U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
__________to__________
Commission File Number 33-21546-D
CONCORDE STRATEGIES GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1108035
(State or other jurisdiction of (IRS Employer
Identification No.)
incorporation or organization)
444 Madison Avenue, Suite 1710, New York, NY 10022
(Address of principal executive offices)
(212) 317-0060
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
3,600,000 shares of Common Stock, no par value, outstanding on
November 13, 1998.
CONCORDE STRATEGIES GROUP, INC.
Form 10-QSB Quarterly Report
For Period Ended September 30, 1998
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Balance Sheets at
September 30, 1998 and December 31, 1997 4-5
Unaudited Consolidated Statement of Operations
For Three and Nine Months Ended September 30, 1998 and 6
September 30, 1997
Unaudited Consolidated Statements of Cash Flows For Nine
Months Ended September 30, 1998 and Unaudited Statement of 7
Cash Flows For Nine Months Ended September 30, 1997
Statement of Stockholders' Equity (Deficit) 8
Notes to Financial Statements 9-14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
PART II -- OTHER INFORMATION 17
SIGNATURES 17
Item 1. Financial Statements:
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are
presented in accordance with generally accepted accounting
principles for interim financial information and the instructions
to Form 10-QSB and item 310 under subpart A of Regulation S-B. In
the opinion of management, all adjustments considered necessary for
a fair presentation have been included. The results of operations
for the period covered by this report include the unaudited results
of the Company's subsidiary (see Note 8). The results of
operations do not include any adjustments which may be necessary
based on results of the audit of the Subsidiary's financial
statements as of June 30, 1997, which has not been completed as of
the date of this report. The results of operations for the
Company's Subsidiary have been included in the consolidated results
of the Company for the three and nine month periods ended September
30, 1998 and for the three month period ended September 30, 1997.
These results do not include the Subsidiary's results of operations
for the six month period ended June 30, 1997, since the effective
date of the acquisition was July 1, 1997. Operating results for
the nine months ended September 30, 1998 are not necessarily
indicative of results that may be expected for the year ending
December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes, thereto included
in the Company's annual report on form 10-KSB/A for the year ended
December 31, 1997.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited) Audited
September 30, December 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 37,672 $ 133,606
Accounts receivable 1,105,546 1,374,546
Inventory (as submitted) 2,248,169 1,819,695
Prepaid Expenses $ 95,025 $ 13,435
TOTAL CURRENT ASSETS: $ 3,486,412 $ 3,341,282
Fixed assets, net of accumulated
depreciation of $ 250 $ 2,246 -
Leasehold improvements net of
accumulated amortization
of $ 4,696 57,702 58,852
Security Deposits 40,500 40,500
Deferred Offering Costs 12,000 -
TOTAL ASSETS $ 3,598,860 $ 3,440,634
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) Audited
September 30, December 31,
1998 1997
CURRENT LIABILITIES:
Accounts payable $ 1,247,622 $ 1,487,426
Payroll taxes payable 1,950 -
Due to Factor 332,768 361,098
Bank and other loans payable
(current) 72,880 73,130
Corporate income taxes payable 6,577 13,000
Due to Ameristar
Capital Corporation $ 23,383 $ 89,383
TOTAL CURRENT LIABILITIES $ 1,685,180 $ 2,024,037
LONG TERM LIABILITIES:
Bank and other loans $ 212,747 $ 252,414
TOTAL LIABILITIES: $ 1,897,927 $ 2,276,451
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
100,000,000 shares authorized.
Series A Convertible, redeemable,
1,000 shares issued and out-
standing.
