offer price and the bid price are the
wholesale prices at which dealers are willing to sell and buy the
stock from other dealers, and that in its trade with a customer the
dealer may add a retail charge to these wholesale prices,
30
o A warning that a large spread between the bid and the offer price can
make the resale of the stock very costly,
o Telephone numbers a person can call if he or she is a victim of
fraud,
o Admonitions -
o to use caution when investing in penny stocks,
o to understand the risky nature of penny stocks,
o to know the brokerage firm and the salespeople with whom one is
dealing, and
o to be cautious if ones salesperson leaves the firm.
Finally, the customer must be furnished with a monthly statement including
prescribed information relating to market and price information concerning the
penny stocks held in the customer's account.
Effects of the Rule
----------------------
The above penny stock regulatory scheme is a response by the Congress and
the Commission to known abuses in the telemarketing of low-priced securities by
"boiler shop" operators. The scheme imposes market impediments on the sale and
trading of penny stocks. It has a limiting effect on a stockholder's ability to
resell a penny stock.
Starfest's merger shares likely will trade below $5 a share on the OTC
Bulletin Board and be, for some time at least, shares of a "penny stock" subject
to the trading market impediments described above.
INFORMATION ABOUT STARFEST, INC.
Business Development
Starfest, Inc. was incorporated in California on August 18, 1993 as
"Fanfest, Inc." On August 29, 1995 its name was changed to Starfest, Inc.
Pursuant to a Stock Purchase Agreement (the "Purchase Agreement") dated
March 6, 2000 between (1) MAS Capital, Inc., an Indiana corporation, the
controlling shareholder of MAS Acquisition XX Corp. ("MAS XX"), an Indiana
corporation, and (2) Starfest, approximately 96.83 percent (8,250,000 shares) of
the outstanding shares of common stock of MAS Acquisition XX Corp. were
exchanged for $100,000 and 150,000 shares of common stock of Starfest in a
transaction in which Starfest became the parent corporation of MAS XX.
At the time of this transaction, the market price of Starfest's common
stock was $1.50 bid at closing on March 7, 2000 on the OTC Bulletin Board.
Accordingly, the consideration Starfest paid for the 96.83 percent interest was
31
valued at $325,000. Concierge loaned to Starfest the $100,000 cash portion of
the consideration evidenced by a no-interest, demand note. Michael Huemmer, the
president of Starfest, loaned to Starfest the 150,000 shares of common stock of
Starfest that was the stock portion of the consideration.
Upon execution of the Purchase Agreement and the subsequent delivery of
$100,000 cash and 150,000 shares of common stock of Starfest on March 7, 2000,
to MAS Capital Inc., pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, Starfest became the
successor issuer to MAS Acquisition XX Corp. for reporting purposes under the
Securities and Exchange Act of 1934 and elected to report under the Act
effective March 7, 2000.
MAS Acquisition XX had no business, no assets, and no liabilities at the
time of the transaction. Starfest entered into the transaction solely for the
purpose of becoming the successor issuer to MAS Acquisition XX Corp. for
reporting purposes under the 1934 Exchange Act. Prior to this transaction,
Starfest was preparing to register its common stock with the Commission in order
to avoid being delisted by the OTC Bulletin Board. By engaging in the Rule
12g-3(a) transaction, Starfest avoided the possibility that its planned
registration statement with the Commission would not be fully reviewed by the
Commission's staff before an April 2000 deadline, which would result in
Starfest's common stock being delisted on the OTC Bulletin Board.
Business of Starfest.
-----------------------
Starfest's initial business was the production and promotion of theme
events involving numerous artists and performers and designed to attract mass
audiences of fans drawn by the theme. In 1994 and 1995 it produced "Fanfest,"
which was held at the Fairplex at the Los Angeles County Fairgrounds, and which
won the Airplay International Award as the "Country Music Event of the Year."
In 1995 the event won the Country Music Associations of America's award as the
"Best Country Event of the Year." The two events lost money, however. By the
end of 1995, Starfest had a retained deficit of $1,228,703.
In 1996 the event was renamed "Starfest" and was again held in Los Angeles.
In 1997 the event was planned but was cancelled before being held. At the end
of 1997, Starfest had no business and a retained deficit of $2,135,885. The
company was essentially dormant in 1998, losing only $2,366 for the year, with
its activities being limited to dealing with creditors and to attempting to
raise capital for the resumption of business.
In 1999, with no business, Starfest turned the management of the company
over to three individuals involved in the adult entertainment business - Billy
Harbour, John Whitley and Pamela Miller of southwestern Virginia. Under this
new direction the company bought three websites on the Internet -
www.starfest.com, www.adultstar.com and www.adultstars.com. Starfest also
purchased and paid $12,000 for twelve additional websites on the Internet, but
the written transfer of the websites was never obtained, and the right to obtain
the transfer of those websites has been sold and transferred to unrelated third
32
parties. Stockholders owning a majority of the outstanding stock of Starfest
regained control of the management of the company by obtaining the resignations
of directors associated with the Virginia management and having the remaining
directors elect Michael Huemmer as president and Janet Alexander as secretary of
the company. On December 31, 1999, pursuant to the written consent of persons
holding a majority of the outstanding shares of common stock of the company,
Starfest sold all the remaining assets of the company associated with the adult
entertainment business for $10,000. The assets consisted of the three adult
entertainment websites and the right to obtain the additional twelve websites.
Starfest applied this and its other cash assets to the payment of outstanding
liabilities. Starfest suffered a loss of $518,606 for the year of 1999.
On January 18, 2000, Starfest and Concierge executed a letter of intent to
submit to their stockholders a proposal to merge. The agreement of merger was
executed on January 26, 2000. Starfest will be the surviving corporation of the
merger, but the business and management of the merged companies will be that of
Concierge. Pending approval of the merger, Starfest has no business.
Starfest has no employees. Starfest's present management consists of two
persons, Michael Huemmer, president, and Janet Alexander, secretary.
Plan of Operation
-------------------
Starfest's sole plan of operation at present is to progress toward a
closing of the proposed merger with Concierge. Should the merger be
consummated, the company's plan of operation for the next twelve months shall
then be the plan of operation that Concierge's management has for its company.
Until the merger should be consummated or abandoned, Starfest has no paid
employees. Its officers and directors are contributing their time without
compensation. Starfest no longer has sufficient cash to meet anticipated cash
requirements that will arise before the merger with Concierge is consummated.
Until the shareholders of the two companies can vote on the proposed merger,
Starfest's president, Michael Huemmer, and legal counsel, Thomas J. Kenan, are
advancing the costs associated with registering the merger transaction shares
with the Securities and Exchange Commission.
Should the merger with Concierge not be consummated, Starfest's management
will seek another merger partner Starfest will find it necessary to raise
additional funds in connection with any other merger it might negotiate with
another merger partner. It would propose to require the other party to the
merger to provide such funds.
Description of Property.
--------------------------
Starfest has no property.
33
Legal Proceedings.
-------------------
Neither Starfest nor its property is a party to, or the subject of, pending
legal proceedings. Starfest is aware of no proceeding that a governmental
authority is contemplating.
Market for Starfest's Common Stock and Related Stockholder Matters.
---------------------------------------------------------------------------
Starfest's common stock presently trades on the OTC Bulletin Board.
Information on the high and low bid prices for Starfest's common stock during
1997, 1998, 1999 and 2000 appears in Risk Factor No. 10 on page 5. The
volatility of the stock price is apparent, not only from year-to-year but within
each quarter. The volume of trading in the stock is also highly volatile. From
the third quarter of 1997 until the second quarter of 1999, there was
practically no trading in the stock. Weeks could pass without a single
transaction. Then, during the second and third quarters of 1999 almost daily
trading recommenced based upon Starfest's public announcements that it was
entering the adult Internet entertainment business. Trading slowed to almost a
stop with the lack of results of this new business venture. Then, in January
2000 the trading volume surged with the announcement of the proposed merger with
Concierge. Daily volumes since late January 2000 are quite erratic. In March
2000, for instance, daily volume ranged from 3,110,300 to 172,500.
There are approximately 96 record holders of Starfest's common stock. Some
19,013,657 of its shares are held in the single name of "Cede & Co.," which is
the record holder for shares held in numerous brokerage accounts.
Rule 144 and Rule 145 Restrictions on Trading.
-----------------------------------------------------
Should the merger with Concierge be approved and effected, all shares of
common stock of the post-merger company issued in the merger to the stockholders
of Concierge shall have been issued pursuant to registration with the
Commission. Nevertheless, there will be certain restrictions on the transfer
for value of the shares received in the merger by the affiliates of Concierge,
who may be deemed to be underwriters.
Securities and Exchange Commission rules define as "affiliates" a
corporation's executive officers, directors and other persons who, by any
manner, exercise control over the corporation's direction and policies. The
affiliates of Concierge at the time of the vote on the merger, in order to sell
their shares received in the merger, must either register them for resale or
comply with the resale provisions set forth in paragraph (d) of the Commission's
Rule 145, unless some other exemption-from-registration provision is available.
The resale provisions of paragraph (d) of Rule 145 refer to certain provisions
of the Commission's Rule 144 and require, for sales of the shares by such
affiliates, that:
o the company must have been subject to the reporting requirements
of Section 13 or Section 15(d) of the Securities Exchange Act for at least 90
days (which is the case, here),
34
o the company must have filed all reports with the Commission
required by such rule during the twelve months preceding such
sale (or such shorter period that the company was required
to file such reports),
o transfers for value by such affiliates can occur only either (1)
through broker transactions not involving the solicitation of
buyers or (2) directly to market-makers, and
o each such affiliate can transfer for value, during a 90-day
period, no more shares than the greater of one percent of
all issued and outstanding shares of common stock of the
company (119,957,713 shares immediately after the merger) or
the average weekly volume of trading in such common stock
reported through the automated quotation system of Nasdaq or the
Bulletin Board during the four calendar weeks prior to placing
the sell order with a broker-dealer.
The above resale provisions of Rule 145 shall continue for such affiliates
for one year after the merger. Then, only the company's reporting requirement
shall continue. When any such affiliate has ceased to be an affiliate of the
post-merger company for at least three months, and provided at least two years
have elapsed since the date of the merger, then even the requirement that the
company file reports with the Commission will no longer be required for such a
former affiliate to sell any of the shares acquired in the merger.
The following table allocates the post-merger company's common stock
between restricted and non-restricted stock for Concierge's and Starfest's
affiliates at the time of the merger:
Percent of No. of Shares Restricted
Post-Merger Company No. of Shares Total Issued by Rules 144 and 145
------------------- ------------- ------------ ------------------------
Authorized shares 190,000,000 - -
Issued and outstanding shares 119,957,713 100.0 60,353,856
----------- ----- -----------
Issued and outstanding shares Rule 145:
To be controlled by
Concierge's affiliates 60,189,663 50.2 60,189,663
Issued and outstanding shares Rule 144:
To be controlled by
Starfest's affiliates 860,000 0.7 860,000
Pre-merger restricted shares
Of Starfest issued during
2000 to persons other than Rule 144:
its affiliates 1,402,001 1.2 1,402,001
Shares in the "public float,"
subject to no restrictions
on trading 57,506,049 47.9 -
----------- ----- ----------
35
119,957,713 100.0 60,353,856
The 860,000 shares controlled by Starfest's affiliates were issued in 2000
and will continue to be "restricted" shares until they have been held for two
years. The same is true of the 1,402,001 other shares of Starfest issued in
2000. After such shares have been held for one year, they may be sold pursuant
to the provisions of Rule 144, the principal ones of which are set forth above
on page 27 as "bullet points" in the second paragraph of this heading.
No equity of Starfest is subject to outstanding options or warrants to
purchase, or securities convertible into, equity of the company.
Dividends. Starfest has had no earnings and has declared no dividends on
our capital stock. Concierge has never earned a profit and may not do so in the
future. Under California law, a company - such as
our post-merger company - can pay dividends only
o from retained earnings, or
o if after the dividend is made,
o its tangible assets would equal at least 11/4 times its liabilities,
and
o its current assets would at least equal its current liabilities,
or
o if the average of its earnings before income taxes and before
interest expenses for the last two years was less than the
average of its interest expenses for the last two years, then
its current assets must be equal to at least 11/4 times its
current liabilities.
The post-merger directors' strategy on dividends is to declare and pay
dividends only from retained earnings and when the directors deem it prudent and
in the best interests of the company to declare and pay dividends.
Reports to Stockholders. Starfest is required to file reports with the
Securities and Exchange Commission. These reports are annual 10-KSB, quarterly
10-QSB and periodic 8-K reports, although none of such filed reports are
incorporated herein by reference. Starfest will furnish stockholders with
annual reports containing financial statements audited by independent public or
certified accountants and such other periodic reports as we may deem appropriate
or as required by law.
Registration Statement. Starfest has filed with the Securities and
Exchange Commission ("SEC") in Washington, D.C., a Registration Statement under
the Securities Act of 1933, with respect to the common stock offered by this
Prospectus-Proxy Statement. The public may read and copy any materials we file
with the SEC at the Public Reference Room of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
36
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Starfest is an
electronic filer, and the SEC maintains an Internet Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of such site is
http://www.sec.gov.
Stock Certificates. Certificates for the securities offered hereby will be
ready for delivery within one week after you approve the merger.
Financial Statements.
----------------------
See "Financial Statements - Starfest, Inc." for the independent auditor's report
dated March 21, 2001, with respect to Starfest's balance sheet as of December
31, 2000 and the related statements of operations, stockholders' deficit and
cash flows for the year ended December 31, 2000, and the independent auditor's
report dated February 9, 2000, with respect to Starfest's balance sheet as of
December 31, 1999, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the years ended December 31, 1999 and
December 31, 1998, and the notes to such financial statements, except with
respect to Note 4, as to which the date is March 7, 2000, as well as the interim
(unaudited) balance sheet at June 30, 2001, statement of operations and
accumulated deficit, and statement of cash flows for the three months periods
ended June 30, 2001 and June 30, 2000.
Management's Plan of Operation.
----------------------------------
Should the stockholders of the two companies not approve the merger,
Starfest will seek another partner. Its sole "asset" is its status as a public
company whose stock trades on the OTC Bulletin Board.
Changes In and Disagreements With Accountants on Accounting and Financial
--------------------------------------------------------------------------------
Disclosures.
------------
On March 8, 2000 Starfest's principal independent accountant, Jaak (Jack)
Olesk, Beverly Hills, California, resigned. His reports on the Company's
financial statements from inception onward contained no adverse opinions or
disclaimers of opinions and were not modified as to uncertainty, audit scope or
accounting principles. There were no disagreements with Jaak (Jack) Olesk,
whether or not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not
resolved to Jaak (Jack) Olesk's satisfaction, would have caused him to make
reference to the subject matter of the disagreements in connection with his
reports.
On November 14, 2000, the Company engaged the firm of Kabani & Company, of
Fountain Valley, California, as independent accountants for the Company. Prior
to November 14, 2000, neither the Company, nor anyone on its behalf, had
consulted with Kabani & Company concerning the accounting principles of any
specific completed or contemplated transaction, any type of audit opinion on the
Company's financial statements or any other material factor which might be
37
considered by the Company in reaching a decision as to any accounting, auditing
or financial reporting issue.
38
INFORMATION ABOUT CONCIERGE, INC.
Overview
Concierge was incorporated in Nevada on September 20, 1996, with the
business purpose to develop personal computer software designed to read an
Internet e-mail user's e-mail messages to one over any wirelined telephonic
connection. The user may call ones computer from any telephone to initiate the
transaction. The software may also be configured by the user to automatically
call one at any telephone number when new e-mail is received from any e-mail
address entered on the user-defined "VIP list." The concept uses voice
recognition technology to allow the user to direct the interaction by voice
command. Concierge devoted almost all its efforts to the development of a
usable product, the Personal Communications Attendant ("PCA "), which was
finally completed in September, 2000. It may be purchased through the company's
Web sites at http://www.pcahome.com and http://www.conciergetech.com. As
presently constituted, the PCA is a single-user product and has a list purchase
price of $39.95. The company anticipates future sales to individual end-users,
large user groups and re-sellers and is pursuing potential opportunities in all
those channels.
Concierge's Plan of Operation
--------------------------------
Concierge commenced marketing the PCATM in September 2000. It had expected
to bring the PCATM to market in early April, announced this expectation in an
interview on a television program and set up a toll-free line with contract
personnel available to take telephone orders. Approximately 50 orders were
received. Unfortunately, Concierge's initial marketing effort was precipitous.
The company Concierge had hired to write the programming code to implement
Concierge's design, technical specifications and program logic did not timely
meet its contractual commitments. The product was not ready. The initial
marketing effort was terminated.
On May 12, 2000 the responsibility for writing the programming code was
reassigned to Dave Cook Consulting of Mercer Island, Washington. That company's
work was overseen by Concierge. Detailed technical development of the initial
PCATM product, packaging design, documentation, field testing and attendant
tasks were completed, and the PCATM became available for direct purchase online
in September 2000.
Full scale marketing efforts have not yet commenced. Concierge has placed
evaluation units of the PCA with a number of major end-user and reseller
organizations for their assessment of the product's suitability for their
purposes. Technical problems in automatic credit card verification and funds
transfer have been resolved. The company is positioned to ship ordered units
expeditiously. Aggressive sales and marketing campaigns are planned but are
being held in abeyance pending the generation of additional funding.
Two hundred units were shipped between September, 2000 and January 15,
2001. Of these, only a small number were sold to individual end-users.
39
Approximately 120 units were sent as evaluation copies to large corporate users
and re-sellers to stimulate demand in situations representing high volume
potential. Such technical evaluations were arranged by Concierge or
intermediaries; no unsolicited evaluation units have been sent. Product
evaluations of this nature by major organizations tend to be time-consuming, and
there is no guarantee of success. Product inventory is not maintained on
company premises but was recently moved from XeTel Corp. in San Ramon, CA to
Point to Point, LLC in Mill Valley, CA from which location order fulfillment
services will be performed. Current inventory, all pre-paid, consists of 14,800
packages, 14,800 printed User's Guides and 1,800 CDs containing the PCA software
itself.
Description of the PCATM. Concierge's PCATM provides a means by which any
user of Internet e-mail can have e-mail messages spoken to him or her over any
touch-tone telephone or wireless phone in the world.
The PCATM responds to the user's voice commands to read, verbalize and
manage e-mail traffic stored on a personal computer. The PCATM is "trained" to
respond only to the voice commands and personal voice password of the individual
user, thus guaranteeing that each user's personal messages cannot be accessed by
anyone else. Responding to spoken instructions, the PCATM can verbalize e-mail
(with future fax and voice-mail capabilities) over the phone and save or delete
those messages as directed by the user.
The PCATM software executes on a personal computer operating under Windows
95 or Windows 98 and using Microsoft Outlook or Outlook Express as an e-mail
client. It requires 350 megabytes of available hard disk space. The Internet
connection may be effected by any standard means, including dial-up or dedicated
telephone line, cable or DSL, but voice interaction between the user and the
PCATM software requires a dial-up phone line and a voice-capable modem.
Generally, although not invariably, many available 56 KB modems are
voice-capable. The initial product being offered for sale is a stand-alone,
single-user version and is not designed to function in a LAN or WAN environment.
There are no set-up costs associated with the product other than assuring that
the minimum hardware and software requirements are present.
The initial product can verbalize only a user's e-mail. It is, however,
implemented with "hooks" for the addition of fax and voice-mail modules.
"Hooks" means that the programs have been written to facilitate the future
inclusion of additional features such as fax and voice-mail capabilities. The
date of availability of these features will depend upon decisions still to be
made by Concierge management regarding the assignment of priorities to product
introduction. Among future products planned are the "Pro" version, which will
enable the user to access by telephone the user's fax and voice-mail messages; a
multi-user, server-based version for corporate/enterprise users; and various
"nationalized", that is, non-English, versions. An assessment of individual
market segments and other considerations will enter into the decision of
Concierge's management as to how its available resources might best be utilized.
