U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended
March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934 For the transition period from
________ to ________
Starfest, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 000-29913 95-4442384
-------------- ------------------------ -------------
(state of (Commission File Number) (IRS Employer
incorporation) I.D. Number)
9494 East Redfield Road, #1136
Scottsdale, AZ 85260
480-551-8280
-------------------------------------------------------
(Address and telephone number of registrant's principal
executive offices and principal place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of March 31, 2000, there were 23,000,000 shares of the Registrant's
Common Stock, no par value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
2
<PAGE>
Starfest, Inc.
Balance Sheets
March 31, 2000
Assets
------
<TABLE>
<CAPTION>
2000
-----------
Current Assets:
<S> <C>
Cash $ 833
----------
Total Current Assets $ 833
==========
</TABLE>
Liabilities And Stockholders' Equity (Deficit)
----------------------------------------------
<TABLE>
Current Liabilities:
<S> <C>
Accounts payable $ 5,461
Payable to shareholders 24,814
-----------
Total current liabilities $ 30,275
-----------
Stockholders, Equity (Deficit):
Common stock, no par value,
65,000,000 shares authorized;
19,499,999 and 23,000,000 shares
issued and outstanding 2,647,253
Retained earnings (deficit) (2,676,695)
-----------
Total stockholders, equity
(deficit) (29,442)
-----------
$ 833
===========
</TABLE>
See notes to financial statements.
3
<PAGE>
Starfest, Inc.
Statements Of Operations
Three Months Ended March 31,
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ - $ -
----------- -----------
General and Administrative
Expenses 19,038 2,424
----------- -----------
Operating Loss (19,038) (2,424)
Provision for income taxes 800 800
----------- -----------
Net Loss $ (19,838) (3,224)
=========== ===========
Accumulated Deficit - beginning of year (2,656,857) (2,138,251)
----------- -----------
Accumulated Deficit - end of year (2,676,695) (2,141,475)
Basic and Diluted Weighted Average
Number of Common Shares Outstanding 23,038,298 6,478,397
=========== ===========
Basic Loss Per Common Share $ (.00) $ (.00)
=========== ===========
Diluted Loss Per Common Share $ (.00) $ (.00)
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
Starfest, Inc.
Statement Of Changes In Stockholders' Equity (Deficit)
For the Three Months ended March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
Common Stock Retained
------------------------
Number of Earnings
Shares Amount (Deficit) Total
--------- ---------- ------------ ----------
Balance,
<S> <C> <C> <C> <C>
December 31, 1998 6,236,323 $1,598,072 $(2,138,251) $(540,179)
Shares issued
for services 208,339 208 - 208
Shares issued for
debt extinguished 298,338 127,400 - 127,400
Net loss for
three months
ended
March 31, 1999 - - (3,224) (3,224)
---------- --------- ---------- ---------
Balance,
March 31, 1999 6,743,000 $1,725,680 $(2,141,475) $(415,795)
========== ========= ========== =========
Balance, December
31, 1999 21,697,999 $2,639,651 $(2,656,857) $ (17,206)
Shares issued
for services 602,001 602 602
Shares issued
for cash 700,000 7,000 7,000
Net loss for
three months
ended
March 31, 2000 (19,838) (19,838)
---------- --------- ---------- --------
Balance March
31, 2000 23,000,000 $2,647,253 $(2,676,695) $ (29,442)
========== ========= ========== ========
</TABLE>
See notes to financial statements.
5
<PAGE>
Starfest, Inc.
Statements Of Cash Flows
Three Months Ended March 31,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
Net Cash From
operating Activities:
<S> <C> <C>
Net loss $ (19,838) $ (3,224)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Shares issued for services 602 208
Loss on disposal of equipment - 2,216
Shares issued for debt
extinguishment - 127,400
---------- ----------
Total Adjustments 602 129,824
Increase (Decrease) in Liabilities
Accounts payable (12,226) 800
Other liabilities - (127,400)
---------- ----------
Net cash used
by operating activities (31,462) -
Cash Flows From Investing Activities - -
Cash Flows From Financing Activities
Proceeds from Shareholders issued notes 24,814 -
Proceeds from issuance of common stock 7,000 -
---------- ----------
Net cash provided by
Financing Activities 31,814 -
---------- ----------
Net Cash Provided from All Activities 352 -
Cash - beginning of period 481 -
---------- ----------
Cash at end of period $ 831 $ -
========== ==========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Non cash financing transactions:
Shares for services $ 602 $ 208
Shares for debt extinguishment $ 0 $ 127,400
</TABLE>
See notes to financial statements.
