SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Commission File No. 000-29913
AMENDMENT NO. 2 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) Classification 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. [ ]
<PAGE>
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. [ ]
<TABLE>
<CAPTION>
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
------------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock 96,957,713 $0.001 $32,320 $8.54(1)
</TABLE>
(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
<PAGE>
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 commission has approved or
a high degree of risk. See "Risk disapproved these securities or
Factors," beginning on page 3. determined if this prospectus-proxy
statement is truthful or 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
December __, 2000
<PAGE>
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.......................................... 4
7. It is likely that trading in our stock will
be volatile and limited ................................... 5
8. 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 ............................... 5
9. Concierge has contingent liability of $467,500
for possible violations of registration requirements
of the Securities Act ..................................... 6
10. Concierge may need additional funding ..................... 6
11. Our success depends on our ability to retain
Allen E. Kahn and other key personnel .................... 7
1 2. Management and their affiliates will control all
matters submitted to shareholder votes ................... 7
1 3. One year after the proposed merger should become
effective, certain trading restrictions will be relaxed on the
53.7 percent interest in the post-merger company to be owned by
Concierge's present affiliates, which could result in a
disruptive force in an orderly
trading market in the company's shares ................... 7
1 4. The liquidation value of the post-merger
company is far less than its market value.
ii
<PAGE>
A collapse of the market price of the
post-merger company's common stock would
likely occur in the event of the company's
liquidation .............................................. 8
15. The technology for Concierge's product, the
Personal Communications Attendant, is not
patented by Concierge and is available to
competitors. Strong competition is expected ............. 8
16. Should a change in management seem necessary, it
will be difficult for the non-management
stockholders to do this .................................. 8
Terms of the Transaction................................................. 8
Material Conditions to the Merger ............................... 8
Terms of the Merger.............................................. 9
Reasons for the Merger .......................................... 10
Description of Securities........................................ 11
Common Stock.............................................. 11
Voting Rights...................................... 1 1
Dividend Rights.................................... 1 1
Liquidation Rights................................. 1 1
Preemptive Rights.................................. 1 1
Registrar and Transfer Agent....................... 1 1
Dissenters' Rights................................. 1 1
Change in Control ................................. 1 1
Preferred Stock........................................... 1 2
Differences Between Rights of Stockholders of
Starfest and of Concierge ................................ 1 2
Accounting Treatment of Proposed Merger ......................... 1 2
Federal Income Tax Consequences.......................................... 1 3
The Merger ............................................ 1 3
Stockholders of Concierge................................. 1 3
Agreement of Merger ............................................. 1 3
Pro Forma Financial Information and Dilution..................... 1 7
Material Contacts Among the Companies.................................... 1 9
Background of the Transaction ................................... 1 9
Interests of Named Experts and Counsel .................................. 2 1
Indemnification ......................................................... 2 2
Penny Stock Regulations ................................................. 2 3
Information About Starfest............................................... 2 5
Business Development ............................................ 2 5
Business of Starfest ............................................ 2 6
Plan of Operation ............................................... 2 7
Description of Property ......................................... 2 8
Legal Proceedings................................................ 2 8
Market for Starfest's Common Stock and Related
Stockholder Matters....................................... 2 8
Rule 144 and Rule 145 Restrictions on Trading.................... 2 8
Dividends ............................................ 30
iii
<PAGE>
Reports to Stockholders .................................. 30
Registration Statement ................................... 30
Stock Certificates ....................................... 31
Financial Statements............................................. 31
Management's Plan of Operation .................................. 31
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures ..................... 31
Information About Concierge.............................................. 3 1
Overview ........................................................ 3 2
Concierge's Plan of Operation.................................... 3 2
Description of the PCATM ........................................ 3 2
The Market ...................................................... 3 4
Distribution Methods ............................................ 3 4
Production Costs ................................................ 3 5
Government Approval of Principal Products ....................... 3 7
Government Regulations .......................................... 3 7
Properties ...................................................... 3 7
Dependence on Major Customers and Suppliers ..................... 3 7
Seasonality ..................................................... 3 7
Research and Development ........................................ 3 7
Environmental Controls .......................................... 3 7
Year 2000 Computer Problem ...................................... 3 8
Number of Employees ............................................. 3 8
Venue of Sales .................................................. 3 8
Patents, Trademarks, Copyrights and Intellectual Property ....... 3 8
Legal Proceedings ............................................... 3 8
Concierge Management's Plan of Operation ........................ 3 8
Liquidity ....................................................... 3 8
Product Research and Development ................................ 3 9
Other Expected Developments ..................................... 3 9
Market for Common Equity and
Related Stockholder Matters .............................. 3 9
Market Information .............................................. 3 9
Holders ......................................................... 40
Dividends ....................................................... 40
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures ................................ 40
Financial Statements............................................. 40
Voting and Management Information........................................ 41
Date, Time and Place Information ................................ 41
Starfest ............................................ 41
Concierge ............................................ 41
Voting Procedure.......................................... 41
Revocability of Proxy............................................ 42
Effect of the Merger ............................................ 42
Dissenters' Rights of Appraisal.................................. 4 3
Persons Making the Solicitation.................................. 4 4
Voting Securities and Principal Holders Thereof.................. 4 4
Security Ownership of Certain Beneficial Owners and
Management................................................ 4 5
Directors, Executive Officers and Significant Employees.......... 4 8
Executive Compensation .......................................... 50
iv
<PAGE>
Other Arrangements ....................................... 50
Stock Options ............................................ 51
Certain Relationships and Related Transactions................... 51
Transactions with Insiders and Promoters.................. 51
Financial Statements Index .............................................. 5 4
Appendix A - Agreement of Merger......................................... A-1
v
<PAGE>
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 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 70.444 shares of Starfest common stock for each share owned of
Concierge's outstanding 1,376,380 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
1
<PAGE>
The table below compares the hypothetical 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:
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:
<TABLE>
<CAPTION>
Starfest Concierge
------------ ----------
Market Value Book Value
------------ ----------
January 14, 2000 - the last
trading date preceding the
public announcement of the
proposed merger:
<S> <C> <C>
Per share $ 0.29 $
--------- ----------- --------
All issued shares $ 6,670,000 $(4,610)
----------------- ----------- --------
September 30, 2000 - the most
recent date of financial
statements of the two companies:
Per share $ 0.38 $ 0.24
--------- ----------- --------
All issued shares $ 8,740,000 $336,654
----------------- ----------- --------
</TABLE>
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.
2
<PAGE>
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:
<TABLE>
<CAPTION>
Starfest Concierge
-------- ---------
<S> <C> <C>
3.7% 66.5%
</TABLE>
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."
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 1,376,380 Concierge shares, pro rata,
3
<PAGE>
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 $397,462 on September 30, 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.
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 begun selling its product. It has lost
$1,901,017 since inception, which is the amount of its accumulated deficit.
Sales and shipment of its initial product commenced in September 2000. It had
available on September 30, 2000, for working capital, cash of approximately
$107,559 and prepaid expenses of $245,800, representing prepaid royalties and
product manufacturing expense.
4. Starfest will lose most of the income tax benefits of its net
operating loss carryforward.
Starfest had a net operating loss carryforward of $2,656,857 at
December 31, 1999. 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 $2,656,857 operating loss
carryforward will be lost.