Expansion of the initial product's capabilities to add fax and voice-mail
retrieval capabilities will not be a major effort; however, it may or may not be
40
the best application of Concierge's capabilities from a strategic marketing
standpoint.
The e-mail version will retail at $39.95. With a $19.95 upgrade, the
planned pro version will monitor and collect fax, voice mail and e-mail
messages. A user's personal computer will then become a universal
communications center. All the user's incoming communications, be they fax,
voice- or e-mail, will reside on the user's own computer and will be readily
accessible from any telephone.
There will be no monthly service fee - only the one-time purchase price and
the option of buying upgrades. No device other than an ordinary telephone is
needed to access the PCATM. The PCATM also includes an auto pager that notifies
the user by phone or pager when new e-mail is received.
The underlying technology is the subject of patents, and Concierge is
required to pay royalties of $0.425 a delivered PCATM unit to Lexicus, a
subsidiary of Motorola, for its Clamor Automatic Speech Recognition software and
$1.00 a delivered unit to fonix for its text-to-speech software. Concierge has
paid advance royalties to Lexicus for 100,000 units and advance royalties to
fonix for 200,000 units.
Concierge intends to "nationalize" the product to accommodate several
foreign languages, possibly including Japanese, Korean, German, Latin American
Spanish, French and Brazilian Portuguese. fonix has advised Concierge that its
text-to-speech software will be available in up to seven foreign languages
commencing in the first quarter of 2001. "Nationalizing" the PCATM will also
require the translation of PCA-generated voice prompts, packaging for the
product and preparation of the user documentation. The voice recognition
component of the PCA is "language independent" and requires no revision - once
trained by the user, it accepts any sound as signifying any corresponding
instruction provided the sound is uttered consistently and in context.
Concierge anticipates that it will complete the first nationalization of
the PCATM within 45 days after it receives from fonix the nationalized
text-to-speech development materials.
The Market. In a study published May 12, 2000 and entitled "Communications
Software and Services," Donaldson Lufkin & Jenrette reported on the past,
present and future estimated users of the Internet. Referring for its
information to the International Data Corporation, a research and analysis
organization in the information technology field, DLJ reported the following
estimates of Internet users:
41
In Millions
------------
No. of Users Internet
-------------- --------
U.S.A.:
End of 1998 30
End of 2002 67
Global:
End of 1999 196
End of 2003 503
Every Internet user with access to a standard telephone is a potential
buyer of Concierge's PCA .
In a February 2000 research report on "unified messaging,"
Jurisdoctor-LLC.com described a burgeoning cottage industry seeking to integrate
access to e-mail, voice mail, pager messaging and fax mail boxes through PC
desktops, screenphones, and voice/touch-tone telephones. Based on digital
technology and automated voice recognition technology that translates spoken
words into text format that can be edited by a common word processor, unified
messaging systems are being developed by a number of companies. The Gartner
Group, a Massachusetts-based market research firm, predicts that unified
messaging will become a $6.6 billion market this year.
Competition.
------------
In August 1999 Lucent Technologies announced that it was entering the
unified messaging field and proposes to provide to Internet service providers
and to businesses a solution to bring together into a single system a company's
complete voice mail, e-mail and fax capabilities.
USWest is in the field with a unified messaging system that permits the
user to access e-mail, fax and voice messages from ones telephone or PC. It is
called "VoiceWire ", and USWest markets it for $27.90 a month. Among other
entrants in the field are Jfax.com, which offers a unified messaging system at
$12.50 a month plus a $15 activation fee; Premiere Technologies, whose system is
offered at $9.95 a month plus fifteen cents a minute for phone access; and
General Magic, whose Portico system is offered at $19.95 a month and a $50 setup
fee.
Concierge believes that it has positioned itself, with its one-time $39.95
purchase price for its PCATM with no monthly fees, to compete in a growing
market segment.
Distribution Methods. Concierge's marketing methods will include direct,
high-volume, e-mail advertising promulgated on the Internet. Lists of e-mail
addresses are readily available for purchase. Such lists typically contain from
millions to tens of millions of valid e-mail addresses. The lists may cost from
a few hundred dollars to one or two thousand dollars, depending upon the
specificity of the target audience.
In the case of Concierge's PCATM product, any e-mail user who communicates
42
in English and has a need to retrieve e-mail messages while away from his or her
personal computer may legitimately be considered a prospect. The lists to be
utilized by Concierge will be unfiltered lists, generally restricted
geographically to English-speaking North America. Concierge has elected not to
use its in-house server capacity to perform the actual bulk mailings but will
employ an outside service for this function. Both list sources and mailing
services advertise extensively on the Internet and can also be easily identified
through any comprehensive search engine such as www.dogpile.com.
In addition to direct e-mail Internet marketing, Concierge's marketing plan
includes the cultivation of Internet Service Providers (ISPs) as a sales channel
for the PCATM. Under discussion are strategic alliances to provide PCAs with
personal computer systems and sales through direct marketing organizations.
Concierge has participated and will continue to participate, in radio and
television business-oriented shows designed to expose companies and their
products to a mass audience. Approximately 50 percent of Concierge's present
resources will be allocated to advertising, marketing and product promotion.
Production Costs. The PCATM will be manufactured and produced for
Concierge by XeTel Corp. and Point To Point LLC of Mill Valley, CA. A service
order fulfillment contract has been executed with eAssist.com of San Diego,
California, an unaffiliated third party corporation. Dave Cook Consulting of
Mercer Island, Washington will provide product development services to implement
products designed by Concierge.
Manufacturing Services Agreements. XeTel Corporation of Austin, Texas
will manufacture large orders of the PCATM software for Concierge at its San
Ramon, California plant and ship them F.O.B. San Ramon at Concierge's direction.
Because XeTel is not equipped to deal with small-volume shipments, Concierge's
existing finished goods inventory was moved - at Xetel's request - to Point To
Point in December of 2000 for future limited-quantity product runs and order
fulfillment. Should the volume of shipments exceed Point to Point's capacity at
some future date, Concierge can move production and order fulfillment functions
back to XeTel under the terms of their original agreement. Alternative sources
for these services have also been identified and may be considered in the
future.
Under Concierge's agreement with XeTel, Concierge furnishes to XeTel
the design of the PCATM and a twelve-month forecast of sales. They then
negotiate the unit price to be charged Concierge during such period based on the
forecast. Concierge also furnishes to XeTel an approved list of vendors for all
component parts of the PCATM.
The first four months of the twelve-month forecast must be firm
purchase orders. Each month the twelve-month forecast is updated, as are the
four months of purchase orders.
Should the actual orders fall short of those forecast for a
twelve-month period for which a price was negotiated, Concierge is subject to
XeTel's supplier billbacks. As of October 15, 2000, Concierge had prepaid
$49,890 to XeTel for PCAsTM to be manufactured for Concierge. Concierge also had
43
in its inventory at that date 2,000 PCAsTM manufactured for it by XeTel and paid
for.
XeTel warrants the products for 90 days after it ships them. Should a
product be defective because of Concierge's design, Concierge still must pay
XeTel the full purchase price for the product. Should a product be defective
because of XeTel's workmanship or material furnished by XeTel, XeTel will
replace the goods at its expense if the goods are returned to it within 30 days
after XeTel's 90-day warranty period.
Either party can terminate the agreement for its convenience on 180
days' notice or for cause on 30 days' notice.
Concierge's agreement with Point To Point, for limited-quantity
product runs and order fulfillment, is for Point To Point's services at its
prevailing rates. Quoted rates bind Point To Point for only 30 days.
Customer Relations. Concierge provides its technical support and
customer relations on its website at http://pcahome.com and
http://www.conciergetech.com under "techsupport" and "faq." Also, a user of
Concierge's PCA in need of technical assistance may contact Concierge by an
e-mail message stating the problem and receive a reply by e-mail.
Product Development Agreement. Dave Cook Consulting of Mercer Island,
Washington earlier provided product development consulting services to
Concierge. Payment for the services was based upon hourly charges.
After a previous consultant hired to perform program coding
implementation of Concierge's design of the PCATM failed to perform as required
by March 22, 2000, Concierge hired Dave Cook Consulting to perform the work.
Dave Cook Consulting restructured the fundamental systems architecture of the
PCATM, rewrote the basic programming code of major modules of the software
package, and revised the user interface.
Mr. Cook, together with Lisa Monte of Creative Web Works, recommended
major changes that were made in Concierge's web site (www.pcahome.com) and
helped equip the site to handle on-line entry order, credit card verification
and order fulfillment.
The intellectual property rights associated with the work product of
Dave Cook Consulting are owned by Concierge.
The March 17, 2000 agreement with Dave Cook Consulting expired after
one year. At such time as Concierge should obtain the capital for additional
product development, it proposes to negotiate a new agreement with Dave Cook
Consulting.
Governmental Approval of Principal Products. No governmental approval is
required in the U.S. for Concierge's products.
44
Government Regulations. There are no governmental regulations in the U.S.
that apply to Concierge's products.
Properties. Concierge leases approximately 1,100 square feet of office
space at Suite 1278, 6033 West Century Boulevard, Los Angeles, California 90045.
The lease is a one-year lease that expires June 1, 2001. The space is deemed
adequate for the present time. Ample space is available for any needed
expansion in the vicinity of its present space and elsewhere in the Los Angeles
area.
Dependence on Major Customers and Suppliers. Concierge does not anticipate
that it will be dependent on any major customers or suppliers.
Seasonality. There should be no seasonal aspect to Concierge's business
other than possible increased sales anticipated in the fourth calendar quarter
associated with the year-end holidays.
Research and Development. Concierge expended approximately $188,663 on
research and development in 1998 and $50,431 in 1999. It anticipates that it
will expend approximately $150,000 on research and development in 2000 and
approximately $200,000 in 2001.
Environmental Controls. Concierge is subject to no environmental controls
or restrictions that require the outlay of capital or the obtaining of a permit
in order to engage in business operations.
Year 2000 Computer Problem. Concierge has determined that it does not face
material costs, problems or uncertainties about the year 2000 computer problem.
This problem stems from the fact that many existing computer programs use only
two digits to identify a year in the date field and do not consider the impact
of the year 2000. Concierge presently uses off-the-shelf and easily replaceable
software programs and has determined that all software is year 2000 compliant.
Number of Employees. On March 31, 2001 Concierge employed two persons full
time and two persons part time.
Venue of Sales. Concierge anticipates that some of its initial sales will
be attributable to exports to English-speaking countries.
Patents, Trademarks, Copyrights and Intellectual Property. Concierge has
trademarked its Personal Communications Attendant. It has no patents on the
product.
Legal Proceedings. Neither Concierge nor any of its property is a party
to, or the subject of, any material pending legal proceedings other than
ordinary, routine litigation incidental to its business.
Concierge Management's Plan of Operation
Concierge's management proposes to devote the company's cash assets and the
45
time and efforts of its officers and staff for the next twelve months to the
promotion, sale and continued improvement of its Personal Communications
Attendant.
Liquidity. As of December 31, 2000, Concierge had cash assets of $3,356
plus prepaid expenses of $245,800 in prepaid royalties and $49,890 in prepaid
finished goods inventory Of 2000 copies of the compact disk containing the PCA
software that were in inventory on November 15, 2000, less than 100 had been
sold by January 15, 2001. While approximately 120 units have been sent as
evaluation copies to large corporate users and resellers who had agreed to
evaluate the product, the product evaluations are still not concluded.
Significant orders for the PCA can be fulfilled, as Concierge has on hand
14,800 of the packages and user manuals, and the 13,000 copies of the compact
disk needed to complete the 14,800 units for sale can be obtained at a cost to
Concierge of a maximum of $32,500. It is felt that the production of the
additional 13,000 CDs can be accomplished for substantially less than the
$32,500 figure quoted by XeTel.
Concierge is illiquid. It is now operating at a monthly administrative
overhead of approximately $20,000. Of this figure, a substantial portion
represents salaries due full-time employees and payments made to part-time
employees. These parties have all agreed to defer such payments until such time
as the company is in a position to meet said obligations. Concierge requires
advertising funds to create a demand for its product. It is seeking debt
financing from several private sources that have had past business relations
with directors of Concierge. One of these sources has asked that Mr. Kahn,
president of Concierge, pledge a portion of his Concierge stock holdings to the
repayment of any loan to Concierge the source might provide. Mr. Kahn has
agreed to do so.
Short term, Concierge requires approximately $190,000 for an aggressive
sales and marketing campaign and $60,000 for its general and administrative
overhead for the next three months. Long term, Concierge requires an additional
$180,000 just for general and administrative overhead to complete the next
twelve months. It is anticipated that ongoing requirements may be satisfied from
cash flow generated by product sales expected to result when the company's
product promotion plans are implemented. The $430,000 cash requirements
described in this paragraph for the next twelve months would require the sale of
approximately 10,763, or 73 percent, of the 14,800 PCA units now in inventory.
Concierge has no sources of liquidity other than the persons and entities
from whom it is now seeking debt financing. While Mr. Kahn has agreed to secure
a loan to the company with his Concierge stock holdings, such action may be
insufficient to obtain the loan.
The only asset Concierge has is its PCA product. Should debt financing
not be obtained soon, the directors of Concierge propose to seek a joint venture
partner with whom the PCA can be jointly marketed and who will bear the
expenses of marketing the product. Discussions are currently underway with
prospective joint venture partners.
46
Risk Factor No. 12 on page 7 of this Prospectus describes Concierge's
contingent liability of $2,009,610 for possible violations of the stock
registration requirements of federal and state securities laws. The occasion of
the contingent liability was Concierge's sale of $142,500 of its common stock
after the June 8, 2000 filing of the registration statement of which this
Prospectus is a part. Concierge does not concede that no exemption from
registration was available, but the contingency exists that the purchasers of
all shares of Concierge common stock from December 9, 1998 to the present - some
$2,009,610 in amount - could seek - and might prevail in seeking - rescissions
of their purchases of stock and a return of their purchase amounts plus interest
and attorney fees. Should a demand for rescission be made by the purchasers of
such stock, Concierge would oppose such a demand for rescission, and its
directors would provide the expenses for the litigation. Concierge's liquidity
would not be immediately affected, due to its directors' providing the expenses
for such litigation. However, such litigation would likely reduce the ability
of Concierge to raise additional capital for its operations and thereby affect
its liquidity. And, a plaintiff's judgment in a class action lawsuit would
likely force Concierge into a voluntary chapter 11 reorganization or, possibly,
liquidation.
Product Research and Development. Concierge's initial PCATM (audio e-mail
version) is designed to execute on a personal computer operating under Windows
95/98 and using Microsoft Outlook or Outlook Express as an e-mail client.
Future versions are expected to operate in the same or successor environments,
although the server-based, multi-user, versions will most likely function under
Microsoft NT or its derivative, Windows 2000. The initial PCATM, however, is
available for purchase and became available on October 3, 2000.
A June 3, 2000 and other projected product release dates were predicated
upon the fulfillment of firm commitments made to Concierge by outside
contractors. Some of those contractors failed to meet their commitments, and
Concierge was forced to delay product introduction. Due to the complexity of
the PCATM product line, numerous specialized technical skills are essential to
successful implementation. However, very few of these niche skills warrant
full-time employment of qualified specialists. It has thus always been the
intention of Concierge's management to outsource narrowly-focused, technical
functions to the greatest extent possible.
Support for Eudora and other e-mail clients is expected to be available in
the next version, whose release date is yet to be determined. Since Eudora
comprises less than ten percent of the Windows-based e-mail users, it is not
considered to be a significant impediment to the market appeal of the product.
Other Expected Developments. Concierge does not expect to purchase any
plant or significant equipment. It outsources the implementation of product
designs for its products that it develops, through the collaboration of its
president, Allen Kahn, and outside providers.
47
Concierge does expect to increase the number of its employees during the
next twelve months by adding approximately three employees, which would include
administrative and executive personnel.
Market for Common Equity and Related Stockholder Matters.
----------------------------------------------------------------
Market Information. There is no established public trading market for
Concierge's common stock. None of its authorized shares of common stock are
subject to outstanding options or warrants to purchase, or securities
convertible into, common stock.
Concierge's outstanding 1,435,655 shares of common stock will be converted
to 96,957,713 shares of common stock of Starfest on the basis of 67.5355 shares
to Starfest common stock to be exchanged for each share of Concierge common
stock. All 96,957,713 shares will be eligible for sale, but the 60,189,663
shares to be distributed to Concierge's officers and directors will be subject
to the resale provisions of paragraph (d) of Rule 145 discussed above under
"Information About Starfest - Rule 144 and Rule 145 Restrictions on trading."
Holders. There are 175 holders of record of Concierge's common stock.
Dividends. Concierge has declared no cash dividends on its common stock
since its inception. There are no restrictions that limit Concierge's ability
to pay dividends on its common stock or that are likely to do so in the future.
Changes In and Disagreements With Accountants on Accounting and Financial
--------------------------------------------------------------------------------
Disclosures.
------------
On February 28, 2001, Concierge dismissed its principal independent
accountant, Brad B. Haynes
The reports of Brad B. Haynes on the financial statements of the Company
filed with the Securities and Exchange Commission contained no adverse opinions
or disclaimers of opinion, and were not modified as to uncertainty, audit scope,
or accounting principles during the past two years or the interim period to
February 28, 2001, the date of dismissal.
The decision to change accountants was recommended and approved by the
Board of Directors of Concierge.
During the past two years or interim periods prior to February 28, 2001,
there were no disagreements between Concierge and Brad B. Haynes, whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Brad B. Haynes' satisfaction, would have caused it to make reference to the
subject matter of the disagreements in connection with its reports.
On March 1, 2001, Concierge engaged the firm of Kabani & Company, of
Fountain Valley, California, as independent accountants for Concierge. Prior to
March 1, 2001, neither Concierge, nor anyone on its behalf, had consulted with
48
Kabani & Company concerning the application of accounting principles to any
specific completed or contemplated transaction, or the type of audit opinion
that might be rendered on Concierge's financial statements.
Financial Statements.
----------------------
See "Financial Statements - Concierge, Inc." for the independent auditor's
report dated October 18, 2001 with respect to Concierge's balance sheet as of
June 30, 2001 and the related statements of operations and deficit accumulated,
changes in shareholders' deficit and cash flows for the fiscal years ended June
30, 2001 and June 30, 2000, and the notes to such financial statements.
49
VOTING AND MANAGEMENT INFORMATION
Starfest's management and Concierge's management will each solicit the
proxy of their company's stockholders with respect to the proposed merger
described herein.
Date, Time and Place Information.
-------------------------------------
Starfest. Starfest's stockholders will vote on three proposals at a
special meeting of the stockholders of Starfest to be held at 11:00 A.M.,
________________, ________________, 2001, at 4602 East Palo Brea Lane, Cave
Creek, AZ 85331:
o to approve the merger with Concierge,
o to increase the authorized capital of Starfest from 65 million shares
of common stock, no par value, to 190 million shares of common stock,
$0.001 par value, and 10 million shares of preferred stock,
$0.001 par value, and
o to change the name of Starfest to "Concierge Technologies, Inc."
The merger is conditioned upon approval of all three proposals.
Starfest's officers, directors and affiliates are entitled to vote 3.7
percent of the outstanding shares entitled to vote. They have indicated that
they will vote to approve the merger.
Concierge. Stockholders of Concierge will vote on two proposals at a
special meeting of the stockholders of Concierge to be held on 11:00 A.M.,
__________, ___________________, 2001, at ____________
_________________________________________________________:
o to approve the merger with Starfest, and
o to amend the bylaws to increase to eleven the number of directors of
Concierge.