Series B Convertible,non-dividend
bearing, 765,000 shares issued
and outstanding $ 209,383 $ 130,633
Series B Convertible Preferred
Stock Purchase Warrants issued $ 337,600 $ -
and outstanding
Common stock, no par value,
500,000,000 shares authorized,
3,600,000 and 3,300,000 shares
issued and outstanding $ 307,839 $ 166,839
Additional paid-in-capital 977,875 977,875
Retained earnings(Deficit) (131,764) (111,164)
TOTAL STOCKHOLDERS' EQUITY 1,700,93 1,164,183
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,598,860 $ 3,440,634
The accompanying notes are an integral part of these financial statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS(Unaudited)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
REVENUES 1998 1997 (1) 1998 1997 (1)
Sales $ 853,492 $ 817,399 $2,785,295 $ 817,399
COST OF GOODS SOLD $ 648,125 $ 621,224 $2,101,683 $ 621,224
GROSS PROFIT: $ 205,367 $ 196,175 $ 683,612 $ 196,175
OPERATING EXPENSES:
Transfer and filing fees $ 1,323 6,107 $ 2,909 $ 7,872
Insurance 16,455 12,681 35,484 12,681
Payroll and payroll taxes 87,465 66,059 245,912 66,059
Other taxes - - 476 -
Rent 32,229 10,500 96,687 10,500
Utilities and telephone 6,007 5,550 19,352 6,244
Commissions 9,507 12,700 30,428 12,700
Auto and travel 12,112 6,187 26,397 6,187
Security - 404 - 404
Entertainment 3,734 - 8,528 -
Bank charges and interest 16,720 2,916 39,934 2,916
Credit card charges 4,684 2,776 7,757 2,776
Advertising - 12,856 1,400 12,856
Office Expenses 23,485 2,980 37,805 3,984
Repairs and maintenance 1,169 3,406 5,632 3,406
Consulting 21,825 13,000 74,575 69,000
Professional Fees 8,520 30,425 60,152 33,800
Depreciation and amortization 6,415 994 10,728 994
Dues 362 - 1,862 -
Printing $ 341 $ - $ 1,422 $ -
TOTAL OPERATING EXPENSES $ 252,353 $ 189,541 $ 707,440 $ 252,379
INCOME(LOSS) FROM OPERATIONS $ (46,986) $ 6,634 $ (23,828)$ (56,204)
OTHER INCOME AND (EXPENSES):
INTEREST INCOME $ 5,383 $ - $ 6,505 $ -
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES $ (41,603) 6,634 $ (17,323) $ (56,204)
ESTIMATED PROVISION FOR
INCOME TAXES $ (2,793) $ - $ 3,277 $ -
NET INCOME (LOSS) $ (38,810) $ 6,634 $ (20,600) $ (56,204)
NET (LOSS) PER SHARE $ (.01) $ N/A $ .01 $ (.03)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,600,000 3,300,000 3,411,100 1,850,000
(1) See Note 12
The accompanying notes are an integral part of these financial statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997 (Unaudited)
Consolidated Cash Consolidated Cash
Flow Statement Flow Statement
September 30, 1998 September 30, 1997 (1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (20,600) $ (56,204)
Adjustments to reconcile
net income to net cash flow
from operating activities:
Depreciation and amortization 10,728 -
Decrease (increase)in
accounts receivable 269,000 (131,757)
Decrease (increase)in inventory (428,474) 444,713
Increase in prepaid expenses (81,590) -
(Increase) in deferred
offering costs (12,000) -
Increase (Decrease)in advances due
to Ameristar Capital Corporation(66,000) 60,340
(Decrease)in accounts payable (239,804) (387,126)
Increase (Decrease) in payroll
taxes payable 1,950 (271)
Increase (Decrease)in corporate
income taxes payable $ (6,423) $ 24,227
(Decrease) in rent payable - (26,000)
Cash Flow from Operating Activities $(573,213) $ (72,078)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in fixed assets (2,496) (1,427)
Increase in leasehold improvements (9,328) -
Cash Flow from investing activities (11,824) (1,427)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
preferred stock and warrants 416,350 -
Issuance of common stock 141,000 30,000
Increase in due from shareholders - 19,749
Reduction in amount due
to factor - net (28,330) -
Repayment of bank and other loans (39,917) (6,730)
Cash Flow from financing activities $ 489,103 $ 43,019
Net (Decrease) in Cash $ (95,934) $ (30,486)
CASH, BEGINNING OF THE PERIOD $ 133,606 $ 47,881
CASH, END OF THE PERIOD $ 37.672 $ 17,395
(1) See Note 12
The accompanying notes are an integral part of these financial statements.<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1998(Unaudited)
Preferred Series B
Stock Non- Convertible
Dividend Preferred Common Total
Bearing Stock Stock Common Additional Stockholders'
Series B Purchase Number of Stock Paid-in Deficit Equity
Convertible Warrants Shares Amount Capital Accumulated(Deficit)
Balance,
January 1, 1998 $130,633 $ 0 3,300,000 $166,839 $977,875$(111,164)$1,164,183
315,000 shares
of Series B
Convertible 78,750 -- -- -- -- -- $ 78,750
Preferred Stock
issued for
services,
January 7, 1998
Private Placement
of Series B -- $337,600 -- -- -- -- 337,600
Convertible
Preferred Stock
Purchase Warrants,
for cash issued,
August 12, 1998
300,000 shares of
Common Stock issued
for services, -- -- 300,000 141,000 -- -- 141,000
June 22, 1998
Net income for
the Nine Months
Ended September 30,
1998 -- -- -- -- --(20,600)(20,600)
Balance,
September
30, 1998 $209,383 $337,600 3,600,000 $307,839 $977,875$(131,764)$1,700,933
The accompanying notes are an integral part of these financial statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED September 30, 1998
Note 1 - ORGANIZATION AND HISTORY
The Company is a Colorado corporation and the Company had been in
the development stage since its formation on February 12, 1988.
