U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 000-29913
STARFEST, INC.
(Name of small business issuer in its charter)
California 95-444238
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9494 East Redfield Road, #1136, Scottsdale, AZ 85260
----------------------------------------------------
(Address of principal executive offices)
480-551-8280
---------------------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: None.
Name of each exchange on which registered: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 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 [
]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in
<PAGE>
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: None.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days: $37,638,000 computed by
reference to the $1.70 average of the bid and asked price of the Company's
Common Stock on April 12, 2000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 23,000,000 shares of Common
Stock, $0.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (3) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The list documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990). None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
2
<PAGE>
TABLE OF CONTENTS
Page
----
Item 1. Description of Business .................................... 1
Business Development ....................................... 1
Business of Starfest ....................................... 2
Course of Business for Starfest Should
the Merger Not Occur ................................ 2
Number of Employees ........................................ 3
Item 2. Description of Property .................................... 3
Facilities ................................................. 3
Item 3. Legal Proceedings .......................................... 3
Item 4. Submission of Matters to a Vote of Security
Holders ............................................. 3
Item 5. Market for Common Equity and Related Stockholder
Matters ............................................. 3
Dividends .................................................. 4
Holders .................................................... 4
Penny Stock Regulations .................................... 4
The Penny Stock Suitability Rule .................... 4
The Penny Stock Disclosure Rule ..................... 5
Effects of the Rule ................................. 5
Recent Sales of Unregistered Securities .................... 6
Item 6. Plan of Operations ......................................... 7
Overview ................................................... 7
Concierge's Plan of Operation ....................... 7
Description of the PCATM ............................ 7
The Market .......................................... 8
Distribution Methods ................................ 8
Production Costs .................................... 8
Government Approval of Principal Products ........... 8
Government Regulations .............................. 8
Properties .......................................... 9
Dependence on Major Customers ....................... 9
Seasonality ......................................... 9
Research and Development ............................ 9
Environmental Controls .............................. 9
Year 2000 Computer Problems ......................... 9
Number of Employees ................................. 9
Venue of Sales ...................................... 10
Patents, Trademarks, Copyrights and
Intellectual Property ........................ 10
Legal Proceedings ................................... 10
Financial Condition ................................. 10
Liquidity ........................................... 10
Capital Resources ................................... 10
Item 7. Financial Statements ....................................... 10
Item 8. Changes in and Disagreements With Accountants On
Accounting and Financial Disclosure ................. 20
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with
Section 16(a) of the Exchange Act ................... 20
i
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Section 16(a) Beneficial Ownership
Reporting Compliance ......................... 21
Item 10. Executive Compensation ..................................... 21
Long-Term Compensation ..................................... 22
Item 11. Security Ownership of Certain Beneficial Owners
and Management ...................................... 22
Item 12. Certain Relationships and Related Transactions ............. 23
Item 13. Exhibits and Reports on Form 8-K ........................... 24
(a) Exhibits ............................................ 24
(b) Reports on Form 8-K ................................. 24
Signatures ................................................................ 25
ii
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
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 MAS Capital, Inc., an Indiana corporation, the controlling
shareholder of MAS Acquisition XX Corp. ("MAS XX"), an Indiana corporation, and
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.
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.
A change in control of Starfest could occur in the future, should the
shareholders of Starfest and Concierge, Inc., a Nevada corporation, approve an
agreement of merger entered into between Starfest and Concierge on January 26,
2000. The proposed merger will be submitted to the shareholders of each of
Starfest and Concierge pursuant to a Form S-4 Prospectus-Proxy Statement to be
filed with the Commission as soon as the necessary audited financial statements
of Concierge are prepared. It is expected that these financial statements will
be available within 30 days.
Pursuant to the agreement of merger between Starfest and
Concierge,
o Starfest will be the surviving corporation,
o The shareholders of Concierge will receive pro rata for their
shares of common stock of Concierge, 78,000,000 shares of common
stock of Starfest in the merger, and all shares of capital stock
of Concierge will be cancelled,
o The officers and directors of Concierge will become the
officers and directors of Starfest, and
1
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o The name of Starfest will be changed to "Concierge
Technologies, Inc."
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." In 1996 the event was renamed
"Starfest" and was again held in Los Angeles.