Concierge's officers, directors and their affiliates are entitled to vote
62.1 percent of the outstanding shares entitled to vote. They will vote their
shares to approve or disapprove the merger in accordance with the majority vote
cast by the other Concierge stockholders.
Voting Procedure. Voting by Starfest's stockholders and by Concierge's
stockholders may be by written ballot at the meetings or by written proxy.
Starfest stockholders of record as of ________________, 2001 shall be entitled
to vote at their meeting. Concierge stockholders of record as of the day before
the date of this Prospectus-Proxy Statement shall be entitled to vote at their
meeting. Provided a quorum is present in person or by proxy (as determined by
the aggregate voting rights of the common stock, considered as a whole),
abstentions by stockholders present in person at the meeting shall be counted as
a vote for rejecting the merger. None of the shares of Concierge are held of
record by brokers. Some 19,013,657 of the 23 million shares of Starfest are
50
held by brokers. Broker non-votes shall be counted as votes disapproving the
proposed merger.
Revocability of Proxy.
------------------------
A person giving a proxy has the power to revoke it. A revocation of a
proxy earlier given can be accomplished either (1) by written notification by
the giver of the proxy of an intent to revoke it, or (2) by attendance at the
special stockholders' meeting called to vote on the proposed merger and either
oral or written instruction to the person counting ballots on the merger vote of
an intention to revoke the earlier given proxy.
Effect of the Merger.
------------------------
Should the merger be approved and effected -
Should the merger be approved and effected -
o the Concierge entity merges into the Starfest entity, and the
separate existence of the Concierge entity ceases;
o the title to any real estate and other property owned by
Concierge is vested in Starfest without reversion or impairment;
o Starfest has all the liabilities of Concierge;
o Any proceeding pending against Concierge may be continued as if
the merger had not occurred or Starfest may be substituted in the
proceeding for Concierge;
o the articles of incorporation of Starfest are amended to the
extent provided in the plan of merger, to-wit:
o Starfest's authorized capital is increased from 65 million
shares of common stock, no par value, to 190 million
shares of common stock, par value $0.001, and ten million
shares of preferred stock, par value, $0.001, and
o Starfest's name is changed to "Concierge Technologies,
Inc.";
o the Concierge shareholders' interest in the Concierge common
stock are converted to interests in Starfest common stock, as
described in the Agreement of Merger, appended hereto as
"Appendix A," and in the Prospectus-Proxy Statement, to-wit: each
share of Concierge common stock will be converted into 67.5355
shares of common stock of Starfest; and
o the shareholders of Concierge and of Starfest do not become
personally liable for the debts, liabilities or obligations of
the surviving entity by reason of the merger.
51
Dissenters' Rights of Appraisal.
-----------------------------------
Stockholders of Starfest and of Concierge who do not vote for or consent in
writing to the proposed merger, and who continuously hold their shares through
the effective date of the merger (should it be effected), are entitled to
exercise dissenters' rights of appraisal. Generally, any stockholder of either
Starfest or Concierge is entitled to dissent from consummation of the plan of
merger and to obtain payment of the fair value of his shares should the merger
be consummated.
The notices of the special meetings of stockholders of Starfest and of
Concierge, at which the votes shall be taken whether to approve the proposed
merger, must state that all stockholders are entitled to assert dissenters'
rights. The notices must be accompanied by a copy of the relevant portions of
California corporation law for the stockholders of Starfest and of Nevada
corporation law for the stockholders of Concierge, describing dissenters'
rights, the procedure for exercise of dissenters' rights, and the procedure for
judicial appraisal of the value of the shares of common stock of Starfest or
Concierge, as the case may be, should a dissenter and his or her corporation not
agree on the value of such shares.
All stockholders of Starfest or Concierge who desire to consider whether
their dissenters' rights should be exercised should carefully read the relevant
portions of the California corporation law or the Nevada corporation law that
will accompany the notice of the special meeting of stockholders. You should
especially be alert to the following requirements if you wish to assert your
dissenters' rights:
o You must deliver to the secretary of the corporation, by mail,
special courier or personal delivery at the corporation's address
before the vote is taken, written notice of your intent to demand
payment for your shares if the merger is approved. Delivery of
this notice can also be made to the corporate secretary at the
special stockholders' meeting before the vote is taken on the
merger. The notice may state simply, "I intend to demand payment
for my shares should the merger between Starfest and Concierge be
approved." It should be signed and dated. You will not be
furnished a separate form for this purpose with the delivery of
the proxy card or this Prospectus-Proxy Statement.
o You must not vote your shares in favor of, or consent in writing
to, the merger, although you will not lose your dissenter's
rights by failing to vote. A mere vote against the merger does
not satisfy the requirement of delivering written notice before
the meeting of your intent to demand payment for your shares if
the proposed merger is effectuated.
o If the merger is authorized, the corporation must send you a
written notice within ten days after the merger is effected. The
notice must tell you where and by when you must demand payment
for your shares and where and when your stock certificates must
be deposited. For Starfest shareholders, the notice must also
state the price Starfest has determined to be the fair market
price.
52
o You must then demand payment, certify whether you acquired
beneficial ownership of your shares before the date set forth in
the written notice to you, and deposit your certificates, if any,
in accordance with the notice. If you fail to do this, you will
lose your right to payment for your shares.
o Within 30 days after your demand for payment, the company must
pay you the amount it estimates to be the fair value of your
shares, plus interest.
o If you disagree with the corporation's estimate of the fair value
of your shares, you may notify the corporation in writing within
30 days of your estimate of the fair value of your shares, plus
interest, and demand payment of this amount.
o If a demand for payment remains unsettled for a Concierge
dissenting shareholder, Concierge must commence a proceeding in
court within 60 days after receiving your demand for payment. The
court will determine the fair value of your shares. If the
corporation fails to commence this proceeding within the 60-day
period, it must pay you the amount you demanded.
o If a demand for payment remains unsettled for a Starfest
dissenting shareholder, such shareholder must commence an action
in court within six months after the date on which notice of the
approval of the merger was mailed by Starfest or lose his or her
appraisal rights. If an action is timely filed, the court will
settle the valuation issue.
Persons Making the Solicitation.
-----------------------------------
Members of management of each of Starfest and of Concierge will solicit
proxies for that entity. MANAGEMENT OF EACH COMPANY RECOMMENDS THAT THE
PROPOSED MERGER BE APPROVED.
They will solicit proxies by the mails, by telephone, or by personal
solicitation. Starfest and Concierge will each bear its cost of its
solicitation.
Management of each of Starfest and of Concierge will vote signed but
otherwise unmarked proxies to approve the merger.
Voting Securities and Principal Holders Thereof.
-----------------------------------------------------
The merger must be approved by an affirmative vote of the holders of a
majority of the outstanding shares of common stock of each of Starfest and of
Concierge.
There are presently outstanding 23 million shares of common stock of
Starfest held of record by 96 stockholders. Each share is entitled to one vote
on the proposed merger.
53
There are presently outstanding 1,435,655 shares of common stock of
Concierge held of record by 175 stockholders. Each share is entitled to one
vote on the proposed merger.
The record date for determining the right to vote on the proposed merger is
_______________, 2001 for Starfest shareholders and the day before the date on
the cover of this Prospectus-Proxy Statement for Concierge shareholders.
Security Ownership of Certain Beneficial Owners and Management.
----------------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of the common stock of Starfest as of January 15, 2001 by each
individual who is known to Starfest to be the beneficial owner of more than five
percent of Starfest's common stock, its only voting security.
Name and Address Amount and
Of Beneficial Nature of Percent of
Owner Beneficial Ownership Class
------------------ --------------------- -----------
Thomas J. Kenan 1,360,000 shares(1) 5.9%
212 N.W. 18th St.
Oklahoma City, OK 73103
Gary Bryant 1,310,000 shares(2) 5.7%
46471 Manitou
Indian Wells, CA 92210
-----------------------------
(1) 760,000 of these shares are held of record by the Marilyn C. Kenan
Trust, of which trust Marilyn C. Kenan, the spouse of Thomas J. Kenan,
is the trustee and beneficiary. Mr. Kenan disclaims any beneficial
ownership of any of the shares held in the trust.
(2) 570,000 of these shares are held of record by Suzanne Bryant, Mr.
Bryant's spouse, and 370,000 are held of record by Newport Capital
Corporation, a corporation under the control of Mr. Bryant. Mr.
Bryant disclaims any beneficial ownership of any of the shares held
by Mrs. Bryant.
The table below sets forth the ownership, as of January 15, 2001, by all
directors and nominees, and each of the named executed officers of Starfest, and
directors and executive officers of Starfest as a group, of the common stock of
Starfest, its only voting security.
Name and Address Amount and Nature of Percent of
of Owner Beneficial Ownership Class
------------------ ----------------------- -----------
Michael Huemmer 760,000 shares 3.3%
4602 East Palo Brea Lane
Cave Creek, AZ 85331
Janet Alexander 100,000 shares 0.4%
Suite C
120 East Andreas Road
Palm Springs, CA 92262
54
Officers and Directors
as a Group (2 persons) 860,000 shares 3.7%
There are no arrangements which may result in a change in control of
Starfest other than the proposed merger described herein. There are no known
voting trusts, pooling arrangements or similar agreements in place between or
among any of the shareholders.
The following table sets forth certain information regarding beneficial
ownership of the common stock of Concierge as of January 15, 2001 by each
individual who is known to Concierge to be the beneficial owner of more than
five percent of Concierge's common stock, its only voting security.
Amount of Post-
Merger Company
Amount and Nature Shares To Be
Name and Address of of Beneficial Percent Owned If Merger Percent
Beneficial Owner Ownerwhip of Class Is Approved of Class
------------------- ----------------- -------- ---------------- ---------
Allen E. Kahn 346,500 shares 24.1% 23,401,050 19.5%
7547 W. Manchester Ave.,
No. 325
Los Angeles, CA 90045
Samuel C.H. Wu 403,500 shares(1) 28.1% 27,250,574 22.7%
1202 Tower 1,
Admiralty Centre
18 Harcourt Road
Hong Kong, China
Polly Force Co., Ltd. 160,000 shares(1) 11.1% 10,805,680 9.0%
1202 Tower 1,
Admiralty Centre
18 Harcourt Road
Hong Kong, China
East Asia Strategic
Holdings, Ltd. 109,500 shares(2) 7.6% 7,395,137 6.2%
1202 Tower 1,
Admiralty Centre
18 Harcourt Road
Hong, Kong, China
-------------------------
(1) Mr. Wu is the record owner of 110,000 shares of common stock of Concierge
and is deemed to be the beneficial owner of the following number of shares
held of record by the following corporations of each of which Mr. Wu is a
director: Polly Force, Ltd. - 160,000 shares, East Asia Strategic Holdings,
Ltd. - 109,500 shares, and Link Sense, Ltd. - 24,000 shares.
(2) The beneficial ownership of these shares is also attributed to Samuel C.H.
Wu. See footnote (1) above.
The table below sets forth the ownership, as of January 15, 2001, by all
directors and nominees and each of the named executive officers of Concierge,
and of directors, director nominees and executive officers of Concierge as a
group, of the common stock of Concierge, its only voting security.
55
Amount of Post-
Merger Company
Amount and Nature Shares To Be
Name and Address of of Beneficial Percent Owned If Merger Percent
Owner Ownerwhip of Class Is Approved of Class
------------------- ----------------- -------- ---------------- ---------
Allen E. Kahn 346,500 shares 24.1% 23,401,050 19.5%
7547 W. Manchester Ave.,
No 325
Los Angeles, CA 90045
F. Patrick Flaherty 70,000 shares(1) 4.9% 4,727,485 3.9%
637 29th Street
Manhattan Beach, CA 90266
Donald V. Fluken 2,130 shares(5) (2) 143,851 (2)
313 Pagosa Way
Fremont, CA 94539
James E. Kirk 57,500 shares 4.0% 3,883,291 3.2%
1401 Kirby, N.E.
Albuquerque, NM 87112
Herbert Marcus, III 500 shares (2) 33,768 (2)
5505 Wenonan Drive
Dallas, TX 75209
Harry F. Camp 500 shares (2) 33,768 (2)
1150 Bayhill Drive
San Bruno, CA 94066
David W. Neibert 10,600 shares(3) (2) 715,876 (2)
24028 Clarington Drive
West Hills, CA 91304
Samuel C.H. Wu 403,500 shares(4) 28.1% 27,250,574 22.7%
1202 Tower 1,
Admiralty Centre
18 Harcourt Road
Hong Kong, China
Officers and Directors
as a Group (8 persons) 891,230 shares 62.1% 60,189,663 50.2%
-------------------------
56
(1) The shares attributed to Mr. Flaherty include 10,000 shares held of
record by each of Mr. Flaherty's sons, Ryan Flaherty and Cole Flaherty.
(2) Less than one percent.
(3) The shares attributed to Mr. Neibert include 200 shares issued to his
son, Ryan Neibert, and 100 shares issued to his daughter, Megan Neibert.
(4) Mr. Wu is the record owner of 110,000 shares of common stock of
Concierge and is deemed to be the beneficial owner of the following
number of shares held of record by the following corporations of each of
which Mr. Wu is a director: Polly Force, Ltd. - 160,000 shares, East
Asia Strategic Holdings, Ltd. - 109,500 shares, and Link Sense, Ltd. -
24,000 shares.
(5) The shares attributed to Mr. Fluken are held of record by Connection
L.L.C.
Directors, Executive Officers and Significant Employees.
-------------------------------------------------------------
Set forth below are the names and terms of office of each of the persons who
will serve as a director or an executive officer of the company should the
merger be approved and a description of the business experience of each during
the past five years.
Office Held Term of
Person Office Since Office
------ ------ ----------- -------
Allen E. Kahn, 63 Chief Executive Officer, 1996 2001
Director, and Chairman of
the Board of Directors
F. Patrick Flaherty, 62 Executive Vice President 1999 2001
Donald V. Fluken, 58 Vice President of Finance, 2000 2001
Chief Financial Officer
James E. Kirk, 64 Secretary 1999 2001
and Director 1996 2001
Herbert Marcus, III, 61 Director 2000 2001
Harry F. Camp, 77 Director 2000 2001
David W. Neibert, 45 Director 2000 2001
Samuel C.H. Wu, 52(1) Director Nominee 2000 2001
--------------------------
(1) Mr. Wu has agreed to serve as a director should the merger occur.
57
Allen E. Kahn. Mr. Kahn invented the company's initial product, the
Personal Communications Attendant, and formed Concierge in 1996. Immediately
prior to that time, he had been employed as president of Advanced Imaging
Centers, an organization formed to establish Ultrafast CT medical imaging
centers in San Diego and Las Vegas.
F. Patrick Flaherty. Mr. Flaherty was the president of Manhattan Resources
of Manhattan Beach, California, a distributor of computer hardware and software
products, from April 1994 to January 1998. He became employed in January 1998,
and was employed until recently, as the regional manager of W. Quinn Associates,
Inc. of Reston, Virginia, a publisher of and vendor of mainframe software. In
December 1999 he became employed as the executive vice president of Concierge.
Donald V. Fluken. Mr. Fluken was employed from May 1991 until January 1997
as the managing director of Results Management of Fremont, California, a company
engaged in financial consulting. From January 1997 until June 1999 he was
employed as the chief financial officer of Chemtrak, Inc. of Sunnyvale,
California, a company that manufactured and marketed medical testing devices.
After Mr. Fluken terminated his employment with Chemtrak, it filed a voluntary
chapter 11 petition under the U.S. Bankruptcy Code. From June 1999 he became
employed and is still employed as the part-time chief financial officer of CFO
Connection, L.L.C. of San Jose, California, a company engaged in financial
consulting. He became employed in February 2000 as the part-time chief
financial officer of Concierge. He estimates he devotes approximately 95
percent of his time on Connection, L.L.C.'s affairs and approximately five
percent of his time on Concierge's affairs.
James E. Kirk. Mr. Kirk has been a self-employed attorney in Albuquerque,
New Mexico for the last five years.
Herbert Marcus, III. Mr. Marcus has been employed since January 1991 as
the senior vice president of Burgess Management Corp. of Dallas, Texas, a real
estate management company.
Harry F. Camp. Mr. Camp founded the Harry Camp Company in 1948, a company
that operated retail women's accessory departments inside department and retail
stores and operated boutique stores in major shopping centers. It was sold in
1975. In 1971 Mr. Camp co-founded Identicator, Inc., which designs, develops,
manufactures and markets inkless identification systems. Mr. Camp serves today
as chairman of the board of directors of Identicator, Inc. A division of the
company merged with Identix, Inc. in April 1999. In 1982 Mr. Camp founded Camp
Investors, Ltd. a limited partnership that provided venture capital financing to
start-up and emerging growth technology companies.
58
David W. Neibert. Mr. Neibert was employed from June 1993 until October
1997 as the president and chief operating officer of Roamer One, a national
wireless service provider, based in Torrance, California. From February 1994
until March 1999 he served as a director of Roamer One's parent company, Intek
Global Corp., and several of its subsidiaries including Midland, USA of Kansas
City, Missouri and Roamer One. From October 1997 until March 1999 he was
employed as the executive vice president of business development of Intek Global
Corp. (now named "Securicor Wireless"), a multinational wireless technology
provider of New York, New York. From April 1999 until the present he has been
employed as the president and general partner of The Wallen Group of West Hills,
California, a consulting organization in the wireless and other high technology
industries.
Samuel C.H. Wu. Mr. Wu is a graduate of the University of California,
Berkeley, where he received a BSEE degree in electronics and computer sciences
and an MBA degree. After being employed from 1976 to December 1983 with the
Bank of America in several positions leading up to its senior marketing and
credit officer - World Banking Division in Tokyo, London and Hong Kong, he
founded in January 1984 and still directs Hong Kong-based Woodsford Shipping &
Trading Co., Ltd., an import-export and financial services company.
Harry F. Camp, a director, is the uncle of Herbert Marcus, III, a director.
Executive Compensation.
------------------------
The following information concerns the compensation of Concierge's chief
executive officer for the last three completed fiscal years. No other executive
officers or individuals received total annual salary and bonus that exceeded
$100,000 during the last three completed fiscal years.
Restricted
Name of Chief Executive Officer Year Cash Salary Stock Awards
------------------------------- ---- ----------- ------------
Allen E. Kahn 2000 $108,000 $1,100
1999 None None
1998 None None
Other than as stated above, no cash or stock compensation, deferred
compensation or long-term incentive plan awards were issued or granted to
Concierge's management during or with respect to the last fiscal year.
Other Arrangements. There are no employment contracts, compensatory plans
or arrangements, including payments to be received from Starfest, with respect
to any director or executive officer of Starfest which would in any way result
in payments to any such person because of his or her resignation, retirement or
other termination of employment with Starfest or its subsidiaries, any change in
control of Starfest, or a change in the person's responsibilities following a
change in control of Starfest.
59
Stock Options.
---------------
Starfest has adopted a stock option plan which shall survive the merger,
the major provisions of which Plan are as follows:
Options granted under the plan may be "employee incentive stock options" as
defined under Section 422 of the Internal Revenue Code or non-qualified stock
options, as determined by the option committee of the board of directors at the
time of grant of an option. The plan enables the option committee of the board
of directors to grant up to 500,000 stock options to employees and consultants
from time to time. The option committee has granted no options.