4
<PAGE>
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
increase from 10 percent to 25 percent of the shares then outstanding.
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.
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. A "going concern" paragraph added by a company's auditor to its audit
report does not represent any qualification of the auditor's report. It does,
however, reflect the fact that the auditor has identified conditions or events
that indicate there could be reasonable doubt about the company's ability to
continue as a going concern for a reasonable period of time, not to exceed one
year.
7. 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 and 1999 and the first three quarters of 2000.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
<TABLE>
<CAPTION>
Average Daily
High Low Shares Traded
---- --- -------------
1998:
<S> <C> <C> <C>
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
-------
</TABLE>
5
<PAGE>
<TABLE>
1999:
<S> <C> <C> <C>
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
-------- ------ ------ -------
</TABLE>
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.
8. 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 certain rules governing 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. Not only
do these rules prevent broker recommendations of a penny stock in many
instances, they tend to delay or to frustrate 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.
9. Concierge has contingent liability of $467,500 for possible
violations of registration requirements of the Securities Act.
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 $467,500 worth of its common stock to seven
persons. Concierge believed that such offering
6
<PAGE>
was 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 under Section 12(1)
of the Act to the seven purchasers of such common stock for their purchase
price, 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. Such an action would have to be brought in a court within one year
after the purchase of the securities.
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.
10. Concierge 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 become profitable, Concierge's
contingent liability for possible violations of the registration requirements of
the Securities Act of 1933 (see Risk Factor No. 9 immediately above) could
impose a future requirement for additional funding. If additional funding is
needed, whether during the next twelve months or later, the source of 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 Operations; - Liquidity."
11. 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.
7
<PAGE>
12. Management and their affiliates will control all matters submitted
to shareholder votes.
Should the merger be approved, the post-merger company's
management and their affiliates will own approximately 53.7 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.
13. One year after the proposed merger should become effective, certain
trading restrictions will be relaxed on the 53.7 percent interest in the
post-merger company to be owned by Concierge's present affiliates, which could
result in a disruptive force in an orderly trading market in the company's
shares.
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 28.
14. The liquidation value of the post-merger company is far less than
its market value. A collapse of the market price of the post-merger company's
common stock would likely occur in the event of the company's liquidation.
15. 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 will license this technology to other
companies.
8
<PAGE>
16. Should a change in management seem necessary, it will be difficult
for the non-management stockholders to do this.
Should the proposed merger be approved, the company's officers
and directors and their affiliates will own approximately 53.7 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 66.5 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 1,376,380 outstanding shares of common
stock shall be converted into 70.444 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.
9
<PAGE>
5. The articles of incorporation of Starfest will be amended to provide
the following:
o Its name will be changed to "Concierge Technologies, Inc."
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
10
<PAGE>
o combinations of the above or other preferences.
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 - 53,258,472
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
1,376,380 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.
11
<PAGE>
Dividend rights. Stockholders receive dividends when and if
declared by the board of directors out of funds of the corporation legally
available therefor.
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 ben five directors. A
Starfest bylaw designates not less than four nor more than five
directors.
12
<PAGE>
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.
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.
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<PAGE>
federal income tax law, including legislation, regulations, administrative
rulings and court decisions.
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.
14
<PAGE>
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."
o the change of management to that of Concierge's
management, and
15
<PAGE>
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
16
<PAGE>
breaches of representations, but only if the losses exceed $10,000 and the total
indemnification obligation shall not exceed $200,000.
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 5,083,300 shares of common
stock, through his ownership of 75,000 shares of Concierge common stock, should
the merger be approved. 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.
17
<PAGE>
<TABLE>
<CAPTION>
Starfest Concierge
Inc. Inc. Pro Forma Pro Forma
(Historical) (Historical) Adjustments Combined
------------ ------------ ----------- ---------
ASSETS
<S> <C> <C> <C> <C>
Current assets $ 1,105 $ 430,905 $ (100,000) $ 332,010
Property and equipment - 4,692 - 4,692
Goodwill - - 362,441 362,441
--------- ---------- ---------- ----------
TOTAL ASSETS $ 1,105 $ 435,597 $ 699,143
========= ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 363,546 $ 39,155 $ 100,000 $ 302,701
Long term liabilities - - - -
---------- ---------- ---------- ----------
Total liabilities $ 363,546 39,155 $ 302,701
---------- ---------- ----------
Stockholders' equity:
Common stock 2,647,353 13,764 2,647,353 13,764
Additional paid-in capital - 1,741,407 - 1,741,407
Retained earnings (deficit) (3,009,794) (1,358,729) (3,009,794) (1,358,729)
---------- ---------- ---------- ----------
Total stockholders'
equity (362,441) 396,442 - 396,442
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND $ 1,105 $ 435,597 $ - $ 699,143
========== ========== ========== ===========
STOCKHOLDERS' EQUITY
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Starfest Concierge
Inc. Inc. Pro Forma Pro Forma
(Historical) (Historical) Adjustments Combined
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Sales $ - $ - $ - $ -
Cost of Sales - - - -
---------- ---------- --------- ---------
Gross profit - - - -
Operating expenses 352,137 259,335 - 611,472
---------- ---------- --------- ---------
Loss from operations (352,137) (259,335) - (611,472)
Income (loss) before taxes (352,137) (259,335) - (611,472)
---------- ---------- --------- ---------
Provision for taxes 800 800 - (1,600)
---------- ---------- --------- ---------
NET INCOME (LOSS) (352,937) (260,135) - (613,072)
========== ========== ========= =========
EARNINGS PER SHARE
Net income (loss) $ (352,937) $ (260,135) $ - $ (613,072)
Weighted-average number
of shares outstanding 23,000,000 96,957,713 - 119,957,713
(Loss) per share $ (0.02) $ (0.00) - $ (0.01)
========== ========== ========= =========
</TABLE>
19
<PAGE>
MATERIAL CONTACTS BETWEEN STARFEST AND CONCIERGE
Background of the Transaction.
On December 14, 1999, at the initiation of John Everding and Gary
Bryant, financial consultants doing business as Newport Capital Consultants,
Inc., a meeting was held in Irvine, California in the offices of Grant Bettingen
Company. Attending the
20
<PAGE>
meeting were John Everding, Gary Bryant, Grant Bettingen and two representatives
of Concierge - Allen Kahn and Patrick Flaherty. The subjects discussed 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.
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 14, 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.
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.
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. Finally, on May 5, 2000 the directors of
Concierge agreed to the compensation proposed by Gary Bryant and John Everding -
75,000 shares of pre-merger common stock of Concierge to Gary Bryant - which
will convert into 5,283,300 shares of post-merger Starfest common stock - and
37,500 shares of pre-merger Concierge common stock to John Everding - which will
convert into 2,641,650 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. 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.
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,
advised the officers of Starfest
21
<PAGE>
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.
Concierge loaned the $100,000 to Starfest. 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. The Form 8- K12G3 was accepted without review by the Commission.
Starfest was not delisted from the OTC Bulletin Board.
22
<PAGE>
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.
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.
23
<PAGE>
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. Concierge'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
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
24
<PAGE>
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.
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,
25
<PAGE>
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,
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,
26
<PAGE>
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
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.
27
<PAGE>
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 no business and 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. 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 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.
28
<PAGE>
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.