6
<PAGE>
Starfest, Inc.
Notes To Financial Statements
March 31, 2000 and March 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) 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 copy (see Note 3). The
purpose of the merger is to effect an online communication retrieval system such
as e-mail via the telephone.
(b) 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 for the three months ended March 31, 2000 and March 31,
1999.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals 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.
(d) Issuance of Shares for Services
Valuation of shares for services is based on the estimate fair market
value of the services performed.
(e) Income Taxes
The Company's uses the liability method of accounting for income tax
specified by SFAS No. 109, "Accounting for Income Taxes", whereby deferred tax
liabilities and assets are determined based on the difference between financial
statements and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Deferred
tax assets are recognized and measured based on the likelihood of realization of
the related tax benefit in the future. The Company had no material net deferred
tax assets or liabilities at March 31, 2000 and March 31, 1999.
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<PAGE>
Starfest, Inc.
Notes To Financial Statements
March 31, 2000 and March 31, 1999
(f) Loss Per Share
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128 "Earnings Per Share." The statement replaced primary EPS
with basic EPS which is computed by dividing reported earnings available to
common shareholders by weighted average shares outstanding. The provision
requires the calculation of diluted EPS. The company uses the method specified
by the statement.
2. ADVERTISING
-----------
Advertising is expensed as incurred.
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, 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.
4. RELATED PARTY NOTES PAYABLE
---------------------------
Payable to shareholders is non-interest bearing, unsecured with no
specified due date.
5. GOING CONCERN UNCERTAINTIES
---------------------------
At the end of the first quarter (March 31, 2000) the Company incurred an
operating loss of (3,224). If management will be unable to generate revenue or
secure adequate financing to do its current business operational plan, there
will be substantial doubt of the Company's ability to continue as a going
concern. The Company, however, believes that its current financing and
reorganization plan will generate the resources required to continue and sustain
its operation indefinitely.
8
<PAGE>
Item 2. Plan of Operation
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.
Should the merger not be approved, Starfest will seek another merger
partner. Our sole "asset" is our status as a public company whose stock trades
on the OTC Bulletin Board.
Concierge's Plan of Operation
Concierge has developed a "unified messaging" product - the Personal
Communications Attendant ("PCATM") It attempted to commence marketing this
product in April 2000. The product was not ready. It terminated the April
initiative and will again commence marketing the product in August 2000.
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.
Concierge expects it will be able to commence marketing the PCATM in
August 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 is being overseen by Concierge. Concierge is pleased with Dave Cook
Consulting's progress and performance and is confident the PCATM will be ready
for August 2000 shipments.
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
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<PAGE>
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 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 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. No device other than an ordinary
telephone is needed to access the PCA(TM). The PCATM also includes an auto pager
that notifies the user by phone or pager when new e-mail is received.
Considering direct product costs including royalties, Concierge
projects a gross profit margin of approximately 80 to 90 percent of direct
sales. The underlying technology is the subject of patents, and Concierge is
required to pay royalties of $0.85 a PCATM unit to Lexicus, a subsidiary of
Motorola, for its Clamor Automatic Speech Recognition software and $1.00 a unit
to Fonix for its Text-to-Speech software. Concierge has paid advance royalties
to Lexicus for 50,000 units and advance royalties to Fonix for 180,000 units.
Concierge intends to "nationalize" the product to accommodate several
foreign languages, possibly including Japanese, Korean, German, Latin American
Spanish, French and Brazilian Portuguese. The timing of this depends upon Fonix
Corp.'s delivery date for non-English versions of its text-to-speech software.
Fonix has advised Concierge that its text-to-speech software will be available
by late summer 2000 in seven foreign languages.