Concierge has no stock option plan and no outstanding options. On June 21,
1997, the directors of Concierge granted Allen Kahn, president and a director of
Concierge, an option to buy 70,000 shares of common stock of Concierge at $10 a
share, an exercise price far greater than the fair value of the shares at the
time. The option was to expire on June 21, 2000. Had Mr. Kahn exercised the
option, the 70,000 shares of Concierge common stock would convert in the merger
with Starfest to 4,727,485 shares of Starfest common stock, which would have
been purchased by Mr. Kahn at an effective price of $0.15 a share. On May 3,
2000 the directors of Concierge voted to issue such 70,000 shares of Concierge
common stock directly to Mr. Kahn in exchange for (1) his surrendering his stock
option and (2) services he had performed for Concierge valued by the directors
at $22,400, which was the book value - $0.32 a share - of the 70,000 shares at
the time of their issuance. Should the merger with Starfest be approved, these
70,000 shares of Concierge stock will convert to 4,727,485 shares of Starfest
common stock at an effective price to Mr. Kahn of $22,400 in services rendered,
or $0.005 a share of Starfest stock. The market value of these 4,727,485 shares
will be determined by the trading price of Starfest's common stock at the time
of the merger. On January 22, 2001 the closing price of Starfest's common stock
was $0.115 bid and $0.125 asked.
Certain Relationships and Related Transactions.
---------------------------------------------------
With respect to Starfest, Concierge and each person who will serve as a
director or executive officer of the company should the proposed merger be
approved, there have been no transactions during the last two years, or proposed
transactions, in which any of them had or is to have a direct or indirect
material interest.
Transactions with Promoters. The persons, whose names are set forth below,
may be deemed to be "promoters" of the company. Set forth opposite the name of
each is (1) a description of the nature and amount of anything of value
(including money, stock, property, contracts, options, or rights of any kind)
that was, or is to be received by each promoter, directly or indirectly, either
from Starfest or Concierge and (2) the nature and amount of any assets, services
or other consideration (therefore received) or to be received by Starfest or
Concierge:
60
Shares of Common Stock of
Conciege Received or To Be Received or To Be
Received by the Person Received by Concierge
No. of Shares of
Starfest Into
Which These
No. of Pre- Price Per Total Shares Will
Person Merger Shares Share Value Convert Nature Value
------------- ------------- --------- -------- ---------------- ---------------- ----------
Allen E. Kahn 260,000 $0.01 $ 2,600 17,559,230 Services $ 2,600(1)
40,000 $0.32 $ 12,800 2,701,420 Services $ 12,800(2)
70,000 $0.32 $ 22,400 4,727,485 Surrender of $ 22,400(3)
Stock Options and
Services
James E. Kirk 25,000 $0.40 $ 10,000 1,688,388 Services $ 10,000(4)
20,000 $1.00 $ 20,000 1,350,710 Services $ 20,000(5)
12,500 $0.40 $ 5,00 844,194 Cash $ 5,000
F. Patrick Flaherty 10,000 $2.00 $ 20,000 675,355 Cash $ 20,000
10,000 $1.00 $ 10,000 675,355 Cash $ 10,000
50,000 $0.32 $ 16,000 3,376,775 Services $ 16,000(6)
Donald V. Fluken 2,130 $0.32 $ 682 143,851 Services $ 682(6)
Herbert Marcus, III 500 $0.32 $ 160 33,768 Services $ 160(6)
Harry F. Camp 500 $0.32 $ 160 33,768 Services $ 160(6)
David W. Neibert 10,600 $0.32 $ 3,392 715,876 Services $ 3,392(6)
Samuel C.H. Wu 378,500 $0.368 $139,200 25,562,186 Cash $139,200
25,000 $0.40 $ 10,000 1,688,388 Services $ 10,000(7)
Gary Bryant 2,129 $0.32 $ 19,456 143,783 Services $ 19,456(8)
John Everding 37,500 $0.32 $ 12,000 2,532,581 Services $ 12,000(8)
-------------------------
61
(1) These shares were issued on January 17, 1997 as part of the initial
organization of the company and were valued by the board of directors at
the shares' par value, $0.01 a share.
(2) Mr. Kahn's services consisted of previously uncompensated services as
chief executive officer of Concierge from September 26, 1996 until
February 21, 2000, the date of the award of the stock. His services were
valued on February 21, 2000 at $0.32 a share of Concierge's common
stock, its book value at that time, and were valued by Mr. Kahn and by
James E. Kirk, officers and directors of Concierge from 1996 until 2000.
(3) Mr. Kahn was issued 70,000 shares on May 2, 2000 as compensation for his
surrendering an option to purchase 70,000 shares of Concierge common
stock at $10 a share. The shares were valued at $0.32 a share, their
book value. In taking this action, the board also considered Mr. Kahn's
services as president and chief executive officer since September 1996.
(4) Mr. Kirk's services consisted of legal services from September 26, 1996
until the date of the proposed merger with Starfest. His services were
valued at $0.40 a share of Concierge's common stock and were valued by
himself and Allen Kahn, officers and directors of Concierge from 1996
until 2000, and Garth W. Reynolds, a former officer and director of
Concierge from 1996 to 1999.
(5) These legal services were performed between September 1996 and May 2000,
at a time when shares of stock of Concierge were being sold at prices
varying from $0.40 to $3.00 a share.
(6) This person's services consisted of his services as an officer of
Concierge rendered during 2000 prior to May 5, 2000. The shares were
valued at Concierge's $0.32 book value at the time the services were
rendered, and the services were valued by the board of directors of
Concierge.
61
(7) Mr. Wu's services consisted of his raising money for Concierge in Hong
Kong, where Mr. Wu lives. The services were valued at $0.40 a share by
the board of directors of Concierge.
(8) This person's services consisted of his services as a consultant to the
company rendered during 1999 and 2000 prior to May 5, 2000 and in
connection with the proposed merger with Starfest. The shares were
valued at Concierge's $0.32 book value at the time the shares were
issued, and the services were valued by the Concierge board of
directors.
62
FINANCIAL STATEMENTS INDEX
The financial statements of Starfest and of Concierge appear as follows:
Starfest, Inc.
Independent Auditors' Report F-1
Consolidated Balance Sheet
December 31, 2000 F-2
Consolidated Statements of Operations
Twelve Months Ended December 31,
2000 and 1999 F-3
Consolidated Statements of Changes in
Stockholders' Equity (Deficit)
for the period from
December 31, 1997 to December 31, 2000 F-4
Consolidated Statements of Cash Flows
Twelve Months Ended December 31,
2000 and 1999 F-5
Notes to Consolidated Financial Statements F-6
Independent Auditors' Report F-11
Balance Sheet as of December 31, 1999 F-12
Statement of Operations for the years
ended December 31, 1999 and
December 31, 1998 F-13
Statement of Changes in Stockholders' Equity
(Deficit) for the period from
December 31, 1997 to December 31, 1999 F-14
Statements of Cash Flows for the years ended
December 31, 1999 and December 31, 1998 F-15
Notes to Financial Statements F-16
Balance Sheet as of June 30, 2001 (unaudited) F-20
Statements of Operations for the six months
ended June 30, 2001 and June 30,
2000 (unaudited) F-21
Statements of Cash Flows for the six months
ended June 30, 2001 and June 30,
2000 (unaudited) F-22
Notes to Unaudited Financial Statements F-23
63
Concierge, Inc.
Report of Independent Auditors F-25
Balance Sheets June 30, 2001 and 2000 F-26
Statements of Operations Years Ended
June 30, 2001 and 2000 and the Period
from September 20, 1996 (Inception) to
June 30, 2001 F-27
Statements of Changes in Stockholders' Equity
(Deficit) for the Period September 20,
1996 (Inception) to June 30, 2001 F-28
Statements of Cash Flows Years Ended
June 30, 2001 and 2000 and the Period
from September 20, 1996 (Inception) to
June 30, 2001 F-29
Notes to Financial Statements F-30
64
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Starfest, Inc.:
We have audited the accompanying consolidated balance sheet of Starfest, Inc. (a
California Corporation) (the "Company") as of December 31, 2000, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Starfest, Inc. as of
December 31, 2000, and the results of its operations and its cash flows for the
years ended December 31, 2000 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company's did not earn any revenue during the year
ended December 31, 2000 and 1999 and the Company has incurred net losses from
inception to December 31, 2000 of $3,055,206 including a net loss of $398,349
during the year ended December 31, 2000. These factors, among others, as
discussed in Note 4 to the consolidated financial statements, raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 4. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Kabani & Company, Inc.
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Fountain Valley, California
March 21, 2001
F-1
Starfest, Inc. & Subsidiary
Consolidated Balance Sheet
December 31, 2000
Asset
-----
Current Asset:
Cash $ 40
-----------
Total Current Asset 40
-----------
$ 40
===========
Liabilities And Shareholders' Deficit
-------------------------------------
Current Liabilities:
Accounts payable $ 37,960
Note payable to Concierge, Inc. 100,000
Payable to shareholders 269,933
-----------
Total current liabilities 407,893
Shareholders' Deficit:
Common stock, no par value,
65,000,000 shares authorized;
23,100,000 issued and outstanding 2,711,751
Accumulated Deficit (3,119,604)
-----------
Total shareholders' deficit ( 407,853)
-----------
$ 40
===========
See notes to financial statements.
F-2
Starfest, Inc. & subsidiary
Consolidated Statements of Operations
Twelve months Ended December 31,
2000 1999
------------- -----------
Revenues $ - $ -
General and Administrative
Expenses 461,947 518,606
-------------- ----------
Operating Loss (461,947) (518,606)
Provision for income
taxes 800 -
-------------- ----------
Net Loss $ (462,747) $ (518,606)
============== ===========
Net Loss Per Common
Share $ .02 $ .03
Weighted Average Common
Shares Outstanding 23,011,688 15,893,441
See notes to financial statements.
F-3
Starfest, Inc. & subsidiary
Consolidated Statements of changes in stockholders' equity (deficit)
Common stock Retained
Number of Amount Earnings
Shares Total (Deficit) Total
Balance December 31, 1997 6,236,323 $1,598,072 $(2,135,885) $(537,813)
Net loss for 1998 - - (2,366) (2,366)
---------- --------- ----------- ---------
Balance December 31, 1998 6,236,323 $1,598,072 $(2,138,251) $(540,179)
Shares issued for services 2,313,338 87,200 - 87,200
Shares issued for assets 2,950,000 118,000 - 118,000
Shares issued for debt
extinguishments 6,165,005 646,379 - 646,379
Shares issued for cash 4,033,333 190,000 - 190,000
Net loss for 1999 - - (518,606) (518,606)
---------- --------- ----------- ----------
Balance December 31, 1999 21,697,999 $2,639,651 $(2,656,857) $ (17,206)
Shares issued for services 1,302,001 65,100 - 65,100
Shares issued for cash 100,000 7,000 - 7,000
Net loss for 2000 - - (462,747) (462,747)
---------- --------- ----------- ----------
Balance December 31, 2000 23,100,000 $2,711,751 $(3,119,604) $(407,853)
=========== ========== ============ ==========
See notes to financial statements.
F-4
Starfest, Inc. & subsidiary
Consolidated Statements of Cash Flows
Twelve months Ended December 31,
2000 1999
----------- -----------
Net Cash From
operating Activities:
Net loss $( 462,747) $( 518,606)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Shares issued for services 65,100 87,200
Shares issued for debt
extinguishment - 646,379
Shares issued for assets - 118,000
Changes in assets and
liabilities:
Accounts payable 20,273 ( 413,692)
Other liabilities - ( 108,800)
----------- -----------
Net cash used by
operating activities ( 377,374) ( 189,519)
Cash flows from Financing
Activities:
Loans from Concierge, Inc. 100,000 -
Advances from shareholders 269,933 -
Common stock issued for cash 7,000 190,000
----------- -----------
Net cash provided by
Financing Activities 376,933 190,000
Increase in Cash 441 481
Cash at beginning of period 481 -
----------- -----------
Cash at end of period $ 40 $ 481
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Non cash financing transactions:
Shares for services $ 65,100 $ 87,200
Shares for debt extinguishment $ - $ 646,379
Shares for purchase of assets $ - $ 118,000
See notes to financial statements.
F-5
Starfest, Inc. & subsidiary
Notes To Consolidated Financial Statements
December 31, 2000 and 1999
Note 1 - Nature of Operations and principles of consolidation
Nature of operations
Starfest, Inc. (the Company), a California corporation, was incorporated on
August 18, 1993 as Fanfest, Inc. In August, 1995 the Company changed its name
to Starfest, Inc. During 1998, the Company was inactive, just having minimal
administrative expenses. During 1999 the Company attempted to pursue
operations in the online adult entertainment field. There were no revenues
from this endeavor. The Company is negotiating an agreement with a company
(see Note 3). The purpose of the merger is to effect an online communication
retrieval system such as e-mail via the telephone.
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. Starfest
is now the parent corporation of MAS XX.
Principles of consolidation:
The accompanying consolidated financial statements of the Company and its
wholly owned subsidiary MAS XX have been prepared in accordance with
generally accepted accounting principles. All significant inter-company
balances and transactions have been eliminated in consolidation.
Note 2 - Summary of significant accounting policies
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three months
or less from the date of purchase that are readily convertible into cash to
be cash equivalents.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted laws and rates applicable to the periods in which the
differences are expected to affect taxable income (loss). Valuation allowance
is established when necessary to reduce deferred tax assets to the amount
expected to be realized.
F-6
Starfest, Inc. & subsidiary
Notes To Consolidated Financial Statements
December 31, 2000 and 1999
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15).
Net loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is
based on the assumption that all dilutive convertible shares and stock
options were converted or exercised. Dilution is computed by applying the
treasury stock method. Under this method, options and warrants are assumed to
be exercised at the beginning of the period (or at the time of issuance, if
later), and as if funds obtained thereby were used to purchase common stock
at the average market price during the period. The net loss per common share
has been restated to retroactively effect a reverse stock split in the ratio
of one share for ten shares.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation
rights. SFAS No. 123 requires compensation expense to be recorded (i) using
the new fair value method or (ii) using the existing accounting rules
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
stock issued to employees" (APB 25) and related interpretations with pro
forma disclosure of what net income and earnings per share would have been
had the Company adopted the new fair value method. The Company uses the
intrinsic value method prescribed by APB25 and has opted for the disclosure
provisions of SFAS No. 123. The implementation of this standard did not
have any impact on the Company's financial statements.
Issurance of shares for service
Valuation of shares for services is based on the estimated fair market value
of the services performed.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about fair
value of financial instruments, requires that the Company disclose estimated
fair values of financial instruments. The carrying amounts reported in the
statements of financial position for current assets and current liabilities
qualifying as financial instruments are a reasonable estimate of fair value.
Costs of start-up activities
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the costs
of start-up activities", effective for fiscal years beginning after December
15, 1998. SOP 98-5 requires the costs of start-up activities and organization
costs to be expensed as incurred. The Company adopted this standard in fiscal
1999 and the implementation of this standard did not have a material impact
on its financial statements.
Advertising
The Company expenses advertising costs as incurred.
F-7
Starfest, Inc. & subsidiary
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Risks and Uncertainties
The Company is subject to certain risks and uncertainties in the normal
course of business.
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, is
effective for fiscal quarters of fiscal years beginning after June 15, 2000.
The impact of adopting this statement is not expected to be material to the
Financial statements of the Company.
In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 136, "Transfer of
Assets to a Not-for-Profit Organization or Charitable Trust that Raises or
Holds Contributions for Others." The impact of adopting this statement is
not expected to be material to the financial statements of the Company.
In June 1999, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 137, "Accounting for Derivative Instruments and Hedging
Activities." The Company does not expect adoption of SFAS No. 137 to have a
material impact, if any, on its financial position or results of operations.
In June 2000, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 138, "Accounting for Certain instruments and Certain Hedging
Activities." The impact of adopting this statement is not expected to be
material to the financial statements of the Company.
In June 2000, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 139, "Rescission of FASB Statement No. 53 and Amendments to
Statements No. 63, 89, and 121." The impact of adopting this statement is not
expected to be material to the financial statements of the Company.
In September 2000, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, a replacement of FASB
Statement No. 125." The impact of adopting this statement is not expected to
be material to the financial statements of the Company.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC's views on the application of
F-8
Starfest, Inc. & subsidiary
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Recent Pronoucements (continued)
GAAP to revenue recognition. In June 2000, the SEC released SAB No. 101B that
delays the implementation date of SAB 101 until no later than the fourth
fiscal quarter of fiscal years b beginning after December 15, 1999. The
Company has reviewed SAB No. 101 and believes that it is in compliance with
the SEC's interpretation of revenue recognition.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation." This Interpretation clarifies (a)
the definition of employee for purposes of applying APB Opinion No. 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications
to the terms of a previously fixed stock option or award, and (d) the
accounting for an exchange of stock compensation awards in a business
combination. The adoption of this Interpretation has not had a material
impact on the Company's financial position or operating results.
Note 3 - Merger Negotiations
On January 26, 2000 the Company entered into an agreement of merger with
Concierge, Inc., a Nevada corporation, pursuant to which, should the merger
be approved by the shareholders of both companies, 1,490,744 outstanding
shares of common stock of Concierge, Inc., (which includes 1,376,380 shares
outstanding at December 31, 2000 and 114,364 shares issued in January, 2001)
shall be converted into 96,957,713 common stock of the Company on the basis
of 65.0398 shares of the Company for each share outstanding of Concierge,
Inc. The 96,957,713 post merger shares shall be distributed to the
shareholders of Concierge, Inc. on a pro-rata basis. The transaction will be
accounted for as reverse merger and is subject to approval by shareholders of
both companies and Securities and Exchange Commission.
Note 4 - 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 incurred a net loss of
$462,747 for the twelve months ended December 31, 2000. Accumulated deficit
amounted to $3,119,604 at December 31, 2000. At December 31, 2000, the
Company had shareholders' deficit of $407,853. The continuing losses have
adversely affected the liquidity of the Company. These factors, among others,
raise substantial doubt as to the Company's ability to continue as a going
concern. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or
classification and amounts of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The Company's management intends to raise additional operating funds through
equity and/or debt offerings. However, there can be no assurance management
will be successful in this endeavor.
F-9
Starfest, Inc. & subsidiary
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Note 5 - Income Taxes
No provision was made for Federal income tax since the Company has
significant net operating loss carryforwards. Through December 31, 2000, the
Company incurred net operating losses for tax purposes of approximately
$1,987,000. There is no significant differences between financial statement
and tax losses. The net operating loss carryforwards may be used to reduce
taxable income through the year 2015. Net operating loss for carryforwards
for the State of California are approximately $817,000 and are generally
available to reduce taxable income through the year 2006. 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 gross deferred tax asset balance as of December 31, 2000 was
approximately $833,000. A 100% valuation allowance has been established
against the deferred tax assets, as the utilization of the loss carryforwards
can not reasonably be assured.
Note 6 - Notes Payable-Related parties
Notes payable to shareholders are non-interest bearing, unsecured and due on
demand. Note payable to Concierge, Inc. is non-interest bearing, unsecured
and due on demand.
Note 7 - Shares issued for services
The Company issued 1,301,001 shares of common stock for consulting services
amounting $65,100. The Company has recorded the valuation of shares per
guidance under APB 25. According to APB 25, "when an entity issues equity
instruments to non-employees in exchange for goods or services, the
transactions should be accounted for based on the fair value of the goods
or services received or the fair value of the equity instrument issued,
whichever can be more reliably measured. Frequently, the fair value of
goods or services received from suppliers can be reliably measured and
therefore indicates the fair value of the equity instruments issued." The
valuation of these shares is based upon value of services received since the
Company did not have an established market value of its shares.
F-10
Jaak (Jack) Olesk
Certified Public Accountant
270 North Canon Drive, Suite 203
Beverly Hills, CA 90210
Telephone: 310-288-0693
Fax: 310-288-0863
e-mail: jaakolesk@aol.com
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
Starfest, Inc.
I have audited the accompanying balance sheet of Starfest, Inc. as of December
31, 1999, and the related statements of operations, stockholders' equity
(deficit) and cash flows for the year ended December 31, 1999 and the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Starfest, Inc. as of December 31,
1999, and the results of its operations and its cash flows for the year ended
December 31, 1999 and the year ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring significant losses from
operations that raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Jaak Olesk
Beverly Hills, California
February 9, 2000 (except with respect to Note 4, as to which the date is March
7, 2000)
F-11
STARFEST, INC.