The events all lost money. In 1997 the event was planned but was
cancelled before being held. The company was essentially dormant in 1998 with
its activities being limited to dealing with creditors and to attempting to
raise capital for the resumption of business.
In 1999 Starfest turned control of the company over to
individuals involved in the adult Internet entertainment business. Under this
new direction the company bought three websites found on the Internet through
www.starfest.com with the front-page title of adultstars.com. Starfest also
purchased and paid for twelve 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 parties.
Stockholders owning a majority of the outstanding stock of Starfest regained
control of the management of the company and, 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 assets of the company
associated with the adult entertainment business for $10,000 and applied this
and its other cash assets to the payment of outstanding liabilities.
On January 18, 2000, Starfest and Concierge executed a letter of
intent to submit to their stockholders a proposal to merge. An 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 or significant assets.
Course of Business for Starfest Should the Merger Not Occur
Should the stockholders of the two companies not approve the
merger, Starfest will seek another partner. Its sole
2
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"asset" is its status as a public company whose stock trades on the OTC Bulletin
Board.
Number of Employees
On December 31, 1999, Starfest employed one person full time and no
persons part time.
ITEM 2. DESCRIPTION OF PROPERTY
Starfest owns no plants, real property or personal property.
Facilities
Starfest's office facilities are in the home of its president, Michael
Huemmer, in Scottsdale, Arizona, and are provided rent free.
ITEM 3. LEGAL PROCEEDINGS
Neither Starfest nor any of its property is the subject of any pending
legal proceedings or any proceeding of which Starfest is aware that a
governmental authority is contemplating.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal year 1999.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Starfest's Common Stock presently trades on the OTC Bulletin Board.
The high and low bid and asked prices, as reported by the OTC Bulletin Board,
are as follows for 1998 and 1999. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
<TABLE>
<CAPTION>
High Low
---- ---
1998:
<S> <C> <C>
1st Qtr. 0.02 0.005
2nd Qtr. 0.01 0.005
3rd Qtr. 0.03 0.005
4th Qtr. 0.021 0.01
1999:
1st Qtr. 0.1000 0.0050
2nd Qtr. 0.5938 0.0200
3rd Qtr. 0.2000 0.0600
4th Qtr. 0.1050 0.0450
</TABLE>
3
<PAGE>
Dividends
Starfest has declared no dividends on its common stock. There are no
restrictions that would or are likely to limit its ability to pay dividends on
its common stock.
Holders
There are approximately 90 holders of record of Starfest's common stock.
Penny Stock Regulations
Starfest's common stock 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 $5 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.
4
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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 sales to "established customers" of the broker-dealer persons who
either have had an account with the broker-dealer for at least a
year or who have effected three purchases of penny stocks with
the broker-dealer on three different days involving three
different issuers, 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 includes a description
of the penny stock market and how it functions, its inadequacies and
shortcomings, and the risks associated with investments in the penny stock
market. The broker-dealer must also disclose the stock's bid and ask price
information and the dealer's and salesperson's compensation related to the
proposed transaction. 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.
5
<PAGE>
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.
Recent Sales of Unregistered Securities
Starfest sold shares of its common stock within the past three years
without registering the shares under the Securities Act of 1933:
<TABLE>
<CAPTION>
Number of Nature of
Shares Amount of Consideration
Person Date Issued Consideration Paid for Shares
------ ---- --------- ------------- ---------------
<S> <C> <C> <C> <C>
Herb Gronauer(1) 02-17-99 100,000 $ 5,000 Services as president
during 1998
J. Douglas Bowey(1) 02-17-99 208,339 10,417 Financial consultant
Thomas J. Kenan(1) 02-17-99 198,338 9,917 Legal services
17 persons(1) 04-06-99 13,000,000 285,000 Cash - $210,000
Cancel notes payable
by Starfest - $75,000
Marjorie J. Cole(2) 05-17-99 33,000 660 (3)
Thomas J. Kenan(2) 08-27-99 100,000 6,000 Legal services
7 persons(2) 11-19-99 1,365,000 40,950 (4)
4 persons(2) 12-30-99 700,000 46,620 (5)
</TABLE>
- -------------------------
(1) Shares were issued to these persons pursuant to the exemption from
registration provided by the Commission's Regulation D, Rule 504.