The Company was formed to seek potential business acquisitions and
its activities since inception are primarily related to its initial
public offering and merger activities.
Upon the completion of the acquisition of Concorde Management, Ltd.
and its wholly owned subsidiary, L'Abbigliamento, Ltd., the Company
has ceased from being a development stage company. This
acquisition was effective July 1, 1997.
L'Abbigliamento, Ltd. is a New York State corporation which was
incorporated in New York State in March of 1992. L'Abbigliamento,
Ltd. commenced operations in August of 1992 as an importer of fine
men's clothing. In October of 1995 Vista International Ltd.,
incorporated in the Cayman Islands, was organized to acquire raw
material and to sell finished goods to areas outside the United
States. Effective July 1, 1997 L'Abbigliamento, Ltd. and Vista
International Ltd. were acquired through an exchange of stock by
Concorde Strategies Group, Inc.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation of Financial Information - See Note 12.
Accounting Method
The Company records income and expenses on the accrual method.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, cash on deposit
and highly liquid investments with maturities generally of three
months or less to L'Abbigliamento, Ltd.
Organization Costs
Costs incurred in organizing the Company are being amortized over
a sixty-month period.
Deferred Offering Costs
Costs associated with the Company's private offerings have been
charged to the proceeds of the offering. If the offerings are
unsuccessful, the costs will be charged to operations.
Sales and expenses
Sales and expenses are recorded using the accrual basis of
accounting. Inventory shipped on consignment is recorded as a sale
when it is sold by the customer.
Inventory
Inventory is stated at the lower of first-in first-out; cost or
market and is based upon physical counts taken by management at
December 31, 1997.
Fixed assets and accumulated depreciation
Fixed assets consist of a computer system and are stated at cost
less accumulated depreciation which is provided for by charges to
operations over the estimated useful lives of the assets. The
assets are depreciated over five years utilizing Internal Revenue
Code Section 179 expense deduction of $17,500 annually with the
remaining basis, when applicable, being depreciated using an
accelerated cost revenue method.
Leasehold improvements and accumulated amortization
Leasehold improvements are stated at cost less accumulated
amortization which is provided for by charges to operations over
31.5 years using a straight line method.
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 revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Note 3 - AGING OF ACCOUNTS RECEIVABLE AND PAYABLE
The percentage aging of trade accounts receivable and accounts
payable at September 30, 1998 is as follows:
Accounts Receivable Accounts Payable
Current 25% 100%
30-60 days 25%
over 60 days 50%
100%
Note 4 - INVENTORY
Estimated inventory at September 30, 1998 was as follows:
Raw material (fabric) $813,481
Finished goods 730,000
Consignment 954,484
Sub-total 2,497,965
Less reserves (249,796)
Total $2,248,169
Effective October 1, 1997, L'Abbigliamento, Ltd. entered into
consignment sales arrangement with two mass merchandisers of men's
clothing. During the first quarter of 1998, L'Abbigliamento, Ltd.
added two additional consignment customers. Management believes
that this newly instituted marketing strategy will improve sales,
profit margins and collection cycles.
Note 5 - FACTORING OF ACCOUNTS RECEIVABLE
The subsidiary has entered into a non-recourse agreement with an
independent factor. The balances advanced by the factor bear a
one-time fee of 5% of the invoice and is secured by post dated
checks issued by the customer.
Note 6 - BANK LOAN
At September 30, 1998, the subsidiary had outstanding debt in the
amount of $285,627($72,880- current) with interest related thereto
at 2% - 7% over the prime rate. These obligations mature over the
next five years with a remaining balloon payment of $40,000 due at
that time. The bank loan is secured by inventory and accounts
receivable.