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Cash $ 481
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Current Liabilities
Accounts payable $ 17,687
-----------
Total current liabilities $ 17,687
-----------
Stockholders' equity (deficit)
Common stock: no par value,
65,000,000 shares authorized;
21,697,999 shares issued and
outstanding 2,639,651
Retained earnings (deficit) (2,656,857)
------------
Total stockholders' equity (deficit) (17,206)
------------
$ 481
============
See accompanying notes to financial statements.
F-12
STARFEST, INC.
STATEMENT OF OPERATIONS
For the Year Ended
December 31, December 31,
1999 1998
------------ ------------
Revenues $ - $ -
----------- ------------
General and Administrative
Expenses 518,606 2,366
------------ ------------
Operating (Loss) (518,606) (2,366)
Provision for income taxes - -
------------ ------------
NET (LOSS) $ (518,606) $ (2,366)
Net (Loss)
per common share $ (.04) $ (.01)
Weighted Average Shares
Outstanding 15,893,441 8,301,323
See accompanying notes to financial statements.
F-13
STARFEST, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
Common Stock Retained
Number of Amount Earnings
Shares Total (Deficit) Total
---------- ----------- ------------- -----------
Balance,
December 31, 1997 6,236,323 $1,598,072 $(2,135,885) $ (537,813)
Net (loss) for
year ended
December 31, 1998 - - (2,366) (2,366)
---------- ----------- ------------- -----------
Balance,
December 31, 1998 6,236,323 1,598,072 (2,138,251) (540,179)
Shares issued
for services 2,313,338 87,200 - 87,200
Shares issued
for assets 2,950,000 118,000 - 118,000
Shares issued
for debt
extinguishment 6,165,005 646,379 - 646,379
Shares issued
for cash 4,033,333 190,000 - 190,000
Net (loss) for
year ended
December 31, 1999 - - (518,606) (518,606)
---------- ------------ -------------- -----------
Balance,
December 31, 1999 21,697,999 $2,639,651 $(2,656,857) $ (17,206)
See accompanying notes to financial statements.
F-14
STARFEST, INC.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1999 1998
Net Cash From
Operating Activities:
Net (loss) $(518,606) $ (2,366)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Shares issued for services 87,200 -
Shares issued for assets 118,000 -
Shares issued for
debt extinguishment 646,379 -
Changes in assets
and liabilities:
Accounts payable (413,692) 2,366
Other liabilities (108,800) -
--------- ---------
Net cash (used)
by operating activities (189,519) -
Investing Activities:
Net cash provided (used) by
Investing Activities - -
--------- ---------
Cash flows from Financing
Activities
Common stock issued for cash 190,000 -
--------- ---------
Net cash provided by
Financing Activities: 190,000
Increase in Cash 481 -
Cash at beginning of period - -
--------- ---------
Cash at end of period $ 481 $ -
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Non cash financing transactions:
Shares for services $ 87,200 $ -
Shares for debt extinguishment $ 646,379 $ -
Shares for assets $ 118,000 $ -
See accompanying notes to financial statements.
F-15
STARFEST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - Summary of Significant Accounting Policies
Nature of Operations
Starfest, Inc. (the "Company"), a California corporation, was incorporated on
August 18, 1993 as Fanfest, Inc.. In August, 1995 the Company changed its name
to Starfest, Inc.. During the year ended December 31, 1998, the Company was
inactive, just having minimal administrative expenses. During the year ended
December 31, 1999 the Company attempted to pursue operations in the online adult
entertainment field. However, the Company was not successful in this pursuit.
Cash equivalents
Cash equivalents consist of funds invested in money market accounts and
in investments with a maturity of three months or less when purchased. There
were no cash equivalents at December 31, 1999.
Loss per share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the periods presented.
Fully diluted calculations are not presented since the Company only had losses
for all periods presented (thus antidilutive).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in financial statements and
accompanying notes. Actual results could differ from those estimates.
Issuance of Shares for Services
Valuation of shares for services is based on the estimated fair market
value of the services performed.
Income taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". (See Note 3).
F-16
STARFEST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - Summary of Significant Accounting Policies(continued)
Fair Value of Financial Instruments
Pursuant to SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, the Company is required to estimate the fair value of all financial
instruments included on its balance sheet at December 31, 1999. The Company
considers the carrying value of such amounts in the consolidated financial
statements to approximate their expected realization and interest rates, which
approximate current market rates. During the periods presented and at December
31, 1999 the Company had no financial instruments.
Comprehensive Income (Loss)
In fiscal 1999, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. This statement establishes standards for the reporting of
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. The adoption
of SFAS No. 130 required no additional disclosure for the Company and did not
have any effect on the Company's financial position, as there was no difference
between comprehensive loss and the net loss as reported.
Segment Disclosures
In Fiscal 1999, the Company adopted SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. This Statement establishes
standards for the way companies report information regarding operating segments
in annual financial statements. The adoption of SFAS No. 131 required no
additional disclosure for the Company as the Company operated in one principal
business segment.
Reclassifications
Certain items in prior period financial statements have been
reclassified to conform with 1999 classifications.
NOTE 2 - Basis of presentation and considerations related to continued existence
(going concern)
The Company's financial statements have been presented on the basis that
it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
incurred a net loss of $518,606 for the year ended December 31, 1999. The
Company incurred a net loss of $2,366 for the year ended December 31, 1998.
F-17
STARFEST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - Basis of presentation and considerations related to continued existence
(going concern) (continued)
These factors, among others, raise substantial doubt as to the Company's
ability to continue as a going concern.
The Company's management intends to raise additional operating funds
through equity and/or debt offerings. However, there can be no assurance
management will be successful in this endeavor.
NOTE 3 - Income Taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" which requires the use of the liability method of accounting for deferred
income taxes.
Since the Company did not have taxable income during the periods
presented, no provision for income taxes has been provided. At December 31,
1999, the Company did not have any significant tax net operating loss
carryforwards (tax benefits resulting from losses for tax purposes have been
fully reserved due to the uncertainty of a going concern). At December 31, 1999,
the Company did not have any significant deferred tax liabilities or deferred
tax assets.
NOTE 4 - Subsequent Events
On January 18, 2000 the Company issued 1,302,001 of its common shares
for January, 2000 services, to three shareholders.
On January 26, 2000 the Company entered into an agreement of merger with
Concierge, Inc., a Nevada corporation, pursuant to which, should the merger be
approved by the shareholders of both companies, the presently outstanding
1,376,380 shares of common stock of Concierge, Inc. will be converted into
shares of common stock of the Company on the basis of 70.444 shares of Starfest,
Inc. to be issued for each share of Concierge, Inc. Concierge, Inc. does not
have significant assets or revenues.
The proposed merger of Starfest, Inc. and Concierge, Inc. will result in
a reverse acquisition, i.e. the acquisition of Starfest, Inc. by Concierge, Inc.
as Concierge, Inc. will have the controlling voting rights of the combined
entity.
F-18
STARFEST, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Pursuant to a Stock Purchase Agreement (the "Purchase Agreement") dated
March 6, 2000 between (1) MAS Capital, Inc., an Indiana corporation, the
controlling shareholder of MAS Acquisition XX Corp. ("MAS XX"), an Indiana
corporation and (2) Starfest, Inc. approximately 96.83 percent (8,250,000
shares) of the outstanding shares of common stock of MAS Acquisition XX Corp.
were exchanged for $100,000 and 150,000 shares of common stock of Starfest, Inc.
in a transaction in which Starfest, Inc. became the parent corporation of
MAS XX. MAS Capital, Inc. and MAS Acquisition XX Corp. do not have significant
assets or revenues.
Upon execution of the Purchase Agreement and the subsequent delivery of
$100,000 cash and 150,000 shares of common stock of Starfest, Inc. on March 7,
2000, to MAS Capital, Inc. pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, Starfest, Inc. became the
successor issuer to MAS Acquisition XX Corp. for reporting purposes under the
Securities and Exchange Act of 1934 and elected to report under the Act
effective March 7, 2000.
The merger transaction with MAS Acquisition XX Corp. is considered to be
a capital transaction (i.e. the issuance of stock of MAS Acquisition XX Corp.
accompanied by a recapitalization).
F-19
Starfest, Inc. and Subsidiary
Balance Sheet
(Unaudited)
June 30, 2001
Assets
------
Current Assets:
Cash $ 644
----------
$ 644
==========
Liabilities And Shareholders' Deficit
-------------------------------------
Current Liabilities:
Accounts payable $ 54,572
Note payable to Concierge, Inc. 100,000
Payable to shareholders 272,568
----------
Total current liabilities 427,140
----------
Shareholders' Deficit:
Common stock, no par value,
65,000,000 shares authorized;
23,100,000 issued and outstanding 2,711,751
Accumulated Deficit (3,138,247)
---------
Total shareholders' deficit (426,496)
---------
$ 644
=========
See notes to financial statements.
F-20
Starfest, Inc. and Subsidiary
Statements of Operations
(Unaudited)
Three Months and six months periods Ended June 30
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
----------- ----------- ----------- ------------
Revenues $ - $ - $ - $ -
---------- ---------- ---------- -----------
General and Administrative
Expenses 1,809 18,411 17,843 352,137
---------- ---------- ---------- -----------
Operating Loss (1,809) (18,411) (17,843) (352,137)
Provision for income
taxes - - 800 800
---------- ---------- ---------- -----------
Net Loss $ (1,809) $ (18,411) $ (18,643) $ (352,937)
========== ========= ========= ==========
Net Loss Per Common
Share - basic and
diluted $ .001 $ .001 $ .001 $ .015
Weighted Average Common
Shares Outstanding
- Basic and diluted 23,100,000 23,063,586 23,100,000 22,921,341
See notes to financial statements.
F-21
Starfest, Inc. and Subsidiary
Statements of Cash Flows
(Unaudited)
Six Months Ended June 30
2001 2000
--------- ----------
Net Cash From
operating Activities:
Net loss $(18,643) $(352,937)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Shares issued for services - 702
Changes in assets and
liabilities:
Accounts payable 16,612 (1,643)
------- --------
Net cash used by
operating activities (2,031) (353,878)
Cash Flows from Investing
Activities: - -
------- --------
Cash flows from Financing
Activities:
Loans from a related party - 100,000
Loans from shareholders 2,635 247,502
Common stock issued for cash - 7,000
------- --------
Net cash provided by
Financing Activities 2,635 354,502
Increase in Cash 604 624
Cash at beginning of period 40 481
------- --------
Cash at end of period $ 644 $ 1,105
======= ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Non cash financing transactions:
Shares for services $ - $ 702
See notes to financial statements.
F-22
Starfest, Inc. and Subsidiary
Notes To Unaudited Financial Statements
June 30, 2001 and 2000
Note 1 - Summary of Significant Accounting Policies
Nature of operations
Starfest, Inc. (the Company), a California corporation, was incorporated on
August 18, 1993 as Fanfest, Inc. In August 1995 the Company changed its
name to Starfest, Inc. During 1998, the Company was inactive, just having
minimal administrative expenses. During 1999 the Company attempted to
pursue operations in the online adult entertainment field. There was no
revenue from this endeavor. The Company is negotiating an agreement with an
entity (see Note 2). The purpose of the merger is to affect an online
communication retrieval system such as e-mail via telephone.
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. Starfest
is now the parent corporation of MAS XX.
Basis of Preparation:
The accompanying unaudited condensed consolidated interim financial
statements have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission for the presentation of interim
financial information, but do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The audited consolidated financial statements for the year
ended December 31, 2000 was filed on April 2, 2001 with the Securities and
Exchange Commission and is hereby referenced. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included. Operating results for the three-month and six-month periods ended
June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2001.
Note 2 - Merger Negotiations
On January 26, 2000 the Company entered into an agreement of merger with
Concierge, Inc., a Nevada corporation, pursuant to which, should the merger
be approved by the shareholders of both companies, the presently
outstanding 1,376,380 shares of common stock of Concierge, Inc. will be
converted into shares of common stock of the Company on the basis of 70.444
shares of Starfest, Inc. to be issued for each share of Concierge, Inc. The
Company is registering 96,957,713 shares of its common stock on a Form S-4
to be filed with the Securities and Exchange Commission to be available
should the merger be approved.
F-23
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Concierge, Inc.
(A development stage company):
We have audited the accompanying balance sheets of Concierge, Inc., a
development stage company (a Nevada Corporation) (the "Company") as of June 30,
2001 and 2000 and the related statements of operations, stockholders' deficit
and cash flows for the years then ended and for the period from commencement of
development stage on September 20, 1996 to June 30, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at June 30, 2001
and 2000 and the results of its operations and its cash flows for each of the
two years in the period ended June 30, 2001 and the period from inception
(September 20, 1996) to June 30, 2001 in conformity with accounting principles
generally accepted in the United States of America.
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has accumulated deficit of $2,001,809 and stockholders
deficit of $1,694,038 on June 30, 2001. These factors as discussed in Note 3 to
the financial statements, raises substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Kabani & Company, Inc.
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Fountain Valley, California
October 18, 2001
F-25
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JUNE 30, 2001 AND 2000
ASSETS 2001 2000
------- ---------- ----------
CURRENT ASSETS:
CASH & CASH EQUIVALENTS $ 695 $ 85,105
PREPAID EXPENSES 245,800 245,800
NOTE RECEIVABLE - RELATED PARTY 100,000 100,000
---------- ----------
TOTAL CURRENT ASSETS 346,495 430,905
EQUIPMENT, NET 2,110 4,692
---------- ----------
$ 348,605 $ 435,597
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
ACCRUED EXPENSES $ 90,743 $ 138,755
LOANS PAYABLE-OFFICER 22,000 4,400
---------- ----------
TOTAL CURRENT LIABILITIES 112,743 143,155
SUBSCRIPTIONS RECEIVED FOR COMMON STOCK
SUBJECT TO CONTINGENCY 1,663,290 1,175,790
COMMON STOCK ISSUED SUBJECT TO CONTINGENCY 266,610 266,610
STOCKHOLDERS' DEFICIT:
COMMON STOCK, PAR VALUE $.01 PER SHARE;
10,000,000 SHARES AUTHORIZED; ISSUED AND
OUTSTANDING 1,376,380 6,959 6,959
ADDITIONAL PAID IN CAPITAL 300,812 300,812
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (2,001,809) (1,457,729)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (1,694,038) (1,149,958)
---------- ----------
$ 348,605 $ 435,597
========== ==========
The accompanying notes are an integral part of these financial statements.
F-26
CONCIERGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 2001 & 2000 AND THE PERIOD FROM
SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2001
SEPTEMBER 20,
JUNE 30, JUNE 30, 1996 (INCEPTION)
2001 2000 TO JUNE 30, 2001
---------- ---------- -----------------
REVENUE $ - - -
COSTS AND EXPENSES
PRODUCT LAUNCH EXPENSES 230,241 490,078 1,077,785
GENERAL & ADMINISTRATIVE EXPENSES 313,039 496,108 920,024
---------- ---------- ----------
TOTAL COSTS AND EXPENSES 543,280 986,186 1,997,809
NET LOSS BEFORE INCOME TAXES (543,280) (986,186) (1,997,809)
PROVISION OF INCOME TAXES 800 800 4,000
---------- ---------- ----------
NET LOSS (544,080) (986,986) (2,001,809)
========== ========== ==========
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING, BASIC AND
DILUTED 1,065,960 1,065,960
========== ==========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.51) $ (0.93)
========== ==========
The accompanying notes are an integral part of these financial statements.
F-27
CONCIERGE, INC.
(A development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2001
Subscription
Common Stock received for
----------------- common stock
Number of Par Additional Accumulated Stockholders' Advance subject to
shares value Paid In Capital Deficit Equity (deficit) Subscriptions contingency
--------- ----- --------------- ----------- ---------------- ------------- ------------
Common Stock issued for cash
through June 30, 1997 176,306 $1,763 $106,162 $ - $ 107,925 $ - $ -
Common stock issued for
services through June 30,
1997 621,545 6,215 - - 6,215 - -
Net loss through June 30,
1997 - - - (96,933) (96,933) - -
--------- ------ -------- ----------- ----------- ---------- ---------
Balance at June 30, 1997 797,851 7,978 106,162 (96,933) 17,207 - -
Common Stock issued for
cash in the year ended
June 30, 1998 137,475 1,375 194,650 - 196,025 - -
Common stock issued for
services in the year
ended June 30, 1998 22,550 226 - - 226 - -
Net loss for the year
ended June 30, 1998 - - - (283,891) (283,891) - -
--------- ------ -------- ----------- ----------- ---------- ---------
Balance at June 30, 1998 957,876 9,579 300,812 (380,824) (70,433) - -
Common Stock issued for
cash in the year ended
June 30, 1999 208,000 - - - - - 60,996
Common stock issued for
services in the year
ended June 30, 1999 450 - - - - - 4
Net loss for the year
ended June 30, 1999 - - - (89,919) (89,919) - -
--------- ------ -------- ----------- ----------- ---------- ---------
Balance at June 30, 1999 1,166,326 9,579 300,812 (470,743) (160,352) - 61,000
Acquisition and retirement
of Common shares (262,000) (2,620) (2,620) - -
Common Stock issued
for cash in the year
ended June 30, 2000 117,184 - - - - - 202,061
Common stock issued for
services in the year
ended June 30, 2000 354,870 - - - - - 3,549
Post acquisition stock
subscription funds
received net of costs
& expenses of $79,710 - - - - - 1,175,790 -
Net loss for the year
ended June 30, 2000 - - - (986,986) (986,986)
--------- ------ -------- ----------- ----------- ---------- ---------
Balance at June 30, 2000 1,376,380 6,959 300,812 (1,457,729) (1,149,958) 1,175,790 266,610
Post acquisition stock
subscription funds
received - - - - - 487,500 -
Net loss for the year
ended June 30, 2001 - - - (544,080) (544,080) - -
--------- ------ -------- ----------- ----------- ---------- ---------
Balance at June 30, 2001 1,376,380 $6,959 $300,812 $(2,001,809) $(1,694,038) $1,663,290 $ 266,610
========= ====== ======== =========== =========== ========== =========
The accompanying notes are an integral part of these financial statements.
F-28
CONCIERGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2001 & 2000 AND THE PERIOD FROM
SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2001
SEPTEMBER 20,
JUNE 30, JUNE 30, 1996 (INCEPTION)
2001 2000 TO JUNE 30, 2001
---------- ---------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(544,080) $ (986,986) $(2,001,809)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 2,582 2,350 10,800
STOCK ISSUED FOR SERVICES - 929 7,374
INCREASE IN CURRENT ASSETS:
PREPAID EXPENSES - (245,000) (245,800)
INCREASE/(DECREASE) IN
CURRENT LIABILITIES:
ACCOUNTS PAYABLE - (70,093) -
ACCRUED EXPENSES (48,012) 118,537 90,743
PAYROLL TAX PAYABLE (4,400) 4,400 -
--------- ----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (593,910) (1,175,863) (2,138,692)
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
NOTE RECEIVABLE -
. RELATED PARTY - (100,000) (100,000)
ACQUISITION OF PROPERTY
& EQUIPMENT - (1,266) (12,910)
--------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES - (101,266) (112,910)
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE
OF SHARES - 202,061 567,007
PROCEEDS FROM ADVANCE
SUBSCRIPTIONS 487,500 1,255,500 1,743,000
COSTS AND EXPENSES OF
ADVANCE SUBSCRIPTIONS - (79,710) (79,710)
PROCEEDS FROM (REPAYMENTS
OF) RELATED PARTY LOANS 22,000 (22,000) 22,000
--------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 509,500 1,355,851 2,252,297
--------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH (84,410) 78,722 695
CASH, BEGINNING BALANCE 85,105 6,383 -
--------- ----------- -----------
CASH, ENDING BALANCE $ 695 $ 85,105 $ 695
========= =========== ===========
The accompanying notes are an integral part of these financial statements.