Should the merger with Concierge not be consummated, Starfest's
management will seek another merger partner. Starfest has sufficient cash to
meet any anticipated cash requirements that will arise before the merger with
Concierge is consummated. Should the merger with Concierge not be consummated,
Starfest will likely 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.
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.
29
<PAGE>
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 the first three quarters of 2000 appears in Risk Factor No.
5 on page 4. 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),
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),
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<PAGE>
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:
<TABLE>
<CAPTION>
Percent of No. of Shares Restricted
Post-Merger Company No. of Shares Total Issued by Rules 144 and 145
------------------- ------------- ------------ ------------------------
<S> <C> <C> <C>
Authorized shares 190,000,000 - -
Issued and outstanding shares 119,957,713 100.0 65,297,240
Issued and outstanding shares to be Rule 145:
controlled by Concierge's affiliates 64,437,240 53.7 64,437,240
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C> <C>
Issued and outstanding shares to be Rule 144:
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 53,258,472 44.4 -
119,957,713 100.0 65,297,240
</TABLE>
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 542,001 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.
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<PAGE>
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
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 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 as well
as the interim (unaudited) balance sheet at June 30, 2000, statement of
operations and accumulated deficit, and statement of cash flows for the six
months periods ended June 30, 2000 and June 30, 1999.
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
33
<PAGE>
reference to the subject matter of the disagreements in connection with
his reports.
Starfest has not yet engaged a new independent accountant to audit its
financial statements.
INFORMATION ABOUT CONCIERGE, INC.
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- 216-6334.
Concierge's Plan of Operation
-----------------------------
Concierge has developed a "unified messaging" product - the Personal
Communications Attendant ("PCATM"). 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 is now available for direct purchase online
at www.pcahome.com.
Limited shipments began in September 2000. Advertising and marketing
campaigns were held in abeyance until technical problems in automatic credit
card verification and funds transfer could be addressed. These problems are
believed to have been resolved. Extensive system testing and certification are
currently underway. Testing is expected to be completed by late October, at
which time full direct marketing efforts are planned to commence together with
shipments to fill any orders. Concierge is also involved in negotiations with
several reseller, merchandising and manufacture representative organizations,
which negotiations it hopes will culminate in agreements leading to sales of the
PCATM.
34
<PAGE>
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
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. No device other than an
ordinary telephone is needed to access the PCA(TM). The PCATM also includes
35
<PAGE>
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 $0.85 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 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. 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 and of wireless
communications devices. Referring to several sources for its information, DLJ
reported the following estimates of users:
36
<PAGE>
In Millions
-----------
Wireline Wireless Source of
No. of Users Internet Communication Estimate
------------ -------- ------------- ---------
U.S.A.:
End of 1998 30 I.D.C.
End of 2002 67 I.D.C.
Global:
End of 1999 196 I.D.C.
End of 2003 503 I.D.C.
U.S.A.:
End of 1999 87 DLJ and WTDR
End of 2002 160 DLJ and WTDR
End of 2005 200 DLJ and WTDR
Global:
End of 1999 425 DLJ and WTDR
End of 2002 1,000 DLJ and WTDR
DLJ estimated that by 2005, over 70 percent of all wireless users in the
U.S. will access the Internet - better than 50 percent of the nation's
population, or 150 million users. It stated, "The ability to send messages,
retrieve e-mail . . . is all within the grasp of a mobile device and at the
touch of our fingertips or at the tone of our voice."
Concierge believes that it has positioned itself, with its PCATM, to
provide a valuable service to 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 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
37
<PAGE>
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. 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 software 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. As of October 15, 2000, Concierge had prepaid
$49,890 to XeTel for PCAsTM to be manufactured for Concierge. Concierge also had
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.
38
<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.
e-Assist.com will charge Concierge a one-time installation and
set-up services fee and then a flat-rate monthly management fee to be negotiated
after eAssist.com's and Concierge's technical staffs have completed the setup,
implementation and integration of customized software applications for -
o one-to-one chat interaction,
o processes for integrating web pages directly with eAssist.
com's chat server,
o automated and personalized e-mail,
o VoIP (voice-over Internet Packets), and
o multimedia, customer-relationship, management services via
the Internet to Concierge.
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 provides product development consulting services to
Concierge. Payment for the services is 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.
39
<PAGE>
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 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 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 October 1, 2000 Concierge employed
two persons full time and two persons part time.
40
<PAGE>
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 September 30, 2000, Concierge had cash assets of
$107,559 plus prepaid expenses of $295,800 in prepaid royalties and product
manufacturing. In this regard, Concierge had raised $467,500 through the sale of
shares of its common stock during the period from July 31 through September 6,
2000. The circumstances of the sale of these shares were such that there may not
have been an exemption from registration available for the sales. See "Risk
Factors - 9. Concierge has contingent liability of $467,500 for possible
violations of registration requirements of the Securities Act." Concierge does
not concede that no exemption from registration was available, but the
contingency exists that the purchasers of these shares 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 the stock sold for $467,500, Concierge
would simultaneously oppose such a demand for rescission, seek to raise
additional capital to cover the contingency that rescissions might have to be
made, but continue to use its cash assets to pursue its business objectives, as
outlined above.
Concierge expects that it will not have to raise additional funds . As
of November 30, 2000 it had in inventory 2,000 copies of the compact disk
containing the PCATM software product and 15,000 of the
more-costly-to-manufacture packages for the compact disks and user manuals. The
compact disks containing the software are replicable at extremely low costs. The
additional 13,000 PCAsTM needed, for the 15,000 packages and user manuals on
hand as of November 30, 2000, will cost Concierge approximately $32,500 and can
be paid for by Concierge out of cash on hand. The sale of 15,000 PCAsTM would
produce revenues approaching $600,000, an amount that would make unnecessary the
raising of additional capital by Concierge. Should the need arise for some
reason during the next twelve months for additional capital, Concierge will
attempt to raise this capital in an offering exempt from registration.
41
<PAGE>
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.
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.
42
<PAGE>
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.
Financial Statements.
--------------------
See "Financial Statements - Concierge, Inc." for the independent
auditor's report dated August 23, 2000 with respect to Concierge's balance sheet
as of June 30, 2000 and the related statements of operations and deficit
accumulated, changes in shareholders' deficit and cash flows for the fiscal
years ended June 30, 2000 and June 30, 1999, and the notes to such financial
statements.
43
<PAGE>
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.,
________________, ________________, 2000, 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.,
__________, ___________________, 2000, 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 66.5 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 ________________, 2000 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
44
<PAGE>
Concierge are held of record by brokers. Some 19,013,657 of the 23 million
shares of Starfest are 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 -
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 70.444
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.
45
<PAGE>
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,
46
<PAGE>
the notice must also state the price Starfest has determined to
be the fair market price.
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 unsettle, 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.
47
<PAGE>
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.
There are presently outstanding 1,376,380 shares of common stock of
Concierge held of record by 97 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 _______________, 2000 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 October 15, 2000 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.
<TABLE>
<CAPTION>
Name and Address Amount and
Of Beneficial Nature of Percent of
Owner Beneficial Ownership Class
---------------- -------------------- ----------
<S> <C> <C>
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
</TABLE>
-------------------------
(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 October 15, 2000, 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.
48
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and
Of Beneficial Nature of Percent of
Owner Beneficial Ownership Class
---------------- -------------------- ----------
<S> <C> <C>
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
Officers and Directors
as a Group (2 persons) 860,000 shares 3.7%
</TABLE>
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 October 15, 2000 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.