Note 7 - CAPITALIZATION
In April 1996, the Company undertook a private placement of its
securities pursuant to the provisions of Rule 504 under Regulation
D under the Securities Act of 1933, as amended, whereby it issued
9,000,000 shares of its Common Stock in exchange for the
satisfaction of $45,000 in debts owed by the Registrant. Also in
April 1996, the Company effected a 1-for-10 reverse split of its
common stock as the result of which the Company had, following the
aforesaid private offering, 1,200,000 shares issued and
outstanding. This reverse split was effected in anticipation of
management's renewed efforts to find a suitable business
opportunity for the Company.
In June, 1997 the Company issued 300,000 shares of common stock to
certain parties who had performed services on behalf of the
Company. The shares were issued in consideration for the
cancellation of payments owed by the Company at the agreed upon
rate of $.10 per share and were sold through a Private Placement
pursuant to the exemption provided by Rule 504 of Regulation D
under the Securities Act of 1933, as amended.
On October 24, 1997, the Company completed a Private Placement
Offering of 450,000 non dividend bearing, no par value, Series B
Convertible Preferred Shares. All of the shares were sold by the
Company and no Placement Agent was involved in this Offering. The
shares were sold at a purchase price of $.3125 per share and the
Company realized proceeds of $130,633 from the Offering, net of
offering expenses in the amount of $9,992. The shares were sold
through a Private Placement pursuant to the exemption provided by
Rule 504 of Regulation D under the Securities Act of 1933, as
amended. Each Preferred Share is convertible into one and one
quarter (1.25) shares of the Company's Common Stock, no par value,
at the election of the Preferred Shareholder at any time after
thirteen months from the date of issuance thereof and for a period
of four years thereafter.
On January 7, 1998, the Company issued 315,000 shares of Series B
Convertible Preferred shares to certain parties who had performed
services on behalf of the Company, including two companies which
are principally owned by two Directors of the Company. The shares
were issued by the Company in consideration for the cancellation of
debt owed by the Company at the agreed upon rate of $.25 per share
and were sold through a Private Placement pursuant to the exemption
provided by Rule 504 of Regulation D under the Securities Act of
1933, as amended.
On June 22, 1998, the registrant issued 300,000 shares of Common
Stock to a company which has performed services on behalf of the
registrant. The shares were issued pursuant to an option in the
Consulting Agreement to pay for the consulting fees through the
issuance of restricted shares of Common Stock at the agreed upon
rate of $.47 per share.
On August 12, 1998, the Company completed a Private Placement of
337,600 Series B Convertible Preferred Stock Purchase Warrants.
All of the Warrants were sold by the Company and no Placement Agent
was involved in this Offering. The Warrants were sold at a
purchase price of $1.00 per Warrant and the Company realized
proceeds of $325,600 from the Offering, net of offering expenses in
the amount of $12,000. The Warrants were sold through a Private
Placement pursuant to the exemption provided by Rule 504 of
Regulation D under the Securities Act of 1933, as amended. Each
warrant entitles the holder thereof to purchase one Series B
Convertible Preferred Share at a price of $3.00 per share during
the period commencing thirteen months after the date of the
issuance thereof and continuing thirty (30) months thereafter. The
warrants are redeemable by the Company at any time after thirteen
months after their issuance and prior to their expiration at a
price of $0.05 per warrant, upon 30 days prior written notice,
provided that the closing sale price of the shares as reported on
the NASD Electronic Bulletin Board shall have been at least $4.80
(160% of the exercise price of the warrants) on each of the 20
consecutive trading days ending on the tenth day prior to the day
on which the notice of redemption is given.
Note 8 - MERGER ACTIVITIES
Pursuant to the Agreement and Plan of Reorganization entered into
with Concorde Management, Ltd. (formerly, Concorde Strategies
Group, Ltd.) on September 23, 1996, and in anticipation of
receiving audited financial statements the Company has completed
the acquisition of Concorde Management, Ltd. and its wholly owned
subsidiary, L'Abbigliamento, Ltd. The Agreement and Plan of
Reorganization was filed as an Exhibit to Form 8-K dated November
15, 1996.
The acquisition, effective as of July 1, 1997, was completed
through a tax-free exchange of securities by the Company's issuance
of 1,800,000 shares of its common stock in exchange for all of the
issued and outstanding common shares of Concorde Management, Ltd.