(2) Shares were issued to these persons pursuant to the exemption from
registration provided by the Commission's Regulation D, Rule 506.
(3) Financial consulting services provided by her spouse,
George W. Cole.
(4) Services rendered to promote the company's product.
(5) Advertising and promotional services.
All shares issued in reliance upon the Regulation D, Rule 506 exemption
from registration were issued to persons that had existing relationships with
the company's officers and
6
<PAGE>
directors and were sophisticated in investment matters. No public solicitation
or public advertising was used in connection with these sales of securities.
ITEM 6. PLAN OF OPERATIONS
As described above under "Item 1. Description of Business," on January
26, 2000, Starfest and Concierge, Inc. entered into an agreement of merger that
will be submitted to the shareholders of each corporation for their approval or
rejection. The submittal will be pursuant to a Form S-4 Prospectus-Proxy
Statement to be filed with the Commission during April 2000. Should the proposed
merger be approved by the shareholders of both corporations, the business of
Concierge will be the business of Starfest.
Should the proposed merger be effected, Starfest's management has been
advised by the management of Concierge that Concierge's present and proposed
business is as follows:
Overview
Concierge was incorporated on September 20, 1996, in the
State of Nevada. Its principal office is at 6033 West Century
Boulevard, Suite 1278, Los Angeles, California 90045. Its
telephone number is 310-645-1582.
Concierge's Plan of Operation
Concierge has developed a "unified messaging" product - the Personal
Communications Attendant. It proposes to market this product commencing in
April 2000.
Description of the PCA
Concierge's PCA provides a means by which any user of Internet e-mail
can have e-mail and fax messages spoken to him or her over any touch-tone
telephone or wireless phone in the world.
The PCA responds to the user's voice commands to read, verbalize and
manage e-mail traffic stored on a personal computer. The PCA 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 PCA can verbalize e-mail
with fax and voice-mail capabilities over the phone and save or delete those
messages as directed by the user. Even more exciting, the user, by voice
command, over the telephone, can dictate e-mail messages to respond to the
e-mail messages accessed by telephone.
7
<PAGE>
The Market
As of early 1999, there were estimated to be over 250 million e-mail
users worldwide, a number which is growing rapidly. As to the domestic market,
last year there were more than 40 million e-mail users in the U.S. 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 release.
Distribution Methods
Concierge plans an aggressive, direct-mail and Internet- marketing
campaign to introduce and promote the PCA.
Production Costs
The PCA will be manufactured and produced for Concierge by Xetel Corp.
A service order fulfillment contract is being negotiated at this time with an
unaffiliated third party corporation. Emerald Solutions, Inc. will provide
project management, program design and program coding services to implement
products designed by Concierge.
The e-mail version will retail at $39.95. With a $19.95 upgrade, the pro
version monitors and collects fax, voice mail and e-mail messages. There will be
no monthly service fee. No device other than an ordinary telephone is needed to
access the PCA. The PCA 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.
Concierge is in the process of "nationalizing" the product to
accommodate several foreign languages, including Japanese, Korean, German, Latin
American Spanish, French and Brazilian
Portuguese.
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.
8
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Properties
Concierge subleases approximately 150 square feet of office space at
Suite 1278, 6033 West Century Boulevard, Los Angeles, California 90045. The
space is deemed adequate for the present time, but additional space will be
needed commencing in April 2000. Concierge has not yet identified the additional
space it will lease, but ample space is available 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
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 affects many
companies and organizations and 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.
9
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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; the underlying technology is the subject of patents,
and Concierge is required to pay royalty of approximately $0.50 a PCA unit to
each of two unaffiliated patent holders, Lexicus, a subsidiary of Motorola, and
Fonix.
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.
Financial Condition
As of March 8, 2000, Concierge had cash assets of approximately $500,000
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.
Liquidity
Concierge expects to improve its liquidity through anticipated sales of
its PCATM commencing in April 2000.
Capital Resources
Should the need arise during the next twelve months for additional
capital, Concierge believes that several of its existing shareholders will
provide equity capital to meet this need.
ITEM 7. FINANCIAL STATEMENTS
Starfest, Inc.