<TABLE>
<CAPTION>
Amount of Post-
Merger Company
Amount and Nature Shares To Be
Name and Address of of Beneficial Percent of Owned If Merger Percent of
Beneficial Owner Ownership Class Is Approved Class
------------------- ----------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Allen E. Kahn 370,000 shares 26.9% 26,064,280 21.7%
7547 W. Manchester Ave., No. 325
Los Angeles, CA 90045
Samuel C.H. Wu 403,500 shares(1) 29.3% 28,424,154 23.7%
1202 Tower 1, Admiralty Centre
18 Harcourt Road
Hong Kong, China
Polly Force Co., Ltd. 160,000 shares(1) 11.6% 11,271,040 9.4%
1202 Tower 1, Admiralty Centre
18 Harcourt Road
Hong Kong, China
East Asia Strategic Holdings, Ltd. 109,500 shares(2) 8.0% 7,713,618 6.4%
1202 Tower 1, Admiralty Centre
18 Harcourt Road
Hong Kong, China
Gary E. Bryant 75,000 shares 5.1% 6,593,300(3) 5.3%
3 Gavina
Monarch Beach, CA 92629
</TABLE>
-------------------------
49
<PAGE>
(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.
(3) This number includes 1,310,000 shares of Starfest owned beneficially by
Mr. Bryant prior to the vote on the proposed merger.
The table below sets forth the ownership, as of October 15, 2000, 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.
<TABLE>
<CAPTION>
Amount of Post-
Merger Company
Amount and Nature Shares To Be
of Beneficial Percent of Owned If Merger Percent of
Name and Address of Owner Ownership Class Is Approved Class
------------------------- ---------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Allen E. Kahn 370,000 shares 26.9% 26,064,280 21.7%
7547 W. Manchester Ave., No. 325
Los Angeles, CA 90045
F. Patrick Flaherty 70,000 shares(1) 5.1% 4,931,080 4.1%
637 29th Street
Manhattan Beach, CA 90266
Donald V. Fluken 2,130 shares(5) (2) 150,046 (2)
---
313 Pagosa Way
Fremont, CA 94539
James E. Kirk 57,500 shares 4.2% 4,050,530 3.4%
1401 Kirby, N.E.
Albuquerque, NM 87112
Herbert Marcus, III 500 shares (2) 35,222 (2)
5505 Wenonan Drive
Dallas, TX 75209
Harry F. Camp 500 shares (2) 35,222 (2)
1150 Bayhill Drive
San Bruno, CA 94066
David W. Neibert 10,600 shares(3) (2) 746,706 (2)
24028 Clarington Drive
West Hills, CA 91304
Samuel C.H. Wu 403,500 shares(4) 29.3% 28,424,154 23.7%
1202 Tower 1, Admiralty Centre
18 Harcourt Road
Hong Kong, China
Officers and Directors
as a Group (8 persons) 914,730 shares 66.5% 64,437,240 53.7%
</TABLE>
-------------------------
50
<PAGE>
(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.
<TABLE>
<CAPTION>
Office Held Term of
Person Office Since Office
------ ------ ----------- -------
<S> <C> <C> <C>
Allen E. Kahn, 63 Chief Executive Officer, President, 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, Chief 2000 2001
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, 4 5 Director 2000 2001
-
Samuel C.H. Wu, 52(1) Director Nominee 2000 2001
</TABLE>
-------------------------
(1) Mr. Wu has agreed to serve as a director should the merger occur.
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.
51
<PAGE>
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.
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
52
<PAGE>
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.
<TABLE>
<CAPTION>
Restricted
Name of Chief Executive Officer Year Cash Salary Stock Awards
------------------------------- ---- ----------- ------------
<S> <C> <C> <C>
Allen E. Kahn 1999 None None
1998 None None
1997 None $2,600
</TABLE>
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. The
restricted stock award in 1997, valued at $2,600, consisted of 260,000
"founders" shares of common stock of Concierge, valued at $0.01 a share, its par
value.
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.
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
53
<PAGE>
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 4,931,000 shares of Starfest common stock, which
would have been purchased by Mr. Kahn at an effective price of $0.14 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 4,931,000
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 4,931,000 shares will be determined by the trading price of Starfest's
common stock at the time of the merger. On October 23, 2000 the closing price of
Starfest's common stock was $0.35 bid and $0.39 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock of
Concierge 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
------------- ------------- --------- ----- ---------------- ------ -----
</TABLE>
54
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Allen E. Kahn 260,000 $0.01 $ 2,600 18,315,440 Services $ 2,600(1)
----- ----------
40,000 $0.32 $ 12,800 2,817,760 Services $ 12,800(2)
----- ----------
70,000 $0.32 $ 22,400 4,931,080 Surrender of $ 22,400(3)
----- ----------
Stock Options and
Services
James E. Kirk 25,000 $0.40 $ 10,000 1,761,000 Services $ 10,000(4)
----- ---------
20,000 $1.00 $ 20,000 1,408,880 Services $ 20,000(5)
----- ----------
12,500 $0.40 $ 5,000 880,550 Cash $ 5,000
----- ----------
F. Patrick Flaherty 10,000 $2.00 $ 20,000 704,440 Cash $ 20,000
----- -------
10,000 $1.00 $ 10,000 704,440 Cash $ 10,000
----- ----------
50,000 $0.32 $ 16,000 3,522,200 Services $ 16,000(6)
----- ----------
Donald V. Fluken 2,130 $0.32 $ 682 150,046 Services $ 682(6)
----- -------
Herbert Marcus, III 500 $0.32 $ 160 35,222 Services $ 160(6)
----- ------
Harry F. Camp 500 $0.32 $ 160 35,222 Services $ 160(6)
----- ------
David W. Neibert 10,600 $0.32 $ 3,392 746,706 Services $ 3,392(6)
----- -------
Samuel C.H. Wu 378,500 $0.368 $139,200 22,663,054 Cash $139,200
------ ----------
25,000 $0.40 $ 10,000 1,761,000 Services $ 10,000(7)
----- ----------
Gary Bryant 75,000 $0.32 $ 24,000 5,283,300 Services $ 24,000(8)
----- ---------
John Everding 37,500 $0.32 $ 12,000 2,641,650 Services $ 12,000(8)
----- ---------
</TABLE>
-------------------------
(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.
(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
55
<PAGE>
$0.32 book value at the time the shares were issued, and the services
were valued by the Concierge board of directors.
56
<PAGE>
FINANCIAL STATEMENTS INDEX
The financial statements of Starfest and of Concierge appear as follows:
Starfest, Inc.
Independent Auditors' Report.................................... F-1
Balance Sheet as of December 31, 1999........................... F-2
Statement of Operations for the years
ended December 31, 1999 and
December 31, 1998 ....................................... F-3
Statement of Changes in Stockholders' Equity
(Deficit) for the period from
December 31, 1997 to December 31, 1999 .................. F-4
Statements of Cash Flows for the years ended
December 31, 1999 and December 31, 1998 ................. F-5
Notes to Financial Statements .................................. F-6
Balance Sheet as of September 30, 2000 (Unaudited) ............. F-9
Statement of Operations for the nine-month
periods ended September 30, 1999 and
September 30, 2000 (Unaudited) .......................... F-10
Statements of Cash Flows for the nine months
ended September 30, 1999 and September 30,
2000 (Unaudited) ........................................ F-11
Notes to Financial Statements (Unaudited) ...................... F-12
Concierge, Inc.