F-29
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Concierge, Inc. ("the Company"), is a development stage enterprise incorporated
in the state of Nevada on September 20, 1996. The Company has 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. The accounting
policies of the Company are in accordance with generally accepted accounting
principles and conform to the standards applicable to development stage
companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Property & Equipment
Property and equipment is carried at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives of the assets. Expenditures for maintenance and repairs are charged to
expense as incurred.
Income taxes
Deferred income tax assets and liabilities are computed annually for differences
between the financial statements and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted laws
and rates applicable to the periods in which the differences are expected to
affect taxable income (loss). Valuation allowance is established when necessary
to reduce deferred tax assets to the amount expected to be realized.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
F-30
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The company uses the intrinsic value method prescribed by APB25 and has
opted for the disclosure provisions of SFAS No.123. The implementation of this
standard did not have any material impact on the Company's financial statements.
Issuance of shares for service
Valuation of shares for services is based on the estimated fair market value of
the services performed.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
Accounting for the costs of computer software developed or obtained for internal
use
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (ASEC of AICPA) issued Statement of
position (SOP) No. 98-1, "Accounting for the costs of computer software
developed or obtained for internal use", effective for fiscal years beginning
after December 15, 1998. SOP N0. 98-1 requires that certain costs of computer
software developed or obtained for internal use be capitalized and amortized
over the useful life of the related software. The Company adopted this standard
in fiscal year 1999 and the implementation of this standard did not have a
material impact on its financial statements.
Web site development costs
In March 2000, the Emergency Issues Task Force (EITF) of FASB issued its
consensus under EITF-00-02. Per the consensus, certain costs incurred in the
development of a Web site should be capitalized. According to the EITF, those
costs incurred in developing a software program should be capitalized in
accordance with Statement of Position (SOP) 98-1, "Accounting for the costs of
Computer Software Developed or obtained for internal use". Capitalization of
software development costs begins upon the establishment of technological
feasibility. The establishment of technological feasibility and the ongoing
assessment of recoverability of capitalized software development costs require
considerable judgment by management with respect to certain external factors,
including, but not limited to, anticipated future revenues, estimated economic
life, and changes in software and hardware technologies. The Company expenses
web site development costs, which are allocated for preliminary project
development, web site general and maintenance.
F-31
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
Costs of start-up activities
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the costs of
start-up activities", effective for fiscal years beginning after December 15,
1998. SOP 98-5 requires the costs of start-up activities and organization costs
to be expensed as incurred. The Company adopted this standard in fiscal year
1999 and the implementation of this standard did not have a material impact on
its financial statements.
Research and Development
Expenditures for software development costs and research are expensed as
incurred. Such costs are required to be expensed until the point that
technological feasibility is established. The period between achieving
technological feasibility and the general availability of such software has been
short. Consequently, costs otherwise capitalizable after technological
feasibility is achieved are generally expensed because they are insignificant.
Revenue Recognition
Revenue Recognition Revenue is recognized when earned. The Company's revenue
recognition policies are in compliance with all applicable accounting
regulations, including American Institute of Certified Public Accountants
(AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition, and SOP
98-9, Modification of SOP 97-2, With Respect to Certain Transactions. Revenue
from license programs is recorded when the software has been delivered and the
customer is invoiced. Revenue from packaged product sales to and through
distributors and resellers is recorded when related products are shipped. The
Company does not charge monthly service fee, instead charges only one-time
purchase price and the option of buying upgrades at a fixed fee based on fair
value of the upgrade. When the revenue recognition criteria required for
distributor and reseller arrangements are not met, revenue is recognized as
payments are received. Costs related to insignificant obligations, which include
telephone support for certain products, are accrued. Provisions are recorded for
returns, concessions and bad debts. Cost of revenue includes direct costs to
produce and distribute product and direct costs to provide online services,
consulting, product support, and training and certification of system
integrators. Research and development costs are expensed as incurred. The
company did not earn any revenue in the years ended June 30, 2001 and 2000.
Allowance for doubtful accounts
In determining the allowance to be maintained, management evaluates many factors
including industry and historical loss experience. The allowance for doubtful
accounts is maintained at an amount management deems adequate to cover estimated
losses. The company did not have accounts receivable or allowance for doubtful
accounts as of June 30, 2001 and 2000.
Advertising
The Company expenses advertising costs as incurred.
Accounting developments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
F-32
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133, as amended by SFAS No. 137 and SFAS No. 138, is effective for fiscal
quarters of fiscal years beginning after June 15, 2000. The Company does not
expect that the adoption of this standard will have a material impact on its
financial statements.
In June 2000, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 138, "Accounting for Certain Instruments and Certain Hedging
Activities." The Company does not expect that the adoption of this standard will
have a material impact on its financial statements.
In June 2000, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 139, "Rescission of FASB Statement No. 53 and Amendments to
Statements No. 63, 89, and 121." The Company does not expect that the adoption
of this standard will have a material impact on its financial statements.
In September 2000, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, a replacement of FASB Statement No. 125."
The Company does not expect that the adoption of this standard will have a
material impact on its financial statements.
On July 20, 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." These statements make
significant changes to the accounting for business combinations, goodwill, and
intangible assets.
SFAS No. 141 establishes new standards for accounting and reporting requirements
for business combinations and will require that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
Use of the pooling-of-interests method will be prohibited. This statement is
effective for business combinations completed after June 30, 2001.
SFAS No. 142 establishes new standards for goodwill acquired in a business
combination and eliminates amortization of goodwill and instead sets forth
methods to periodically evaluate goodwill for impairment. Intangible assets with
a determinable useful life will continue to be amortized over that period. This
statement becomes effective January 1, 2002.
The Company does not expect that the adoption of SFAS No. 141 & 142 will have a
material impact on its financial statements.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP
to revenue recognition. In June 2000, the SEC released SAB No. 101B that delays
the implementation date of SAB 101 until no later than the fourth fiscal quarter
of fiscal years b beginning after December 15, 1999. The Company has reviewed
SAB No. 101 and believes that it is in compliance with the SEC's interpretation
of revenue recognition.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44") "Accounting
for Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of Opinion 25 for (a) the
definition of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
F-33
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
accounting consequence for various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000,
but certain provisions cover specific events that occur after either December
15, 1998,or January 12, 2000. The adoption of certain other provisions of FIN 44
prior to March 31, 2000 did not have a material effect on the financial
statements. The Company does not expect that the adoption of the remaining
provisions will have a material effect on the financial statements.
In January 2001, the Financial Accounting Standards Board Emerging Issues Task
Force issued EITF 00-27 effective for convertible debt instruments issued after
November 16, 2000. This pronouncement requires the use of the intrinsic value
method for recognition of the detachable and imbedded equity features included
with indebtedness, and requires amortization of the amount associated with the
convertibility feature over the life of the debt instrument rather than the
period for which the instrument first becomes convertible. Management is in the
process of evaluating the requirements of EITF 00-27, but does not expect this
pronouncement will materially impact the Company's financial position or results
of operations.
Reclassifications
Certain prior period amounts have been reclassified to conform with the current
period presentation.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company's did not earn any revenue
during the years ended June 30, 2001 and 2000 and the Company has incurred net
losses from inception to June 30, 2001 of $2,001,809 including a net loss of
$544,080 during the year ended June 30, 2001. 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, 2001, towards (i) obtaining
additional equity (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 fiscal year.
F-34
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
4. PROPERTY AND EQUIPMENT
June 30, 2001 June 30, 2000
-------------- -------------
Property and Equipment $ 12,910 $ 12,910
Less: Accumulated depreciation 10,800 8,218
---------- ----------
$ 2,110 $ 4,692
========== ==========
5. PREPAID EXPENSES
The Company entered into software license agreements with two Delaware
Corporations. One Corporation granted permission to the Company to utilize its
software for the "PCA " development. The corporation was paid $202,500 as
initial non-refundable license fee and was considered to be pre-paid royalties.
The agreement calls for Concierge, Inc. to pay a royalty of $1.00 for the first
million units sold and $.75 for units greater than 1,000,000.
The second software license agreement granted the Company the rights to
incorporate its software in the Company's personal communication attendant
e-mail device. The corporation was paid $42,500 by Concierge, Inc. as a
non-refundable, advance royalty payment. The agreement calls for the Company to
pay a royalty of $1.10 for the first 100,000 units, thereafter $.85 per unit.
The Company amortizes the prepaid royalties by the amount which is the greater
of the amount computed using (a) the ratio that current gross revenues bear to
the total of current and anticipated future gross revenues or (b) the
straight-line method over the remaining estimated economic life. Per the
guideline under SFAS 86 "Accounting for the Costs of Computer Software to Be
Sold, Leased, or Otherwise Marketed", amortization shall start when the product
is available for general release to customers.
The term of licenses is five years from the date the Company begins shipping of
its product. The prepaid royalties will be amortized based on straight-line
method over five-year period from the date shipping begins.
6. NOTE RECEIVABLE - RELATED PARTY
The Company has loaned $100,000 to a Corporation with which the Company is
planning to merge (see note 9). The Note is due on demand, unsecured and is
non-interest bearing.
7. INCOME TAXES
No provision was made for Federal income tax since the Company has significant
net operating loss carryforwards. Through June 30, 2001, the Company incurred
net operating losses for tax purposes of approximately $2,002,000. Differences
between financial statement and tax losses consist primarily of amortization
allowance, was immaterial at June 30, 2001. The net operating loss carryforwards
may be used to reduce taxable income through the year 2016. Net operating loss
for carryforwards for the State of California are generally available to reduce
taxable income through the year 2006. 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.
F-35
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
The net deferred tax asset balance, due to net operating loss carryforwards, as
of June 30, 2001 and 2000 were approximately $800,000 and $580,000,
respectively. A 100% valuation allowance has been established against the
deferred tax assets, as the utilization of the loss carrytforwards cannot
reasonably be assured.
8. STOCKHOLDERS' EQUITY AND COMMON STOCK ISSUED SUBJECT TO CONTINGENCY
The Company 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,
the Company sold securities to persons in six states in the U. S. The Company
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 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, the Company has treated
all such shares issued since December 1998, as Common stock issued subject to
contingency. Total shares issued subject to contingency through June 30, 2001
and 2000, were 680,504 for cash and services amounting $266,610.
During the year ended June 30, 2000, the Company reacquired and cancelled
262,000 shares, previously issued for services of $2,620 in the year ended June
30, 1997.
9. SUBSCRIPTIONS RECEIVED FOR COMMON STOCK SUBJECT TO CONTINGENCY
The Company has entered into subscription agreements to issue "post merger"
shares in exchange for cash. Through December 31, 2000, the Company 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 Concierge, Inc. and Starfest, Inc. 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, the Company is involved in a proposed merger
transaction with Starfest, Inc. ("SFI"). SFI filed a registration statement with
the Securities and Exchange Commission ("the Commission") on June 8, 2000
related to the proposed merger, naming the Company as the entity proposed to be
merged into SFI. From July 1, 2000 through September 15, 2000, the Company
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 SFI and the manner in which the Company conducted
the sale of the 2,127,500 post merger shares of common stock constituted
"general advertising or general solicitation" by the Company. 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. The
Company does not concede that there was no exemption from registration available
for this offering. Nevertheless, should the aforementioned circumstances have
F-36
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
constituted general advertising or general solicitation, the Company 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 the Company 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) and $1,442,400 as of June 30, 2001 and 2000,
respectively.
10. MERGER AGREEMENT
On January 26, 2000 the Company entered into an agreement of merger with
Starfest, Inc., a California Corporation. Under the agreement, the presently
outstanding 1,376,380 share of common stock of the Company shall be converted
into 96,957,713 common stock of Starfest, Inc. on the basis of 70.444 shares of
Starfest, Inc. for each share outstanding of the Company. The 96,957,713 post
merger shares shall be distributed to the shareholders of the Company on a
pro-rata basis. For accounting purposes, the transaction would be treated as a
recapitalization of the Company, with the Company as the accounting acquirer
(reverse acquisition), and would be accounted for in a manner similar to a
pooling of interests. The operations of Starfest, Inc. would be included with
those of the Company from the acquisition date. Starfest, Inc. had minimal
assets and did not have significant operations prior to the acquisition. The
merger is subject to approval by shareholders of both companies and Securities
and Exchange Commission.
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 $800 and $800 for income tax in the year ended June 30, 2001
and 2000, respectively. Total amount paid for income taxes from September 20,
1996 (inception) through June 30, 2001 amounted to $4,000. The Company paid $0
for interest during the periods ended June 30, 2001 and 2000. Total amount paid
for interest from September 20, 1996 (inception) through June 30, 2001, amounted
to $4,227.
The Cash flow statements do not include effect of acquisition and cancellation
of 262,000 shares issued for services of $2,620. 737,415 shares have been issued
since inception through June 30, 2001, for services amounting $7,374. Valuation
of shares is based on the estimated fair market value of the services performed
12. COMMITMENT
The Company sub-leases office space in Los Angeles, California from Ardent, Ltd.
The term of the lease is 26 months with monthly payments of $1,542. The lease
expires on August 31, 2002. Rent was $18,501 and $7,823 for the year ended June
30, 2001 and 2000, respectively.
F-37
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
Future minimum lease payments associated with the lease are as follow:
Year ended June 30 Amount
--------------------- ----------
2002 $ 18,501
2003 3,083
----------
Total $ 21,584
==========
F-38
APPENDIX A
AMENDED AGREEMENT OF MERGER
This Amended Agreement of Merger (the "Agreement") is made and entered
into as of January 19, 2001 by and among:
STARFEST, Inc., a California corporation ("STARFEST"); and
CONCIERGE, Inc., a Nevada corporation ("CONCIERGE").
RECITALS
WHEREAS, STARFEST's common stock, no par value per share (the "Common
Stock"), is currently traded on the OTC Bulletin Board; and
WHEREAS, STARFEST currently operates an Internet entertainment business;
and
WHEREAS, the parties hereto wish to reorganize STARFEST by merging
CONCIERGE into STARFEST, with STARFEST being the surviving corporation of the
merger; and
WHEREAS, as part of the reorganization, STARFEST wishes to sell its
Internet entertainment business to a third party in order that the sole business
of STARFEST after the merger will be the business of CONCIERGE.
NOW, THEREFORE, in consideration of the following representations,
promises and undertakings, the parties hereto hereby agree as follows:
1. STARFEST merger with CONCIERGE. Promptly after the execution of
this Agreement, the officers and directors of each of STARFEST and CONCIERGE
shall cause all corporate actions to occur, including without limitation the
holding of any required special meeting of the shareholders of each of STARFEST
and CONCIERGE, that are required to approve:
(a) The merger of STARFEST with CONCIERGE, STARFEST to be the
surviving corporation, with the stockholders of CONCIERGE
receiving a total of 96,957,713 shares of Common Stock of
STARFEST in the merger and the stockholders of STARFEST
retaining their presently issued 23 million shares of
Common Stock of STARFEST;
(b) The change of name of the post-merger company to
"CONCIERGE TECHNOLOGIES, INC."
A-1
(c) The change of management of the post-merger company to
that of the directors and officers of CONCIERGE
immediately before the effectiveness of the merger;
(d) An increase in the authorized capital of the post-merger
corporation to 190 million shares of Common Stock, $0.001
a share, and 10 million shares of Preferred Stock, par
value $0.001 a share;
(e) The authorization of the directors of the post-merger
corporation to issue no more than 9 million shares of
Common Stock (or common stock equivalents or derivatives)
to raise the necessary capital to commence its business
and to attract additional members of management; and
2. Representations by STARFEST. STARFEST represents as follows:
2.1 STARFEST is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and is authorized
to transact its business and is in good standing in each state in which its
ownership of assets or conduct of business requires such qualifications.
2.2 Subject to shareholder approval of the transactions
contemplated by this Agreement, STARFEST has the right, power, legal capacity
and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement and the documents, instruments and certificates
to be executed and delivered by it pursuant to this Agreement. The execution and
delivery of and performance of the obligations contained in this Agreement by
STARFEST and all documents, instruments and certificates made or delivered by
STARFEST pursuant to this Agreement, and the transactions contemplated hereby,
have been or as of the Closing will be, duly authorized by all necessary action
on the part of STARFEST.
2.3 Subject to shareholder approval of the transactions
contemplated by this Agreement, the terms and provisions of this Agreement and
all documents, instruments and certificates made or delivered from time to time
by STARFEST hereunder and thereunder shall constitute valid and legally binding
obligations of STARFEST, enforceable against STARFEST in accordance with the
terms hereof and thereof.
2.4 The execution of this Agreement by STARFEST does not require
any consent of, notice to or action by any person or governmental authority,
other than as provided in Exhibit 2.4 hereto. The performance of this Agreement
by STARFEST and the consummation by STARFEST of the transactions contemplated
hereby will not require any consent of, notice to or action by any person or
governmental authority, other than as provided in Exhibit 2.4 hereto.
2.5 The making and performance of this Agreement by STARFEST and
the consummation of the transactions contemplated hereby will not result in a
breach or violation by STARFEST of any of the terms or provisions of, or
constitute a default under, its Articles of Incorporation, its Bylaws, any
indenture, mortgage, deed of trust (constructive or other), loan agreement,
A-2
lease, franchise, license or other agreement or instrument to which STARFEST is
bound, any statute, or any judgment, decree, order, rule or regulation of any
court or governmental agency or body applicable to STARFEST or any of the
properties of STARFEST.
2.6 Attached hereto as Exhibit 2.6 are financial statements of
STARFEST for the annual periods ended December 31, 1998 and December 31, 1999
and as of December 31, 1998 and as of December 31, 1999, which have been audited
in accordance with GAAP. These financial statements present fairly the financial
condition and results of operations of its business, in accordance with
generally accepted accounting principles as of the dates thereof and the periods
covered thereby.
2.7 As of the date hereof, the executive officers and directors
of STARFEST are Michael Huemmer and Janet Alexander.
2.8 STARFEST has authorized capital of 65 million shares of
Common Stock, no par value. Of these shares, 23 million are issued and
outstanding. Except as described in Exhibit 2.8 hereto, there are no existing
agreements, options, warrants, rights, calls or commitments of any kind
providing for the issuance of any shares, or for the repurchase or redemption of
shares, of STARFEST's capital stock, and there are no outstanding securities or
other instruments convertible into or exchangeable for shares of such capital
stock and no commitments to issue such securities or instruments. Each person
that has such a right shall surrender it to Starfest for no consideration other
than that of promoting the Closing of the transaction described in this
Agreement. All of the outstanding shares of STARFEST common stock have been duly
authorized and validly issued and are fully paid and nonassessable. None of the
outstanding shares of STARFEST common stock were issued in violation of the
Securities Act or any state securities laws.
2.9 Attached hereto as Exhibit 2.9 is a true and correct list of
all known material liabilities of STARFEST, contingent or matured, as of
December 31, 2000, which are not reflected on the balance sheet dated as of
December 31, 1999 and which arose in the ordinary course of business.
2.10 There is no claim for personal injury, products liability,
property or other damages, grievance, action, proceeding or governmental
investigation pending or, to STARFEST's knowledge, threatened against STARFEST
or affecting its assets or business, other than as listed on Exhibit 2.10
hereto.