The Market. As of early 1999, we estimate there were over 250 million
e-mail users worldwide, a number which is growing rapidly. As to the domestic
market, we estimate that there were more than 40 million e-mail users in the
U.S. in 1996 churning out more than 150 million messages a day. By 2003 that
could reach more than 200 million users, creating 7 billion messages a day. A
substantial majority of this group are potential users of Concierge's current
products and products planned for future release.
10
<PAGE>
Distribution Methods. Concierge's marketing methods will include
direct, high-volume, e-mail advertising promulgated on the Internet. Every
individual using Internet e-mail, communicating in English, and having the need
to remotely access e-mail is, by definition, a legitimate prospect for
Concierge's products. Bulk e-mail promotion is extremely cost-effective,
especially in view of the fact that the Concierge product is specifically
designed for Internet e-mail users, or 100 percent of the addressees. 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. 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 Agreement. XeTel Corporation of Austin,
Texas will manufacture the PCATM for Concierge at its San Ramon, California
plant and ship it F.O.B. San Ramon at Concierge's direction.
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.
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.
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<PAGE>
Service Order Fulfillment Agreement. eAssist.com will provide
multimedia, customer-relationship-management services via the Internet to
Concierge. eAssist.com will provide -
o outsourced e-mail management services and software,
o chat management services and software, and
o voice-based call handling.
All services are to be provided 24 hours a day, 7 days a week. eAssist.com
agrees to provide -
o 90% of its automatic e-mail responses within 10 minutes,
o 90% of its personalized e-mail responses within 8 hours,
o 80% of its chat requests within 120 seconds, and
o 80% of calls answered within 120 seconds.
The term of the agreement is two years - March 29, 2002.
Either party can terminate the agreement on 60 days' notice.
Product Development Agreement. Dave Cook Consulting of Mercer
Island, Washington has agreed to provide product development consulting services
to Concierge. Payment for the services is based upon hourly charges.
The intellectual property rights associated with the work
product of Dave Cook Consulting will be owned by Concierge.
The term of the March 17, 2000 agreement is one year.
Concierge can terminate the agreement without cause on 30 days' notice. Dave
Cook Consulting can terminate the agreement on 30 days' notice if Concierge
materially breaches any obligation of the agreement.
Governmental Approval of Principal Products. No governmental approval
is required in the U.S. for Concierge's products.
Government Regulations. There are no governmental regulations in the
U.S. that apply to Concierge's products.
Properties. Concierge subleases approximately 1,600 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.
12
<PAGE>
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 1, 2000 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 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 June 30, 2000, Concierge had cash assets of $85,105
acquired through the sale of its common stock in an offering exempt from
registration pursuant to the provisions of the Commission's Regulation D, Rule
506. Concierge expects that it will not have to raise additional funds for the
next five months. Should the need arise during the next twelve months for
additional capital, Concierge will attempt to raise this capital in another
offering exempt from registration.
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
13
<PAGE>
environments, although the server-based, multi-user, versions will most likely
function under Microsoft NT or its derivative, Windows 2000.
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.
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 1,376,380 shares of common stock will be
converted to 96,957,713 shares of common stock of Starfest on the basis of
70.444 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
64,437,240 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 97 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.
During the last two fiscal years and the period since June 30, 1999,
there have been no changes in Concierge's principal independent accountant.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule*
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<PAGE>
*Previously filed with Form 10-QSB 03-31-00 filed June 8, 2000;
Commission File No. 000-29913, incorporated herein.
(b) Forms 8-K
Starfest filed two Forms 8-K during this fiscal quarter:
(1) March 10, 2000 - reporting the purchase by Starfest of
substantially all the capital stock of MAS Acquisition XX
Corp. The following financial statements were filed in the
Form 8-K:
Starfest, Inc.
Independent Auditor's Report
Balance Sheet as of 12-31-99
Statement of Operations for the years ended 12-31-99
and 12-31-98
Statement of Changes in Stockholders' Equity
(Deficit) for the period from 12-31-97 to 12-31-99
Statements of Cash Flows for the Years ended 12-31-99
and 12-31-98
Notes to Financial Statements
(2) March 15, 2000 - reporting the resignation of Jaak Olesk as
Starfest's independent certifying accountant.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 6, 2000 STARFEST, INC.
By /s/ Michael Huemmer
--------------------------
Michael Huemmer, president
15