Note 9 - PROVISION FOR TAXES ON INCOME
The estimated provision for income taxes are based on the statutory
federal and state income tax rates.
Note 10 - LEASES AND OTHER COMMITMENTS
The parent company leases its premises from Ameristar, an
affiliated company, for the following annual rent expenses.
(eleven months) November 1, 1997 thru September 30, 1998 $41,173
October 1, 1998 thru September 30, 1999 46,152
October 1, 1999 thru September 30, 2000 47,424
October 1, 2000 thru September 30, 2001 48,732
Total Rent Commitment $183,481
The subsidiary leases it premises from a company whose owner is
related to a shareholder of Concorde Strategies Group, Inc. at an
annual rent of $84,000, for each of the next five years with annual
adjustment for real estate taxes.
The subsidiary has an employment agreement with its key executive
officer for five years at base compensation, of $200,000 per year.
The contract also provides for additional incentives based upon
performance standards and annual adjustments to the base for
changes in the consumer price index.
Note 11 - RELATED PARTY TRANSACTIONS
The Company has received advances of monies for its operating
expenses from an affiliated company, Ameristar Group Incorporated.
That company ("Ameristar") also serves as a consultant to Concorde.
Concorde Strategies Group, Inc. is leasing office space from
Ameristar on a monthly rental, commencing on November 1, 1997 for
a term of three years and eleven (11) months. (see note 10)
The Company has incurred consulting fees of $113,500 to its
President, and $45,000 to "Ameristar" (an affiliate corporation)
since the beginning of 1996.
The Company has issued 200,000 shares of common stock to two
related privately owned companies in consideration of $.10 per
share for consulting services performed on behalf of the Company.
(See Note 7. - Capitalization)
On January 7, 1998, the Company issued 315,000 shares of Series B
Convertible
Preferred Stock to certain parties who had performed services on
behalf of the Company. Of that total, 222,000 shares were issued
to two related privately owned companies in consideration of $.25
cents per share.
On June 22, 1998, the Registrant issued 300,000 shares of its
Common Stock to a company principally owned by a Director of the
Registrant in consideration of $.47 per share for consulting
services performed on behalf of the Registrant. (See Note 7 -
Capitalization).
As discussed in note 10, the subsidiary leases it facilities from
a company whose owner is related to a shareholder of Concorde
Strategies Group, Inc. Rent paid under this lease is believed by
management to be at arm's length rates. Additionally,
L'Abbigliamento, Ltd. received advances from its parent, Concorde
Strategies Group, Inc. which bear interest at market rate.
Note 12 - CONSOLIDATION OF FINANCIAL INFORMATION
The consolidated financial statements of the Company for the period
ended September 30, 1998 include the results of the acquisition of
Concorde Management, Ltd. and its wholly owned subsidiary,
L'Abbigliamento, Ltd. only from the date of acquisition on July 1,
1997. The financial statements for the period ended September 30,
1997 include the results of operations for the parent company and
results of the Subsidiary for the three month period ended
September 30, 1997 only.
All material intercompany accounts and transactions have been
eliminated.
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial
Conditions and Results of Operations:
Results of Operations
The results of operations for the Company's Subsidiary have been
included in the consolidated results of the Company for the three
and nine month periods ended September 30, 1998, and for the three
month period ended September 30, 1997. These results do not
include the Subsidiary's results of operations for the six month
period ended June 30, 1997, since the effective date of the
acquisition was July 1, 1997.
Sales for the quarterly period ended September 30, 1998 increased
to $853,492 from $817,399 for the same period in 1997, an increase
of $36,093 or 4.4%. Sales for the nine month period ended
September 30, 1998 were $2,785,295. For the same period in 1997,
the Company did not have any sales for the six months ended June
30, 1997, which was prior to the acquisition of the Subsidiary, and
had sales of $817,399 for the three months ended September 30,
1997. All of the Company's sales resulted from the operation of
its Subsidiary, which was completed effective July 1, 1997.
Gross Profit for the third quarter of 1998 was 24.1% of sales,
which was approximately the same as the 24.0% of sales for the
third quarter of 1997. After Cost of Goods Sold of $648,125 for
the current quarter, Gross Profit realized was $205,367, compared
to $621,224 and $196,175, respectively, for the third quarter of
1997. Gross Profit for the nine month period ended September 30,
1998 was 24.5% of sales, which was consistent with the current
quarter. For the nine month period ended September 30, 1997, the
Company did not have any Gross Profit prior to its acquisition of
the Subsidiary effective July 1, 1997, and had Gross Profit of
24.0% of sales for the third quarter of 1997.