Report of Independent Auditors.................................. F-15
Balance Sheet as of June 30, 2000 .............................. F-16
Statement of Operations and Deficit Accumulated
for the Years Ended June 30, 2000 and
June 30, 1999 and the Period from
September 20, 1996 (Inception Date)
to June 30, 2000 ........................................ F-17
Statement of Changes in Shareholders' Equity
for the Period from
September 20, 1996 (Inception Date)
to June 30, 2000 ........................................ F-18
Statement of Cash Flows for the Years Ended
June 30, 2000 and June 30, 1999 and
the Period from September 20, 1996
(Inception Date) to June 30, 2000 ....................... F-19
Notes to Financial Statements................................... F-20
Balance Sheet as of September 30, 2000 (Unaudited) ............. F-29
Statement of Operations for the three-month
periods ended September 30, 1999 and
September 30, 2000 (Unaudited) ............................ F-30
Statement of Changes in Shareholders' Equity
for the Period from September 20, 1996
(Inception Date) to September 30, 2000
(Unaudited) ............................................... F-31
Statements of Cash Flows for the three-month
periods ended September 30, 2000 and
September 30, 1999 (Unaudited) ............................ F-32
Notes to Financial Statements (Unaudited) ...................... F-33
57
<PAGE>
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: [email protected]
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-1
<PAGE>
STARFEST, INC.
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<TABLE>
<S> <C>
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
===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
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.
F-3
<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.
F-4
<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.
F-5
<PAGE>
STARFEST, INC.
NOTES TO FINANCIAL STATEMENTS
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-6
<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.
F-7
<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.
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-8
<PAGE>
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-9
<PAGE>
Starfest, Inc. and Subsidiary
Balance Sheet
(Unaudited)
September 30, 2000
Assets
------
<TABLE>
Current Assets:
<S> <C>
Cash $ 2,014
Total Current Assets 2,014
----------
$ 2,014
==========
Liabilities And Shareholders' Deficit
-------------------------------------
Current Liabilities:
Accounts payable $ 30,460
Note payable to Concierge, Inc. 100,000
Payable to shareholders 267,002
----------
Total current liabilities 397,462
----------
Shareholders' Deficit:
Common stock, no par value,
65,000,000 shares authorized;
23,100,000 issued and outstanding 2,647,353
Accumulated Deficit (3,042,801)
----------
Total shareholders' deficit ( 395,448)
----------
$ 2,014
==========
</TABLE>
See notes to financial statements.
F-10
<PAGE>
Starfest, Inc. and Subsidiary
Statements of Operations
(Unaudited)
Three Months and Nine Months Ended September 30
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ - $ - $ - $ -
--------- --------- ---------- ----------
General and Administrative
Expenses 33,007 10,640 385,144 188,450
--------- --------- ---------- ----------
Operating Loss (33,007) (10,640) (385,144) (188,450)
Provision for income
taxes - - 800 800
---------- ---------- ---------- ----------
Net Loss $ (33,007) $ (10,640) $ (385,944) $ (189,250)
========== ========== ========== ==========
Net Loss Per Common
Share $ .001 $ .001 $ .017 $ .013
Weighted Average Common
Shares Outstanding 23,100,000 19,779,956 22,914,876 14,914,931
</TABLE>
See notes to financial statements.
F-11
<PAGE>
Starfest, Inc. and Subsidiary
Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30
<TABLE>
<CAPTION>
2000 1999
----------- -----------
Net Cash From
operating Activities:
<S> <C> <C>
Net loss $( 385,944) $( 224,462)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Loss on disposal of equipment - 2,216
Shares issued for services 702 458
Shares issued for debt
extinguishment - 558,038
Shares issued for assets - 118,000
Changes in assets and
liabilities:
Accounts payable 12,773 (410,190)
Other liabilities - (113,400)
---------- ---------
Net cash used by
operating activities (372,469) (69,340)
Cash Flows from Investing
Activities:
Internet assets received in
exchange for stock - (118,000)
---------- ---------
Net cash used by
Investing Activities - (118,000)
---------- ---------
Cash flows from Financing
Activities:
Loans from Concierge, Inc. 100,000 -
Advances from shareholders 267,002 -
Common stock issued for cash 7,000 190,000
---------- ---------
Net cash provided by
Financing Activities 374,002 190,000
Increase in Cash 1,533 2,660
Cash at beginning of period 481 6,149
---------- ---------
Cash at end of period $ 2,014 $ 8,809
========== =========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Non cash financing transactions:
Shares for services $ 702 $ 458
Shares for debt extinguishment $ - $ 558,038
Shares for purchase of assets $ - $ 118,000
</TABLE>
See notes to financial statements.
F-12
<PAGE>
Starfest, Inc. and Subsidiary
Notes To Unaudited Financial Statements
September 30, 2000 and 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 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.
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, 1999 was filed on September 7, 2000 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 nine-month period ended September 30,
2000 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2000.
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-13
<PAGE>
Starfest, Inc. and Subsidiary
Notes To Unaudited Financial Statements
September 30, 2000 and 1999
Note 3 - 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 $385,944 for the nine months ended September 30, 2000.
Accumulated deficit amounted to $3,042,801 at September 30, 2000. At
September 30, 2000, the Company had shareholders' deficit of $395,448.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.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Concierge, Inc.:
We have audited the accompanying balance sheet of Concierge, Inc. (a Nevada
Corporation) (the "Company") as of June 30, 2000, and the related statements of
operations, stockholders' equity and cash flows for the years ended June 30,
2000 and 1999. 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 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 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 Concierge, Inc. as of June 30,
2000, and the results of its operations and its cash flows for the years ended
June 30, 2000 and 1999, 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 shown in the financial statements,
the Company's did not earn any revenue during the year ended June 30, 2000 and
1999 and the Company has incurred net losses from inception to June 30, 2000 of
$1,457,729 including net losses of $986,986 and $89,919 during the fiscal years
ended June 30, 2000 and 1999, respectively. These factors, among others, as
discussed in Note 3 to the 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 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 17, 2000
F-15
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
BALANCE SHEET
JUNE 30, 2000
ASSETS
------
<TABLE>
CURRENT ASSETS:
<S> <C>
Cash & cash equivalents $ 85,105
Prepaid Expenses 245,800
Note Receivable - Related Party 100,000
----------
Total current assets 430,905
PROPERTY & EQUIPMENT, net 4,692
----------
$ 435,597
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 138,755
Payroll taxes payable 4,400
-----------
Total current liabilities 143,155
COMMITMENTS (SEE NOTES)
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share; 10,000,000
shares authorized; issued and outstanding 1,376,380 13,764
Additional paid in capital 560,617
Advance Subscriptionns 1,175,790
Deficit accumulated during the development stage (1,457,729)
----------
Total stockholders' equity 292,442
----------
$ 435,597
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-16
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 2000 & 1999 AND THE PERIOD FROM
SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2000
<TABLE>
<CAPTION>
SEPTEMBER 20,
JUNE 30, JUNE 30, 1996 (INCEPTION)
2000 1999 TO JUNE 30, 2000
--------- -------- ----------------
<S> <C> <C> <C>
REVENUE $ - $ - $ -
COSTS AND EXPENSES
Product launch Expenses 490,078 58,607 847,544
General & Administrative Expenses 496,108 30,512 606,985
--------- ------- ---------
TOTAL COSTS AND EXPENSES 986,186 89,119 1,454,529
--------- ------- ---------
NET LOSS BEFORE INCOME TAXES (986,186) (89,119) (1,454,529)
Provision of Income Taxes 800 800 3,200
--------- ------- ----------
NET LOSS (986,986) (89,919) (1,457,729)
========= ======= =========
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING, BASIC AND DILUTED 1,065,960 994,077 1,166,965
========= ======= =========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.93) $ (0.09) $ (1.25)
========= ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-17
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE PERIOD
SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2000.