2.11 STARFEST has filed, or will have filed prior to Closing, all
income, franchise, real property, personal property, sales, employment and other
tax returns required to be filed by any taxing authority and has paid or accrued
all taxes required to be paid by it in respect to the periods covered by such
returns, whether or not shown on such returns, and STARFEST has no liability for
such taxes in excess of the amounts so paid. A true and complete copy of all
federal income tax returns for the tax year ended December 31, 1998 as filed
with the Internal Revenue Service has been delivered to CONCIERGE, together with
A-3
all supporting schedules thereto. STARFEST is not delinquent in the payment of
any tax, assessment or governmental charge, has not requested any extension of
time within which to file any tax returns which have not since been filed, and
no deficiencies for any tax, assessment or governmental charge have been
claimed, proposed or assessed by any taxing authority. STARFEST's federal income
tax return has not been audited. As used herein, the term "tax" includes all
governmental taxes and related governmental charges imposed by the laws and
regulations of any governmental jurisdiction.
2.12 STARFEST's business, properties, plant and offices do not
exist or operate in violation of any federal, state or local code, law,
regulation or ordinance regulating zoning, city planning, fire safety,
environmental protection or similar matters. All permits, licenses, franchises,
consents and other authorizations necessary for the conduct of STARFEST's
business have been timely obtained and are currently in effect. STARFEST is not
in violation of any term or provision of any such permit, license, franchise,
consent or other authorization.
2.13 Except as described on Schedule 2.13, STARFEST is not a
party as of the date hereof to any written or oral (i) bonus, pension, insurance
or other plan providing employee benefits, (ii) contract, or series of related
contracts with any one vendor or customer, for purchase, sale or exchange made
in the ordinary course of business and in an amount in excess of $1,000, (iii)
contract not made in the ordinary course of business, (iv) franchise, licensing
or manufacturer's representative agreement, (v) contract with any shareholder of
STARFEST or an affiliate of any shareholder of STARFEST within the meaning of
the federal securities laws, or (vi) any contract for borrowed money either as
borrower or lender. All agreements listed on Schedule 2.13, to the extent that
the same give rights to STARFEST, are enforceable by STARFEST, and STARFEST has
not received notice of any claim to the contrary. Complete and correct copies of
all items listed in Schedule 2.13 have been delivered to CONCIERGE prior to the
execution of this Agreement.
Except as listed in Schedule 2.13, all parties other than
STARFEST obligated under the agreements listed on Schedule 2.13 are in
compliance in all material respects with the terms thereof and there has been no
notice of default or termination with respect to any such agreement that has not
been cured or waived in writing.
2.14 No employee pension benefit plan within the meaning of
Section 3(a) of the Employment Retirement Income Security Act of 1994, as
amended ("ERISA"), has been maintained or sponsored by STARFEST or exists to
which STARFEST has contributed since its formation or is obligated to contribute
for the benefit of its employees. Neither STARFEST nor any corporation or other
entity affiliated with STARFEST contributes to, is obligated to contribute to,
or has during the last five years contributed to or been obligated to contribute
to, and none of STARFEST's employees are participants in, any multi-employer
plan within the meaning of Section 4001(a) of ERISA.
A-4
2.15 Since its formation, STARFEST has not infringed any patents,
trademarks, service marks or trade names registered to or used by it in its
business, nor has STARFEST claimed any such infringement.
2.16 The Company is not a party to or bound by any collective
bargaining agreement or any other agreement with a labor union.
2.17 All of the unrestricted outstanding shares were issued
pursuant to the exemption from registration provided by Regulation D, Rule 504.
No legend or other reference to any purported lien or encumbrance appears upon
any certificate representing the unrestricted shares.
2.18 STARFEST has not made any material misstatement of fact or
omitted to state any material fact necessary or desirable to make complete,
accurate and not misleading every representation and warranty set forth herein.
3. Representations of CONCIERGE. CONCIERGE represents as follows:
3.1 CONCIERGE is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada and is authorized to
transact its business and is in good standing in each state in which its
ownership of assets or conduct of business requires such qualifications.
CONCIERGE is engaged in the business of designing, developing, manufacturing and
marketing computer telephony technology devices.
3.2 The authorized capital stock of CONCIERGE consists of 10
million shares of common stock, $0.01 par value, of which 1,490,744 shares are
issued and outstanding (the "CONCIERGE Shares. All of the CONCIERGE Shares have
been duly authorized and are validly issued, fully paid and non-assessable.
Except for the obligations set forth on Exhibit 3.2 attached hereto, there are
no existing agreements, options, warrants, rights, calls or commitments of any
kind to which CONCIERGE is a party or it is bound providing for the issuance of
any shares, or for the repurchase or redemption of shares, of CONCIERGE's
capital stock, and there are no outstanding securities or other instruments
convertible into or exchangeable for shares of such capital stock and no
commitments to issue such securities or instruments. None of the CONCIERGE
Shares were issued in violation of the Securities Act or any state securities
laws.
3.3 CONCIERGE has the right, power, legal capacity and authority
to execute and deliver this Agreement and to perform its obligations under this
Agreement, and the documents, instruments and certificates to be executed and
delivered by CONCIERGE pursuant to this Agreement. The execution and delivery of
and performance of the obligations contained in this Agreement by CONCIERGE and
all documents, instruments and certificates made or delivered by CONCIERGE
pursuant to this Agreement, and the transactions contemplated hereby, have been
or as of the Closing Date will be duly authorized by all necessary action on the
part of the CONCIERGE shareholders and CONCIERGE.
A-5
3.4 The terms and provisions of this Agreement and all documents,
instruments and certificates made or delivered from time to time by CONCIERGE
hereunder and thereunder constitute valid and legally binding obligations of
CONCIERGE, enforceable against CONCIERGE in accordance with the terms hereof and
thereof.
3.5 The execution and delivery of this Agreement by CONCIERGE do
not require any consent of, notice to or action by any person or governmental
authority, which consent, notice or action has not been made, given or otherwise
accomplished, and satisfactory evidence thereof has been delivered to Starfest.
The performance of this Agreement by CONCIERGE and the consummation by CONCIERGE
of the transactions contemplated hereby will not require any consent of, notice
to or action by any person or governmental authority.
3.6 The making and performance of this Agreement by CONCIERGE and
the consummation of the transactions contemplated hereby will not result in a
breach or violation by CONCIERGE of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust (constructive
or other), loan agreement, lease, franchise, license or other agreement or
instrument to which CONCIERGE is bound, any statute, or any judgment, decree,
order, rule or regulation of any court or governmental agency or body applicable
to CONCIERGE or any of the properties of CONCIERGE.
3.7 Attached hereto as Exhibit 3.7 are audited financial
statements of CONCIERGE from its inception throughJune 30, 2000 and interim
financial statements for the period ended September 30, 2000. These financial
statements present fairly the financial condition and results of operations of
its business, in accordance with generally accepted accounting principles,
except for those adjustments that would be required for audited financial
statements.
3.8 As of the date hereof, the executive officers and
directors of CONCIERGE are Allen E. Kahn, James E. Kirk, F. Patrick Flaherty,
Donald V. Fluken, Herbert Marcus III, Harry F. Camp, David W. Neibert and Samuel
C.H. Wu..
3.9 Attached as Exhibit 3.9 is a true and correct list of all
material liabilities of CONCIERGE, contingent or matured, which are not
reflected on the balance sheet dated as of September 30, 2000 and which arose in
the ordinary course of business.
3.10 There is no claim for personal injury, products liability,
property or other damages, grievance, action, proceeding or governmental
investigation pending, or to CONCIERGE's knowledge, threatened against CONCIERGE
or affecting its assets or business, other than as listed on Exhibit 3.10
hereto.
3.11 CONCIERGE has not made any material misstatement of fact or
omitted to state any material fact necessary or desirable to make complete,
accurate and not misleading every representation, warranty and agreement set
forth herein.
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3.12 CONCIERGE has filed, or will have filed prior to Closing,
all income, franchise, real property, personal property, sales, employment and
other tax returns required to be filed by any taxing authority and has paid or
accrued all taxes required to be paid by it in respect to the periods covered by
such returns, whether or not shown on such returns, and CONCIERGE has no
liability for such taxes in excess of the amounts so paid. CONCIERGE is not
delinquent in the payment of any tax, assessment or governmental charge, has not
requested any extension of time within which to file any tax returns which have
not since been filed, and no deficiencies for any tax, assessment or
governmental charge have been claimed, proposed or assessed by any taxing
authority. As used herein, the term "tax" includes all governmental taxes and
related governmental charges imposed by the laws and regulations of any
governmental jurisdiction.
3.13 CONCIERGE's business, properties, plant and offices do not
exist or operate in violation of any federal, state or local code, law,
regulation or ordinance regulating zoning, city planning, fire safety,
environmental protection or similar matters. All permits, licenses, franchises,
consents and other authorizations necessary for the conduct of CONCIERGE's
business have been timely obtained and are currently in effect. CONCIERGE is not
in violation of any term or provision of any such permit, license, franchise,
consent or other authorization.
3.14 Except as described on Schedule 3.14, CONCIERGE is not a
party as of the date hereof to any written or oral (i) bonus, pension, insurance
or other plan providing employee benefits, (ii) contract, or series of related
contracts with any one vendor or customer, for purchase, sale or exchange made
in the ordinary course of business and in an amount in excess of $1,000, (iii)
contract not made in the ordinary course of business, (iv) franchise, licensing
or manufacturer's representative agreement, (v) contract with any shareholder of
CONCIERGE or an affiliate of any shareholder of CONCIERGE within the meaning of
the federal securities laws, or (vi) any contract for borrowed money either as
borrower or lender. All agreements listed on Schedule 3.14, to the extent that
the same give rights to CONCIERGE, are enforceable by CONCIERGE, and CONCIERGE
has not received notice of any claim to the contrary. Complete and correct
copies of all items listed in Schedule 3.14 have been delivered to Starfest
prior to the execution of this Agreement.
Except as listed in Schedule 3.14, all parties other than
CONCIERGE obligated under the agreements listed on Schedule 3.14 are in
compliance in all material respects with the terms thereof and there has been no
notice of default or termination with respect to any such agreement that has not
been cured or waived in writing.
3.15 No employee pension benefit plan within the meaning of
Section 3(a) of the Employment Retirement Income Security Act of 1994, as
amended ("ERISA"), has been maintained or sponsored by CONCIERGE or exists to
which CONCIERGE has contributed since its formation or is obligated to
contribute for the benefit of its employees. Neither CONCIERGE nor any
corporation or other entity affiliated with CONCIERGE contributes to, is
obligated to contribute to, or has during the last five years contributed to or
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been obligated to contribute to, and none of CONCIERGE's employees are
participants in, any multi-employer plan within the meaning of Section 4001(a)
of ERISA.
3.16 Since its formation, CONCIERGE has not infringed any
patents, trademarks, service marks or trade names registered to or used by it in
its business, nor has CONCIERGE claimed any such infringement.
3.17 CONCIERGE is not a party to or bound by any collective
bargaining agreement or any other agreement with a labor union.
4. Confidentiality. From the Closing Date and for a period of five years
thereafter, each of the parties hereto covenants that it will not use for the
benefit of any of them or disclose to another any Confidential Information (as
hereafter defined) except as such disclosure or use may be consented to in
advance by the party which had supplied the information in a writing which
specifically refers to this covenant. Confidential Information as used herein
means information of commercial value to the supplying party and that is not
normally made public by the supplying party, including but not limited to the
whole or any part of any scientific or technical information, design, process,
procedure, formula, or improvement, trade secret, data, invention, discovery,
technique, marketing plan, strategy, forecast, customer or supplier lists,
business plan or financial information.
5. Conditions Precedent to STARFEST's Obligations.
5.1 Conditions Precedent. The obligations of STARFEST to
consummate the transactions contemplated herein are subject to the satisfaction
(unless waived in writing), on or before the Closing Date, of the following
conditions:
(a) CONCIERGE shall have materially performed and
complied with all covenants, conditions and obligations required by this
Agreement to be performed or complied with by CONCIERGE on or before the Closing
Date.
(b) All representations and warranties of CONCIERGE
contained in this Agreement, the Exhibits, and in any document, instrument or
certificate that shall be delivered by CONCIERGE under this Agreement shall be
materially true, correct and complete on and as though made on the Second
Closing Date.
(c) During the period from the date of this Agreement
through and including the Closing Date: (i) there shall not have occurred any
material adverse change affecting CONCIERGE; (ii) CONCIERGE shall not have
sustained any loss or damage that materially affects its ability to conduct
its business; (iii) the performance by CONCIERGE shall not have been rendered,
by a change in circumstances or actions by third parties (including, without
limitation, a change in any law or actions by a governmental authority),
A-8
impossible, illegal, commercially impracticable or capable of accomplishment
only on terms and conditions which require STARFEST to incur substantially
greater costs or burdens than STARFEST reasonably anticipated on the date of
this Agreement.
(d) As of the Closing Date, no action or proceeding
against any of the parties hereto shall be before any court or governmental
agency seeking to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby and
which, in the judgment of Starfest, makes the consummation of the transactions
contemplated by this Agreement inadvisable.
(e) CONCIERGE shall have tendered to STARFEST all
documents, certificates, payments and other items required by this Agreement
hereof to be delivered to STARFEST.
(f) A majority of the STARFEST Shareholders shall have
approved of the transactions contemplated by this Agreement.
(g) CONCIERGE shall have received any consents necessary
to perform their obligations under this Agreement.
(h) STARFEST shall have received any and all permits,
authorizations, approvals and orders under federal and state securities laws for
the issuance of STARFEST's Common Stock, without the imposition of any
conditions adverse to STARFEST.
THE SALES OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT
BEEN QUALIFIED WITH THE COMMISSIONERS OF CORPORATIONS OF THE STATES OF NEVADA OR
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFORE PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION UNDER THE LAWS
OF THOSE STATES. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6. Conditions Precedent to CONCIERGE's Obligations.
The obligation of CONCIERGE to consummate the transactions
contemplated herein are subject to the satisfaction (unless waived in writing),
on or before the Closing Date, of the following conditions:
(a) STARFEST shall have materially performed and
complied with all covenants, conditions and obligations required by this
Agreement to be performed or complied with by STARFEST on or before the Closing
Date.
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(b) All representations and warranties of STARFEST
contained in this Agreement, the Exhibits, and in any document, instrument or
certificate that shall be delivered by STARFEST under this Agreement shall be
materially true, correct and complete on and as though made on the Closing Date.
(c) During the period from the date of this Agreement
through and including the Closing Date: (i) there shall not have occurred any
material adverse change affecting STARFEST; (ii) STARFEST shall not have
sustained any loss or damage that materially affects its ability to conduct its
business; (iii) the performance by STARFEST shall not have been rendered, by a
change in circumstances or actions by third parties (including, without
limitation, a change in any law or actions by a governmental authority),
impossible, illegal, commercially impracticable or capable of accomplishment on
terms and conditions which require CONCIERGE to incur substantially greater
costs or burdens than CONCIERGE reasonably anticipated on the date of this
Agreement.
(d) As of the Closing Date, no action or proceeding
against any of the parties hereto shall be before any court or governmental
agency seeking to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby and
which, in the judgment of CONCIERGE, makes the consummation of the transactions
contemplated by this Agreement inadvisable.
(e) STARFEST shall have tendered to CONCIERGE all
documents, certificates, and other items required by this Agreement hereof to be
delivered to CONCIERGE.
(f) STARFEST shall have received any consents necessary to
perform their obligations under this Agreement.
7. Closing.
-------
7.1 The closing of the transaction contemplated by this Agreement
(the "Closing") shall take place at such time and at such place as the parties
shall mutually agree but no later than February 15, 2001 (the "Closing Date")
unless such date is extended by written agreement of STARFEST and CONCIERGE and
shall be effected in accordance with the following:
(a) CONCIERGE shall deliver to STARFEST, and STARFEST
shall deliver to CONCIERGE, good standing certificates from the secretary of
state of any state where the ownership of its assets or the conduct of its
business would require such qualification, attesting to the good standing of
CONCIERGE or, as the case may be, STARFEST, in each such state.
(b) There shall be delivered all other previously rendered
documents, instruments and other writings required to be delivered by CONCIERGE
to STARFEST or STARFEST to CONCIERGE, as the case may be, at or prior to
A-10
the Closing pursuant to this Agreement or otherwise legally required or
reasonably necessary in connection herewith.
(c) STARFEST shall deliver to CONCIERGE the certificate
of its corporate Secretary certifying that the necessary corporate action of
STARFEST's directors and stockholders has taken place to approve the merger
contemplated by this Agreement, and CONCIERGE shall deliver to STARFEST the
certificate of its corporate Secretary certifying that the necessary
corporate action of CONCIERGE's directors and stockholders has taken place to
approve the merger contemplated by this Agreement.
(d) STARFEST shall provide the documents needed to be
filed with the Secretaries of State of Nevada and California to effect the
merger, and the officers of each of STARFEST and CONCIERGE shall execute the
documents and deliver them to such Secretaries of State for filing.
(e) CONCIERGE shall deliver to STARFEST a list of its
stockholders, certified by its Secretary, setting forth the number of shares of
CONCIERGE common stock owned by each such stockholder and the number of shares
each such stockholder is to receive in the merger. STARFEST shall send the list
to its transfer agent and stock registrar with instructions to issue the
96,957,713 shares to the CONCIERGE stockholders in accordance with the list. The
certificates that will represent such 96,957,713 shares of Common Stock of the
post-merger company will not bear a legend restricting the transferability of
the shares.
8. Termination. This Agreement may be terminated prior to the Closing by
delivery of notice in writing to that effect as follows:
8.1 By CONCIERGE, if any one or more of the conditions to the
obligations CONCIERGE to close has not been fulfilled as of the Closing Date;
8.2 By STARFEST, if any one or more of the conditions to its
obligations to close have not been fulfilled as of the Closing Date.
8.3 At any time on or prior to the Closing Date by mutual
written consent of the parties hereto.
If this Agreement so terminates, it shall become null and void and have no
further force or effect.
9. Survival and Indemnification.
9.1 The representations, warranties and covenants of the parties
made in this Agreement shall survive the Closing for a period of two years after
the Closing Date. Each party shall indemnify and hold harmless the other parties
from and against any loss, liability, damage, cost or expense (including
reasonable attorneys' and accountants' fees) which shall arise out of or is
connected with any breach of any representation or warranty made or covenant to
be performed by the party or parties against whom indemnification is sought;
A-11
provided, however, that no claims may be asserted against any party until and
unless the aggregate of all claims against such party exceeds $10,000 and the
maximum aggregate amount of the obligations of any individual party to provide
indemnification under this Agreement shall not exceed $200,000.
9.2 Upon the assertion by a third party against one of the
parties to this Agreement of a claim to which the indemnification provisions of
this Section apply, the party against whom the claim has been asserted shall
promptly notify the other party to this Agreement against whom a claim for
indemnification is expected to be made of such claim (and such notice shall be a
condition precedent to the liability of the parties or party so notified with
respect to such claim). Any party so notified shall have the right, at its own
expense and with counsel of its choice, to control the defense of any such claim
and all actions and proceedings in connection therewith, provided that any party
seeking indemnification shall have the right to participate in such defense with
counsel of its choice at its own expense. No such claim shall be compromised or
settled by any party to this Agreement without the prior written consent of the
other party. Each other party shall cooperate in every reasonable way with the
party assuming responsibility for the defense and disposition of such claim.
10. Post-Closing Covenants. CONCIERGE covenants that after the Closing:
10.1 The post-merger company will exert all reasonable effort and
take all reasonable actions required to register its Common Stock with the SEC
on SEC Form 10-SB and to maintain its status as a company whose Common Stock is
quoted on the OTC Bulletin Board or shall change its status to a company whose
Common Stock is listed on The Nasdaq Stock Market.
10.2 The post-merger company shall not reverse split its stock
for a period of at least two years from the date hereof without the written
consent of Gary Bryant of Indian Wells, California..