Independent Auditors' Report ...................................... 11
Balance Sheet as of December 31, 1999 ............................. 12
Statement of Operations for the years
ended December 31, 1999 and
December 31, 1998 .......................................... 13
Statement of Changes in Stockholders' Equity
(Deficit) for the period from
December 31, 1997 to December 31, 1999 ..................... 14
10
<PAGE>
Statements of Cash Flows for the years ended
December 31, 1999 and December 31, 1998 .................... 15
Notes to Financial Statements ..................................... 16
11
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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
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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.
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STARFEST, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
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
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
STARFEST, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY/(DEFICIT)
<TABLE>
<CAPTION>
Common Stock Retained
Number of Amount Earnings
Shares Total (Deficit) Total
--------- ---------- ------------ -----------
Balance,
<S> <C> <C> <C> <C>
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)
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
STARFEST, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
---------- ----------
Net Cash From
Operating Activities:
<S> <C> <C>
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 $ -
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
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).
17
<PAGE>
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.
18
<PAGE>
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.
In January and February, 2000 the Company was in negotiations
regarding possibly entering into a business combination with
Concierge, Inc., a development stage software developer. Concierge,
Inc. does not have significant assets or revenues.
19
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
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.
The registrant has not yet engaged a new independent accountant or
principal accountant to audit its financial statements.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below are the names, and terms of office of each of the
directors, executive officers and significant employees of the company and a
description of the business experience of each.
Office Held Term
Person Offices Since of Office
------ ------- ----------- ---------
Michael Huemmer, 60 President and 1999 2000
Director
Janet Alexander, 66 Secretary and 1999 2000
Director
Michael Huemmer. Mr. Huemmer has been employed by Starfest since April
1999. Prior to this employment he was the president of Ameripro Sports Marketing
Company of Palm Desert, California from 1995 until his employment with Starfest.
Janet Alexander. Ms. Alexander has served as Starfest's secretary since
July 1999. Prior to this employment she was self-employed as a hypnotherapist
in Wildomer, California from 1995 until June 1998 when she moved to Palm
Springs, California. She was not employed from June 1998 until she became the
secretary of Starfest in July 1999.
There are no family relationships between the directors and officers.
There are no significant employees of Starfest who are not described above.
20
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the registrant during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the registrant with respect to its most recent
fiscal year, and a review of any written representations received by the
registrant from the following persons, no person, who was at any time a
director, officer or beneficial owner of more than ten percent of any class of
equity securities of the registrant registered pursuant to Section 12, failed to
file on a timely basis, as disclosed in the above Forms, the reports required by
Section 16(a) of the Exchange Act during the most recent fiscal year or prior
fiscal years.
ITEM 10. EXECUTIVE COMPENSATION
The following information concerns the compensation of Starfest'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.
<TABLE>
<CAPTION>
Shares of
Name of Chief Executive Officer Year Cash Salary Common Stock Awarded
- ------------------------------- ---- ----------- --------------------
<S> <C> <C> <C>
Michael Huemmer 1999 $18,000 300,000(1)
1998 0 0
1997 0 0
Thomas J. Kenan 1999 0 0
1998 0 0
1997 0 0
Herb Gronauer 1999 0 0
1998 0 200,000(2)
1997 0 0
</TABLE>
- ------------------------
(1) The value of the 300,000 shares of stock awarded to Mr. Huemmer was
$13,500 when the award was made.
(2) The value of the 200,000 shares of stock awarded to Mr. Gronauer was
$10,000 when the award was made.
In November 1999 Ms. Janet Alexander, secretary of Starfest, was granted
100,000 shares of common stock of Starfest as compensation for her services as
secretary and a director. In March 2000, Pamela Miller was awarded 150,000
shares of common stock of Starfest as compensation for her services as secretary
and a director of Starfest during part of 1999.
21
<PAGE>
Other than as stated above, no cash or stock compensation, deferred
compensation or long-term incentive plan awards were issued or granted to
Starfest's management during or with respect to the period ended December 31,
1999. Further, no member of Starfest's management has been granted any option or
stock appreciation rights; accordingly, no tables relating to such items have
been included within this Item.
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.
Long-Term Compensation
Starfest has no long-term compensation plans or employment agreements
with any of its officers or directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the common stock of Starfest as of March 7, 2000 by each individual
who is known to Starfest, as of the date of this filing, to be the beneficial
owner of more than five percent of Starfest's common stock, its only voting
security.