<TABLE>
<CAPTION>
Common Stock
----------------------
Number of Par Additional Advance Accumulated Stockholders'
shares value Paid In Capital Subscriptions Deficit Equity (deficit)
---------------------- --------------- ------------- ----------- ----------------
Common Stock issued for cash
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 2,080 58,916 - - 60,996
Common stock issued for services
in the year ended June 30, 1999 450 4 - - - 4
Net loss for the year ended
June 30, 1999 - - - - (89,919) (89,919)
--------- -------- -------- ---------- ---------- --------
Balance at June 30, 1999 1,166,326 11,663 359,728 - (470,743) (99,352)
Acquisition and retirement of
Common share (262,000) (2,620) (2,620)
Common Stock issued for cash
in the year ended June 30, 2000 117,184 1,172 200,889 - - 202,061
Common stock issued for services
in the year ended June 30, 2000 354,870 3,549 - - - 3,549
Post acquisition stock subscription
funds received net of costs & expenses
of $79,710 - - - 1,175,790 - 1,175,790
Net loss for the year ended
June 30, 2000 - - - - (986,986) (986,986)
--------- ------- -------- ---------- ---------- ---------
Balance at June 30, 2000 1,376,380 $ 13,764 $ 560,617 $ 1,175,790 $(1,457,729) $ 292,442
========= ======= ======== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-18
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, 2000 & 1999 AND THE PERIOD FROM
SEPTEMBER 20, 1996 (INCEPTION) TO JUNE 30, 2000
<TABLE>
<CAPTION>
SEPTEMBER 20,
JUNE 30, JUNE 30, 1996 (INCEPTION)
2000 1999 TO JUNE 30, 2000
--------- -------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (986,986) $(89,919) $(1,457,729)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,350 2,329 8,218
Stock issued for services 929 4 7,374
(Increase)/decrease in current assets:
Prepaid Expenses (245,000) - (245,800)
Other Assets - 1,625 -
Increase/(decrease) in current
liabilities:
Accounts payable (70,093) 5,717 -
Accrued expenses 118,537 10,784 138,755
Payroll taxes payable 4,400 - 4,400
---------- ------- ----------
Net cash used in
operating activities (1,175,863) (69,460) (1,544,782)
---------- ------- ----------
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 60,996 567,007
Proceeds from advance subscriptions 1,255,500 - 1,255,500
Costs and expenses of advance
subscription (79,710) - (79,710)
Proceeds from (repayments of)
related party loans (22,000) 10,000 -
---------- ------- ----------
Net cash provided by
financing activities 1,355,851 70,996 1,742,797
---------- ------- ----------
NET INCREASE IN CASH 78,722 1,536 85,105
CASH, BEGINNING BALANCE 6,383 4,847 -
---------- ------- ----------
CASH, ENDING BALANCE $ 85,105 $ 6,383 $ 85,105
========== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-19
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
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(TM)"). "PCA(TM)" will provide a means
by which the user of Internet e-mail can have e-mail messages spoken to him/her
over any touch-tone telephone or wireless phone in the world. 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
F-20
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
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.
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 proforma disclosure of what net income and earnings
per share would have been had the Company adopted the new fair value method. The
Company adopted this standard in 1998 and the implementation of this standard
did not have any impact on its financial statements.
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.
Comprehensive income
Statement of financial accounting standards No. 130, Reporting comprehensive
income (SFAS No. 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in
financial statements that are displayed with the same prominence as other
financial statements. The Company adopted this standard in 1998 and the
implementation of this standard did not have a material impact on its financial
statements.
Reporting segments
Statement of financial accounting standards No. 131, Disclosures about segments
of an enterprise and related information (SFAS No. 131), which superceded
statement of financial accounting standards No. 14, Financial reporting for
segments of a business enterprise, establishes standards for the way that public
F-21
<PAGE>
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performances. The Company
adopted this standard in 1998 and the implementation of this standard did not
have a material impact on its financial statements.
Pension and other benefits
In February 1998, the Financing accounting standards board issued statement of
financial accounting standards No. 132, Employers' disclosures about pension and
other post-retirement benefits (SFAS No. 132), which standardizes the disclosure
requirements for pension and other post -retirement benefits. The Company
adopted this standard in 1998 and the implementation of this standard did not
have any impact on its financial statements.
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 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-22
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
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.
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.
Maintenance and subscription revenue is recognized ratably over the contract
period. Revenue attributable to undelivered elements, including technical
support and Internet browser technologies, is based on the average sales price
of those elements and is recognized ratably on a straight-line basis over the
product's life cycle. 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 revenue in the years ended June 30, 2000 and 1999.
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, 2000 and 1999.
F-23
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
Advertising
The Company expenses advertising costs as incurred.
Accounting developments
In June 1998, the FASB issued SFAS No. 133, "Accounting for derivative
instruments and hedging activities", effective for fiscal years beginning after
June 15, 1999, which has been deferred to June 30, 2000 by publishing of SFAS
No. 137. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. This statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial condition and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative instrument depends on its intended use and the resulting
designation. The Company does not expect that the adoption of this standard will
have a material impact on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") 101, "Revenue Recognition," which outlines the basic criteria
that must be met to recognize revenue and provides guidance for presentation of
revenue and for disclosure related to revenue recognition policies in financial
statements filed with the Securities and Exchange Commission. The effective date
of this pronouncement is the fourth quarter of the fiscal year beginning after
December 15, 1999. The Company believes that adopting SAB 101 will not have a
material impact on its financial position and results of operations.
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
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.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
F-24
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
Company as a going concern. However, the Company's did not earn any revenue
during the year ended June 30, 2000 and 1999 and the Company has incurred net
losses from inception to June 30, 2000 of $1,457,729 including net losses of
$986,986 and $89,919 during the fiscal years ended June 30, 2000 and 1999,
respectively. 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
during the fiscal years ended June 30, 2000 and 1999, towards (i) obtaining
additional equity (ii) management of accrued expenses and accounts payable (iii)
Development of the software "PCA(TM)" 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.
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
Property and Equipment $ 12,910
Less: Accumulated depreciation 8,218
--------
$ 4,692
========
</TABLE>
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(TM)" 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
F-25
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
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.
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, 2000, the Company incurred
net operating losses for tax purposes of approximately $1,450,000. Differences
between financial statement and tax losses consist primarily of amortization
allowance were immaterial at June 30, 2000. 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 generally available to reduce
taxable income through the year 2005. The availability of the Company's net
operating loss carryforwards are subject to limitation if there is a 50% or more
positive change in the ownership of the Company's stock. The provision for
income taxes consists of the state minimum tax imposed on corporations.