10.3 For a period of one year, without the written consent of
Michael Huemmer the post-merger company will not issue or reserve for issuance
more than 9 million shares of its Common Stock for the purposes of attracting
qualified management and officers and of obtaining sufficient capital to
commence its business in a viable manner.
11. This Agreement shall be governed and construed in accordance with
the laws of the State of Nevada without application of Nevada's conflicts of
laws provision.
12. Execution in Counterparts. This Agreement and any of the documents
described herein that are necessary for Closing may be executed in counterparts,
each of which shall be deemed an original and together which shall constitute
one and the same instrument.
13. Further Assurances. If, at any time before, on or after either
Closing Date, any further action by any of the parties to this Agreement is
necessary or desirable to carry out the purposes of this Agreement, such party
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shall take all such necessary or desirable action or use such party's best
efforts to cause such action to be taken.
14. Expenses. CONCIERGE shall bear all expenses incurred by it in
connection with the negotiation, preparation or execution of this Agreement, and
STARFEST shall bear all expenses incurred by it in connection with the
negotiation, preparation or execution of this Agreement.
15. Judicial Proceedings. Each party hereto consents to the exclusive
jurisdiction over it of the courts of the State of Nevada in the County of
Hamilton and of the courts of the United States in the Southern District of
Nevada and agrees that personal service of all process may be made by registered
or certified mail pursuant to the provisions of Section 19. All actions arising
out of or relating in any way to any of the provisions of this Agreement or the
transactions contemplated hereby shall be brought or maintained only in one of
such courts. The parties hereby irrevocably waive any objection that they may
now have or hereafter acquire to the laying of venue of any such action or
proceeding brought in such courts and any claim that any action or proceeding
brought in any such court has been brought in an inconvenient forum. The parties
further agree that a final judgment in any such action or proceeding brought in
any such court, after all appeals or all rights of appeal have expired, shall be
conclusive and binding upon them and may be enforced in any competent court
located elsewhere.
16. Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when personally delivered, sent
by overnight courier or deposited in the mail (postage prepaid, certified or
registered, return receipt requested) and addressed as set forth below or to
such other address as any party shall have previously designated by such a
notice. Any notice delivered personally shall be deemed to be received on the
date of personal delivery; any notice sent by overnight courier shall be deemed
to be received upon confirmation one business day after the date sent; and any
notice mailed shall be deemed to be received on the date stamped on the receipt.
If to CONCIERGE Allen E. Kahn, Chief Executive Officer
Concierge, Inc.
7547 West Manchester Ave., No. 325
Los Angeles, CA 90045
Copy to: James E. Kirk, Esq.
11927 Menaul, N.E.
Albuquerque, NM 87112
If to STARFEST Michael Huemmer, President
Starfest, Inc.
A-13
4602 East Palo Brea Lane
Cave Creek, AZ 85331
Copy to: Thomas J.Kenan
Fuller, Tubb, Pomeroy & Stokes
201 Robert S. Kerr Ave., Suite 1000
Oklahoma City, OK 73102
17. Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether herein
so expressed or not.
18. Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
19. Amendment. Except as otherwise provided herein, the parties hereto
may modify or supplement this Agreement at any time, but only in writing duly
executed by each of the parties hereto.
20. Headings. The headings preceding the text of sections of this
Agreement are for convenience only and shall not be deemed a part hereof.
21. Entire Understanding. The terms set forth in this Agreement
including its Exhibits are intended by the parties as the final, complete and
exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms. The Exhibits
attached to this Agreement are made a part of this Agreement.
22. Confidentiality. The parties hereto shall not make any public
announcement regarding the transactions contemplated by this Agreement without
the prior written consent of CONCIERGE and STARFEST, which consent shall not be
unreasonably withheld, conditioned or delayed. The parties hereto will issue a
press release regarding the transactions contemplated by this Agreement upon the
execution of this Agreement. Each of the parties hereto shall keep strictly
confidential any and all information furnished to it or its agents or
representatives in the course of negotiations relating to this Agreement or any
transactions contemplated by this Agreement, and such parties have instructed
their representative officers, partners, employees and other representatives
having access to such information of such obligation of confidentiality. .
A-14
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
STARFEST, INC. CONCIERGE, INC.
By:/s/ Michael Huemmer By:/s/ Allen E. Kahn
--------------------- ---------------------------
Michael Huemmer, Allen E. Kahn, President
President
A-15
UNTIL _____________________, 2001 (90 DAYS AFTER THE EFFECTIVE DATE OF THE
MERGER), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES MAY BE REQUIRED
TO DELIVER A PROSPECTUS.
Exhibits and Financial Statement Schedules.
-----------------------------------------------
Separately bound but filed as part of this Registration Statement are the
following exhibits:
Exhibit Item
------- ----
2 - Agreement of Merger of January 26, 2000, between
Starfest, Inc. and Concierge, Inc.*
2.1 - Stock Purchase Agreement of March 6, 2000 between
Starfest, Inc. and MAS Capital, Inc.*
2.2 - Amendment No. 1 to Agreement of Merger of January 26,
2000 between Starfest, Inc. and Concierge, Inc.+
2.3 - Amended Agreement of Merger of January 19, 2001 between
Starfest, Inc. and Concierge, Inc.+++
3.1 - Articles of Incorporation and Amended Articles of
Incorporation of Starfest, Inc.*
3.2 - Bylaws of Starfest, Inc.*
3.3 - Articles of Incorporation of Concierge, Inc.**
3.4 - Bylaws of Concierge, Inc.**
5 - Opinion of Thomas J. Kenan, Esq., as to the legality of
the securities covered by the Registration Statement.**
8 - Opinion of Thomas J. Kenan, Esq., as to tax matters and
tax consequences.**
10 - 1999 Stock Option Plan adopted by Starfest, Inc.*
10.1 - Manufacturing Services Agreement between Concierge, Inc.
and XeTel Corporation.+
10.2 - Service Level Agreement between Concierge, Inc. and
eAssist.com, Inc.***+ (superseded by Exhibit 10.5).
10.3 - Independent Consulting Agreement between Concierge,
Inc. and Dave Cook Consulting.***+ (superseded by
Exhibit 10.6).
10.4 - CD-ROM Storage and Fulfillment Agreement between
Concierge, Inc. and Point To Point LLC.+++
10.5 - Service Level Agreement between Concierge, Inc. and
eAssist.com, Inc.*+
65
10.6 - Independent Consulting Agreement between Concierge,
Inc. and Dave Cook Consulting.*+
23 - Consent of Thomas J. Kenan, Esq. to the reference to him
as an attorney who has passed upon certain information
contained in the Registration Statement.**
23.1 - Consent of Brad B. Haynes, C.P.A., independent auditor
of Concierge, Inc. (superseded by Exhibit 23.12).
23.2 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit 23.13).
23.3 - Consent of Harry F. Camp to serve as a director should
the proposed merger with Concierge, Inc. become
effective.**
23.5 - Consent of F. Patrick Flaherty to serve as a director
should the proposed merger with Concierge, Inc. become
effective.**
23.6 - Consent of Donald W. Fluken to serve as a director
should the proposed merger with Concierge, Inc.
become effective.**
23.7 - Consent of Allen E. Kahn to serve as a director should
the proposed merger with Concierge, Inc. become
effective.**
23.8 - Consent of James E. Kirk to serve as a director should
the proposed merger with Concierge, Inc. become
effective.**
23.9 - Consent of Herbert Marcus, III to serve as a director
should the proposed merger with Concierge, Inc.
become effective.**
23.10 - Consent of David W. Neibert to serve as a director
should the proposed merger with Concierge, Inc.
become effective.**
23.11 - Consent of Samuel C.H. Wu to serve as a director
should the proposed merger with Concierge, Inc.
become effective.**
23.13 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit 23.14).
23.14 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc.++
23.15 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc.++
23.16 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc. (superseded by Exhibit 23.18).
66
23.17 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit 23.19).
23.18 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc. (superseded by Exhibit 23.21).
23.19 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit 23.22).
23.20 - Consent of Hamid Kabani, C.P.A., independent auditor
of Starfest, Inc. (superseded by Exhibit 23.23).
23.21 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc. (Superseded by Exhibit 23.24.)
23.22 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (Superseded by Exhibit 23.25.)
23.23 - Consent of Hamid Kabani, C.P.A., independent auditor
of Starfest, Inc. (Superseded by Exhibit 23.26.)
23.24 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc.
23.25 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc.
23.26 - Consent of Hamid Kabani, C.P.A., independent auditor
of Starfest, Inc.
27 - Financial Data Schedule.**
27.1 - Financial Data Schedule+
27.2 - Financial Data Schedule++
* Previously filed with Form 8-K12G3 on March 10, 2000; Commission File
No. 000-29913, incorporated herein.
** Previously filed with Form S-4 on June 8, 2000; Commission File No.
333-38838, incorporated herein.
*** Confidential treatment for portions of this exhibit have been
requested.
+ Previously filed with Amendment No. 1 to Form S-4 on September 5,
2000; Commission File No. 333-38838, incorporated herein.
67
++ Previously filed with Amendment No. 2 to Form S-4 on December 8,
2000; Commission File No. 333-38838, incorporated herein.
+++ Previously filed with Amendment No. 3 to Form S-4 on January 31,
2001, Commission File No. 333-38838, incorporated herein.
*+ Previously filed with Amendment No. 5 to Form S-4 on October 5,
2001, Commission File No. 333-38838, incorporated herein.
68
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("the Act") may be permitted to directors, officers and controlling
persons of Starfest, Inc. pursuant to the foregoing provisions, or otherwise,
Starfest, Inc. has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Starfest,
Inc. of expenses incurred or paid by a director, officer or controlling person
of Starfest, Inc. in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, Starfest, Inc. will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Cave Creek, Arizona.
Date: October 29, 2001 Starfest, Inc.
By/s/Michael Huemmer
--------------------------------------
Michael Huemmer, president
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: October 29, 2001 /s/Michael Huemmer
----------------------------------------
Michael Huemmer, president, director,
principal financial officer, and
authorized representative of the
Registrant
Date: October 29, 2001 /s/Janet Alexander
----------------------------------------
Janet Alexander, secretary and director
of the Registrant
70
Starfest, Inc.
Commission File No. 333-38838
Amendment No. 6 to Form S-4
List of Exhibits
----------------
Exhibit Item
------- ----
2 - Agreement of Merger of January 26, 2000, between
Starfest, Inc. and Concierge, Inc.*
2.1 - Stock Purchase Agreement of March 6, 2000 between
Starfest, Inc. and MAS Capital, Inc.*
2.2 - Amendment No. 1 to Agreement of Merger of January 26,
2000 between Starfest, Inc. and Concierge, Inc.+
2.3 - Amended Agreement of Merger of January 19, 2001
between Starfest, Inc. and Concierge, Inc.+++
3.1 - Articles of Incorporation and Amended Articles of
Incorporation of Starfest, Inc.*
3.2 - Bylaws of Starfest, Inc.*
3.3 - Articles of Incorporation of Concierge, Inc.**
3.4 - Bylaws of Concierge, Inc.**
5 - Opinion of Thomas J. Kenan, Esq., as to the legality
of the securities covered by the Registration
Statement.**
8 - Opinion of Thomas J. Kenan, Esq., as to tax matters
and tax consequences.**
10 - 1999 Stock Option Plan adopted by Starfest, Inc.*
10.1 - Manufacturing Services Agreement between Concierge,
Inc. and XeTel Corporation.+
10.2 - Service Level Agreement between Concierge, Inc. and
eAssist.com, Inc.***+ (superseded by Exhibit 10.5)
1
10.3 - Independent Consulting Agreement between Concierge,
Inc. and Dave Cook Consulting.***+ (superseded by
Exhibit 10.6).
10.4 - CD-ROM Storage and Fulfillment Agreement between
Concierge, Inc. and Point To Point LLC.
10.5 - Service Level Agreement between Concierge, Inc. and
eAssist.com, Inc.*+
10.6 - Independent Consulting Agreement between Concierge,
Inc. and Dave Cook Consulting.*+
23 - Consent of Thomas J. Kenan, Esq. to the reference to
him as an attorney who has passed upon certain
information contained in the Registration Statement.**
23.1 - Consent of Brad B. Haynes, C.P.A., independent
auditor of Concierge, Inc. (superseded by Exhibit
23.12).
23.2 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit
23.13).
23.3 - Consent of Harry F. Camp to serve as a director should
the proposed merger with Concierge, Inc. become
effective.**
23.5 - Consent of F. Patrick Flaherty to serve as a director
should the proposed merger with Concierge, Inc. become
effective.**
23.6 - Consent of Donald W. Fluken to serve as a director
should the proposed merger with Concierge, Inc. become
effective.**
23.7 - Consent of Allen E. Kahn to serve as a director should
the proposed merger with Concierge, Inc. become
effective.**
23.8 - Consent of James E. Kirk to serve as a director should
the proposed merger with Concierge, Inc. become
effective.**
23.9 - Consent of Herbert Marcus, III to serve as a director
should the proposed merger with Concierge, Inc. become
effective.**
23.10 - Consent of David W. Neibert to serve as a director
should the proposed merger with Concierge, Inc. become
effective.**
23.11 - Consent of Samuel C.H. Wu to serve as a director
should the proposed merger with Concierge, Inc. become
effective.**
23.13 - Consent of Jaak (Jack) Olesk, C.P.A., independent
2
auditor of Starfest, Inc. (superseded by Exhibit
23.14).
23.14 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc.++
23.15 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc.++
23.16 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc. (superseded by Exhibit 23.18).
23.17 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit
23.19).
23.18 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc. (superseded by Exhibit 23.21).
23.19 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (superseded by Exhibit
23.22).
23.20 - Consent of Hamid Kabani, C.P.A., independent auditor
of Starfest, Inc. (superseded by Exhibit 23.23).
23.21 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc. (Superseded by Exhibit 23.24.)
23.22 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc. (Superseded by Exhibit
23.25.)
23.23 - Consent of Hamid Kabani, C.P.A., independent auditor
of Starfest, Inc. (Superseded by Exhibit 23.26.)
23.24 - Consent of Hamid Kabani, C.P.A., independent auditor
of Concierge, Inc.
23.25 - Consent of Jaak (Jack) Olesk, C.P.A., independent
auditor of Starfest, Inc.
23.26 - Consent of Hamid Kabani, C.P.A., independent auditor
of Starfest, Inc.
27 - Financial Data Schedule.**
27.1 - Financial Data Schedule+
27.2 - Financial Data Schedule++
* Previously filed with Form 8-K12G3 on March 10, 2000; Commission File
No. 000-29913, incorporated herein.
** Previously filed with Form S-4 on June 8, 2000; Commission File No.
333-38838, incorporated herein.
*** Confidential treatment for portions of this exhibit have been
requested.
+ Previously filed with Amendment No. 1 to Form S-4 on September 5,
2000; Commission File No. 333-38838, incorporated herein.
3
++ Previously filed with Amendment No. 2 to Form S-4 on December 8,
2000; Commission File No. 333-38838, incorporated herein.
+++ Previously filed with Amendment No. 3 to Form S-4 on January 31,
2001, Commission File No. 333-38838, incorporated herein.
*+ Previously filed with Amendment No. 5 to Form S-4 on October 5,
2001, Commission File No. 333-38838, incorporated herein.
4
KABANI & COMPANY, INC.
Certified Public Accountants
8700 Warner Avenue, Suite 200
Fountain Valley, California 92708
Telephone 714-849-1543
Fax 714-596-0303
e-mail: hamidkabani@hotmail.com
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated October 18, 2001, with respect to
the financial statements of Concierge, Inc. included in the Amendment No. 6 to
Form S-4 Registration Statement.
/s/Kabani & Company, Inc.
Kabani & Company, Inc.
Fountain Valley, California
October 30, 2001
Exhibit 23.24
Page 1 of 1 Page
JAAK (JACK) OLESK
Certified Public Accountant
345 North Maple Drive, Suite 284
Beverly Hills, CA 90210
310-288-0693
INDEPENDENT AUDITOR'S CONSENT
I consent to the inclusion in Amendment No. 6 to Form S-4 Registration
Statement of Starfest, Inc., of my report dated February 9, 2000, on the balance
sheet of Starfest, Inc. as of December 31, 1999, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year ended
December 31, 1999 and the year ended December 31, 1998, except with respect to
Note 4, as to which the date is March 7, 2000.
/s/Jaak Olesk CPA
--------------------------------
JAAK OLESK CPA
Beverly Hills, California
October 29, 2001
Exhibit 23.25
Page 1 of 1 Page
KABANI & COMPANY, INC.
Certified Public Accountants
8700 Warner Avenue, Suite 200
Fountain Valley, California 92708
Telephone 714-849-1543
Fax 714-596-0303
e-mail: hamidkabani@hotmail.com
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated March 21, 2001, with respect to
the financial statements of Starfest, Inc. included in the Amendment No. 6 to
Form S-4 Registration Statement.
/s/Kabani & Company, Inc.
Kabani & Company, Inc.
Fountain Valley, California
October 30, 2001
Exhibit 23.26
Page 1 of 1 Page
FULLER, TUBB, POMEROY & STOKES
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
201 ROBERT S. KERR AVENUE, SUITE 1000
OKLAHOMA CITY, OK 73102
G. M. FULLER (1920-1999) TELEPHONE 405-235-2575
JERRY TUBB FACSIMILE 405-232-8384
DAVID POMEROY
TERRY STOKES
-------
OF COUNSEL:
MICHAEL A. BICKFORD Thomas J. Kenan e-mail:
THOMAS J. KENAN kenan@ftpslaw.com
ROLAND TAGUE
BRADLEY D. AVEY
October 29, 2001
Suzanne Hayes, Senior Counsel
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 0409
450 Fifth Street, N.W.
Washington, D.C. 20549-0409
Re: Starfest, Inc.
Amendment No. 6 to Form S-4
File No. 333-38838
Dear Ms. Hayes:
In response to your comment letter of September 27, 2001, Starfest, Inc. is
filing its Amendment No. 6 to Form S-4. Set forth below are Starfest's
responses to each of the comments in your September 27, 2001 letter.
General
-------
1. Exhibits 10.2 and 10.3 were superseded by Exhibits 10.5 and 10.6.
Exhibits 10.5 and 10.6, filed with Amendment No. 5 to Form S-4, contain all
information previously omitted from Exhibits 10.2 and 10.3 when confidential
treatment was sought.
2. Updated consents from the independent accountants are included as
Exhibits 23.24, 23.25 and 23.26.
3. Updated audited financial statements for Concierge, Inc. through
June 30, 2001 are now filed as pages F-25 through F-38.
Suzanne Hayes
October 29, 2001
Page 2
Form S-4 Am 5 filed September 10, 2001
---------------------------------------------
Pro Forma Financial Information
----------------------------------
4. Updated pro forma financial information as of and for the period
ended June 30, 2001 is included beginning on page 19.
Concierge Financial Statements
--------------------------------
5. The accounting policy for stock-based compensation has been
clarified to disclose the recording of compensation expenses per APB 25 (page
F-31).
6. The term of the licenses has been disclosed in note 5 to the
financial statements, and it is stated that the prepaid royalties will be
amortized over the 5-year term of the licenses (page F-35).
7. Note 9 to the financial statements has been revised to reflect a
contingent liability of $2,009,610 at the balance sheet date (page F-36).
8. Note 10 has been expanded to describe the accounting acquirer in the
reverse merger (page F-37).
If you have any questions that might be properly handled by conversing with
the undersigned, please do so at my telephone number 405-235-2575, fax number
405-232-8384, or e-mail at kenan@ftpslaw.com.
Sincerely,
/s/Thomas J. Kenan
Thomas J. Kenan
e-mail: kenan@ftpslaw.com
cc: Michael Huemmer
Allen Kahn
Hamid Kabani, C.P.A.
Jaak Olesk