<TABLE>
<CAPTION>
Name and Address Amount and
Of Beneficial Nature of Percent of
Owner Beneficial Ownership(1) Class
---------------- ----------------------- ----------
<S> <C> <C> <C>
Thomas J. Kenan 1,360,000 shares(2) 5.9%
212 N.W. 18th St.
Oklahoma City, OK 73103
Gary Bryant 1,310,000 shares(3) 5.7%
46471 Manitou
Indian Wells, CA 92210
</TABLE>
- -------------------------
(1) Unless otherwise indicated, Starfest believes that all persons named in
the above table have the sole voting and investment power with respect
to all shares of common stock beneficially owned by them.
(2) 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
22
<PAGE>
disclaims any beneficial ownership of any of the shares held
in the trust.
(3) 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
disavows any beneficial ownership of any of the shares held by Mrs.
Bryant.
The table below sets forth the ownership, as of the date of this filing,
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.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Owner Beneficial Ownership Class
---------------- -------------------- ----------
<S> <C> <C>
Michael Huemmer 760,000 shares 3.3%
#1136
9494 East Redfield Road
Scottsdale, AZ 85260
Janet Alexander 100,000 shares 0.4%
Suite C
120 East Andreas Road
Palm Springs, CA 92262
Officers and Directors
as a Group (2 persons) 860,000 shares 3.7%
</TABLE>
There are no agreements between or among any of the shareholders that
would restrict the issuance of shares in a manner that would cause any change in
control of Starfest. There are no voting trusts, pooling arrangements or similar
agreements in the place between or among any of the shareholders, nor do the
shareholders anticipate the implementation of such an agreement in the near
future.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions during the past two years, or proposed
transactions, to which Starfest was or is to be a party, in which any director,
executive officer, nominee for election as a director, any security holder named
in Item 10 above and any immediate family member of any of the foregoing persons
had or is to have a direct or indirect material interest.
23
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Form 10-KSB:
Exhibit No. Description
2 - Stock Purchase Agreement of March 6, 2000
between Starfest, Inc. and MAS Capital, Inc.*
3.1 - Certificate of Amendment of Articles of
Incorporation of Starfest, Inc. and its
earlier articles of incorporation.*
3.2 - Bylaws of Starfest, Inc.*
10.1 - Agreement of Merger between Starfest, Inc. and
Concierge, Inc.*
23 - Consent of Jaak (Jack) Olesk, certified public
accountant*
27 - Financial Data Schedule
*Previously filed with Form 8-K12G3 on March 10, 2000; Commission File
No. 000-29913, incorporated herein.
(b) Reports on Form 8-K
No Forms 8-K were filed by Starfest during the last quarter of the
period covered by this report.
24
<PAGE>
SIGNATURES
In accordance with Section 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
STARFEST, INC.
Date: April __, 2000 By /s/ Michael Huemmer
---------------------------------
Michael Huemmer, President
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: April __, 2000 /s/ Michael Huemmer
-----------------------------------
Michael Huemmer, President, Chief
Financial Officer, and Director
Date: April __, 2000 /s/ Janet Alexander
-----------------------------------
Janet Alexander, Secretary and
Director
25
<PAGE>
Starfest, Inc.
Exhibits to Form 10-KSB
For the Fiscal Year Ended December 31, 1999
Exhibit No. Description
2 - Stock Purchase Agreement of March 6, 2000
between Starfest, Inc. and MAS Capital, Inc.*
3.1 - Certificate of Amendment of Articles of
Incorporation of Starfest, Inc. and its
earlier articles of incorporation.*
3.2 - Bylaws of Starfest, Inc.*
10.1 - Agreement of Merger between Starfest, Inc. and
Concierge, Inc.*
23 - Consent of Jaak (Jack) Olesk, certified public
accountant*
27 - Financial Data Schedule
*Previously filed with Form 8-K12G3 on March 10, 2000; Commission File
No. 000-29913, incorporated herein.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 481
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 481
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 481
<CURRENT-LIABILITIES> 17,687
<BONDS> 0
0
0
<COMMON> 2,639,651
<OTHER-SE> (2,656,857)
<TOTAL-LIABILITY-AND-EQUITY> 481
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 518,606
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (518,606)
<INCOME-TAX> 0
<INCOME-CONTINUING> (518,606)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (518,606)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