The net deferred tax asset balance as of June 30, 2000 was approximately
$580,000. A 100% valuation allowance has been established against the deferred
tax assets, as the utilization of the loss carrytforwards can not reasonably be
assured.
8. STOCKHOLDERS' EQUITY
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. During the year
ended June 30, 2000, the Company also reacquired and cancelled 262,000 shares,
previously issued for services of $2,620 in the year ended June 30, 1997.
9. ADVANCE SUBSCRIPTIONS
The Company has entered into subscription agreements to issue "post merger"
shares in exchange for cash. Through June 30, 2000, the Company has received
advanced 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
F-26
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
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 $467,500 as advance subscription for 2,127,500
post merger . From July 1, 2000 through September 15, 2000, the Company received
additionally $467,500 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
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. The financial statements for the year ended June 30, 2000, do not
reflect any such amount since the Company received $467,500 as advance
subscription for 2,127,500 post merger shares after June 30, 2000.
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. The transaction will be accounted for as reverse merger and 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 $1,600 and $0 for income tax in the year ended June 30, 2000
and 1999, respectively. Total amount paid for income taxes from September 20,
F-27
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
1996 (inception) through June 30, 2000 amounted to $2,400. The Company paid $
4,227 and $0 for interest during the years ended June 30, 2000 and 1999,
respectively. Total amount paid for interest from September 20, 1996 (inception)
through June 30, 2000, amounted to $4,227.
The Cashflow statements do not include effect of issuance of 354,870 shares for
$3,549 in the year ended June 30, 2000, and 450 shares for $4 in the year ended
June 30, 1999, in exchange of services rendered to the Company. The Cash flow
statements do not include effect of acquisition and cancellation of
262,000shares issued for services of $2,620. 737,415 shares have been issued
since inception through June 30, 2000, 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 $1541.71. The lease
expires on August 31, 2002. Rent was $7,823 and $11,560 for the year ended June
30, 2000 and 1999, respectively. Future minimum lease payments associated with
the lease is as follow:
<TABLE>
<CAPTION>
Year ended June 30 Amount
------------------ ------
<S> <C>
2001 $ 18,501
2002 18,501
2003 3,083
-------
Total $ 40,085
=======
</TABLE>
F-28
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
------
<TABLE>
CURRENT ASSETS:
<S> <C>
Cash & cash equivalents $ 107,559
Prepaid Expenses 245,800
Note Receivable - Related Party 100,000
----------
Total current assets 453,359
PROPERTY & EQUIPMENT, net 4,082
----------
$ 457,441
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accrued expenses $ 119,552
Payroll taxes payable 1,235
----------
Total current liabilities 120,787
COMMITMENTS (SEE NOTES)
SUBSCRIPTIONS RECEIVED FOR COMMON STOCK
SUBJECT TO CONTINGENCY 487,500
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
10,000,000 shares authorized; issued
and outstanding 1,376,380 13,764
Additional paid in capital 560,617
Advance Subscriptions 1,175,790
Deficit accumulated during the development stage (1,901,017)
----------
Total stockholders' deficit (150,846)
----------
$ 457,441
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-29
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 2000 & 1999 AND THE PERIOD FROM
SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 20, 1996
SEPTEMBER 30, SEPTEMBER 30, (INCEPTION) TO
2000 1999 SEPTEMBER 30, 2000
------------- ------------- ------------------
<S> <C> <C> <C>
REVENUE $ - $ - $ -
COSTS AND EXPENSES
Product launch Expenses 241,928 2,647 1,089,472
General & Administrative
Expenses 200,560 2,034 807,545
--------- ---------- ----------
TOTAL COSTS AND EXPENSES 442,488 4,681 1,897,017
--------- ---------- ----------
NET LOSS BEFORE INCOME TAXES (442,488) (4,681) (1,897,017)
Provision of Income Taxes 800 800 4,000
--------- ---------- ----------
NET LOSS (443,288) (5,481) (1,901,017)
========= ========== ==========
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING,
BASIC AND DILUTED 1,376,380 907,804 1,166,965
========= ========== ==========
BASIC AND DILUTED NET LOSS
PER SHARE $ (0.32) $ (0.01) (1.63)
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-30
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2000.
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
----------------------
Number of Par Additional Advance Accumulated Stockholders'
shares value Paid In Capital Subscriptions Deficit Equity (deficit)
---------------------- --------------- ------------- ------------ ----------------
Common Stock issued for cash
<S> <C> <C> <C> <C> <C> <C>
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 2,080 58,916 - - 60,996
Common stock issued for services
in the year ended June 30, 1999 450 4 - - - 4
Net loss for the year ended June 30, 1999 - - - - (89,919) (89,919)
--------- ------- -------- --------- --------- ----------
Balance at June 30, 1999 1,166,326 11,663 359,728 - (470,743) (99,352)
Acquisition and retirement
of Common share (262,000) (2,620) (2,620)
Common Stock issued for cash
in the year ended June 30, 2000 117,184 1,172 200,889 - - 202,061
Common stock issued for services
in the year ended June 30, 2000 354,870 3,549 - - - 3,549
Post acquisition stock subscription
funds received net of costs &
expenses of $79,710 - - - 1,175,790 - 1,175,790
Net loss for the year ended
June 30, 2000 - - - - (986,986) (986,986)
--------- ------- -------- --------- ---------- ----------
Balance at June 30, 2000 1,376,380 $ 13,764 $ 560,617 $1,175,790 $(1,457,729) $ 292,442
========= ======= ======== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-31
<PAGE>
CONCIERGE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
QUARTER ENDED SEPTEMBER 30, 2000 & 1999 AND THE PERIOD FROM
SEPTEMBER 20, 1996 (INCEPTION) TO SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 20, 1996
SEPTEMBER 30, SEPTEMBER 30, (INCEPTION) TO
2000 1999 SEPTEMBER 30, 2000
------------- ------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $ (443,288) $ (5,481) $(1,901,017)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 610 582 8,828
Stock issued for services - - 7,374
(Increase)/decrease in
current assets:
Prepaid Expenses - - (245,800)
Increase/(decrease) in
current liabilities:
Accounts payable - 1,471 -
Accrued expenses (19,203) 800 119,552
Payroll taxes payable (3,165) - 1,235
---------- --------- ----------
Net cash used in
operating activities (465,046) (2,628) (2,009,828)
---------- --------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Note receivable -
related party - - (100,000)
Acquisition of property
& equipment - - (12,910)
----------- --------- -----------
Net cash used in
investing activities - - (112,910)
----------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Issuance
of Shares - 2,529 567,007
Proceeds from advance
subscriptions - - 1,255,500
Proceeds from subscriptions
of common stock subject to
contingency 487,500 - 487,500
Costs and expenses of
advance subscription - - (79,710)
----------- --------- ----------
Net cash provided by
financing activities 487,500 2,529 2,230,297
----------- --------- ----------
NET INCREASE (DECREASE) IN CASH 22,454 (99) 107,559
CASH, BEGINNING BALANCE 85,105 6,383 -
----------- --------- ----------
CASH, ENDING BALANCE $ 107,559 $ 6,284 $ 107,559
=========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-32
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
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(TM)"). "PCA(TM)" will provide a means
by which the user of Internet e-mail can have e-mail messages spoken to him/her
over any touch-tone telephone or wireless phone in the world. 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
F-33
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
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.
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 proforma disclosure of what net income and earnings
per share would have been had the Company adopted the new fair value method. The
Company adopted this standard in 1998 and the implementation of this standard
did not have any impact on its financial statements.
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.
Comprehensive income
Statement of financial accounting standards No. 130, Reporting comprehensive
income (SFAS No. 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in
financial statements that are displayed with the same prominence as other
financial statements. The Company adopted this standard in 1998 and the
implementation of this standard did not have a material impact on its financial
statements.
Reporting segments
Statement of financial accounting standards No. 131, Disclosures about segments
of an enterprise and related information (SFAS No. 131), which superceded
statement of financial accounting standards No. 14, Financial reporting for
segments of a business enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual financial
F-34
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
statements and requires reporting of selected information about operating
segments in interim financial statements regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performances. The Company
adopted this standard in 1998 and the implementation of this standard did not
have a material impact on its financial statements.
Pension and other benefits
In February 1998, the Financing accounting standards board issued statement of
financial accounting standards No. 132, Employers' disclosures about pension and
other post-retirement benefits (SFAS No. 132), which standardizes the disclosure
requirements for pension and other post -retirement benefits. The Company
adopted this standard in 1998 and the implementation of this standard did not
have any impact on its financial statements.
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 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-35
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
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.
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.
Maintenance and subscription revenue is recognized ratably over the contract
period. Revenue attributable to undelivered elements, including technical
support and Internet browser technologies, is based on the average sales price
of those elements and is recognized ratably on a straight-line basis over the
product's life cycle. 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 revenue in the quarter ended September 30, 2000 and 1999.
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 September 30, 2000 and 1999.
F-36
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
Advertising
The Company expenses advertising costs as incurred.
Accounting developments
In June 1998, the FASB issued SFAS No. 133, "Accounting for derivative
instruments and hedging activities", effective for fiscal years beginning after
June 15, 1999, which has been deferred to June 30, 2000 by publishing of SFAS
No. 137. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. This statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial condition and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative instrument depends on its intended use and the resulting
designation. The Company does not expect that the adoption of this standard will
have a material impact on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") 101, "Revenue Recognition," which outlines the basic criteria
that must be met to recognize revenue and provides guidance for presentation of
revenue and for disclosure related to revenue recognition policies in financial
statements filed with the Securities and Exchange Commission. The effective date
of this pronouncement is the fourth quarter of the fiscal year beginning after
December 15, 1999. The Company believes that adopting SAB 101 will not have a
material impact on its financial position and results of operations.
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
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.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
F-37
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
Company as a going concern. However, the Company's did not earn any revenue
during the year ended September 30, 2000 and 1999 and the Company has incurred
net losses from inception to September 30, 2000 of $1,901,017 including a net
loss of $443,288 during the quarter ended September 30, 2000. 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 September 30, 2000, towards (i)
obtaining additional equity (ii) management of accrued expenses and accounts
payable (iii) Development of the software "PCA(TM)" 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.
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
September 30, 2000
------------------
<S> <C>
Property and Equipment $ 12,910
Less: Accumulated depreciation 8,828
-------
$ 4,082
======
</TABLE>
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(TM)" 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
F-38
<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
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.
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 September 30, 2000, the Company
incurred net operating losses for tax purposes of approximately $1,901,017.
Differences between financial statement and tax losses consist primarily of
amortization allowance, was immaterial at September 30, 2000. 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 generally
available to reduce taxable income through the year 2005. The availability of
the Company's net operating loss carryforwards are subject to limitation if
there is a 50% or more positive change in the ownership of the Company's stock.
The provision for income taxes consists of the state minimum tax imposed on
corporations.
The net deferred tax asset balance as of June 30, 2000 was approximately
$580,000. 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
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. During the year
ended June 30, 2000, the Company also reacquired and cancelled 262,000 shares,
previously issued for services of $2,620 in the year ended June 30, 1997.
9. ADVANCE SUBSCRIPTIONS & 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 September 30, 2000, the Company has
received advance subcriptions 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.
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<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
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 $467,500 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
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.
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. The transaction will be accounted for as reverse merger and 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 $0 and $0 for income tax in the quarter ended September 30,
2000 and 1999, respectively. Total amount paid for income taxes from September
20, 1996 (inception) through September 30, 2000 amounted to $2,400. The Company
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<PAGE>
CONCIERGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
paid $ 0 for interest during the quarters ended September 30, 2000 and 1999.
Total amount paid for interest from September 20, 1996 (inception) through
September 30, 2000, amounted to $4,227.
The Cash flow statements do not include effect of acquisition and cancellation
of 262,000shares issued for services of $2,620. 737,415 shares have been issued
since inception through September 30, 2000, 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 $1541.71. The lease
expires on August 31, 2002. Rent was $4,631 and $0 for the quarter ended
September 30, 2000 and 1999, respectively.
Future minimum lease payments associated with the lease is as follow:
<TABLE>
<CAPTION>
Year ended September 30 Amount
----------------------- ------
<S> <C>
2001 $ 18,501
2002 16,959
-------
Total $ 35,460
=======
</TABLE>
F-41
<PAGE>
APPENDIX A
AGREEMENT OF MERGER
This Agreement of Merger (the "Agreement") is made and entered into as
of January 26, 2000 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 78 million 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."
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(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
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<PAGE>
constitute a default under, its Articles of Incorporation, its Bylaws, any
indenture, mortgage, deed of trust (constructive or other), loan agreement,
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
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<PAGE>
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
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.
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<PAGE>
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 895,276 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.
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<PAGE>
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 unaudited financial
statements of CONCIERGE from its inception through December 31, 1999. 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 and G. Robert Knauss.
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 December 31, 1999 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.
3.12 CONCIERGE has filed, or will have filed prior to Closing,
all income, franchise, real property, personal property, sales, employment and
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<PAGE>
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
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.
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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),
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.
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(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.
(b) All representations and warranties of STARFEST
contained in this Agreement, the Exhibits, and in any document, instrument or
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<PAGE>
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 no later than April 15, 2000 (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 the
Closing pursuant to this Agreement or otherwise legally required or reasonably
necessary in connection herewith.
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(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
78 million shares to the CONCIERGE stockholders in accordance with the list.
The certificates that will represent such 78 million 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;
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.
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<PAGE>
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
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.
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<PAGE>
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.
9494 E. Redfield Road, #1136
Scottsdale, AZ 85260
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<PAGE>
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. .
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<PAGE>
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
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<PAGE>
UNTIL _____________________, 2000 (90 DAYS AFTER THE EFFECTIVE DATE OF THE
MERGER), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES MAY BE REQUIRED
TO DELIVER A PROSPECTUS.
<PAGE>
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.+
-
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.***+
10.3 - 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).
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<PAGE>
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.
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.
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<PAGE>
** 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.
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.
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<PAGE>
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: December 8, 2000 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: December 8, 2000 /s/ Michael Huemmer
---------------------------------------
Michael Huemmer, president, director,
principal financial officer, and
authorized representative of the
Registrant
Date: December 8, 2000 /s/ Janet Alexander
---------------------------------------
Janet Alexander, secretary and director
of the Registrant
61