Consolidated operating expenses for the third quarter of 1998 were
$252,353, compared to $185,541 for the same period in 1997, an
increase of $66,812, or 36.0%. The parent company's operating
expenses for the current quarter were $74,481, compared to $41,993
for the same period in 1997, an increase of $32,488 or 77.3%. This
increase resulted from commencement of rent payments of $3,743 per
month, commencement of payroll in the amount of $5,200, travel
expenses totalling $3,940 for due diligence meetings for potential
acquisitions, and increased normal business expenses. The
Subsidiary's operating expenses for the current quarter were
$177,872 compared to $147,548 for the same quarter in 1997, an
increase of $30,324, or 20.5%. This increase resulted primarily
from expense increases in payroll of $9,042, insurance of $4,110,
rent of $3,500, office expenses of $5,999, auto and travel of
$3,401, and depreciation and amortization of $4,020. As a percent
of sales, operating expenses for the current quarter were 29.6%,
compared to 23.2% for the same period in 1997.
Consolidated operating expenses for the nine month period ended
September 30, 1998 were $707,440 compared to $252,379 for the same
period in 1997, an increase of $455,061. The nine month period
ended September 30, 1997 only includes operating expenses for the
Subsidiary for the three months beginning on July 1, 1997, the
effective date of the acquisition. As a percent of sales,
operating expenses for the nine month period ended September 30,
1998 were 25.4% of sales, compared to 30.9% of sales for the same
period in 1997.
The net loss for the third quarter of 1998 was $38,810 compared to
net income of $6,634 for the same period in 1997, a decrease of
$45,444. This decrease is a result of the increased operating
expenses as discussed above. The Company's Subsidiary had net
income on a pre-tax basis of $27,496 for the current quarter,
compared to $33,375 for the same period in 1997. This is a
decrease of $5,879, which resulted from increased operating
expenses.
The net loss for the nine months ended September 30, 1998 was
$20,600 compared to a net loss of $56,204 for the same period in
1997, a decrease of $35,604. The 1997 period only includes results
of the Subsidiary for the three months beginning on July 1, 1997,
as discussed above. The Subsidiary had net income of $115,299,
after provision for taxes of $67,378, for the nine month period
ended September 30, 1998. The parent company had a net loss of
$135,899 for the current nine month period after provision for a
tax credit of $64,101.
The total cash and cash equivalents at September 30, 1998 totalled
$37,672. Of that amount, the Subsidiary's total was $15,239, and
the parent company's total was $22,433.
Accounts receivable at September 30, 1998 totalled $1,105,546, a
decrease of $76,812 from the total of $1,182,358 at June 30, 1998,
all of which is owed to the Subsidiary. Of that total,
approximately 25 per cent is current, 25 per cent is 30-60 days
old, and 50 per cent is over 60 days old. This pattern is
characteristic of the Subsidiary's industry and customer base. The
decrease in accounts receivable resulted from the Company's
consistent collection efforts and consignment sales arrangement
with four retailers (see Note 4 - Inventory).
Inventory at September 30, 1998 totalled $2,248,169 compared to
$2,003,965 at June 30, 1998, an increase of $244,204. The increase
in inventory is related to the Subsidiary's increased sales and
anticipated sales during the Fall and Winter seasons. The total
inventory at June 30, 1998 includes approximately $813,481 of raw
material (fabric) for production. All inventory is maintained by
the Subsidiary.
Accounts payable at September 30, 1998 totalled $1,247,622, a
decrease of $11,056 from June 30, 1998. The total at September
30, 1998 included the Subsidiary's accounts payable in the amount
of $1,176,127 and the parent Company's total of $71,495. All of
the accounts payable at September 30, 1998 are current. The
Subsidiary's accounts payable consists of mostly raw material
purchases and cost of finished goods, consistent with the
Subsidiary's Cost of Goods Sold and Operating Expense percentage of
sales. The parent Company's accounts payable represents its normal
overhead expenses.
The amount of $332,768 due to a factor and the long term bank loans
in the amount of $212,747 represent borrowings by the Subsidiary,
as a result of the need to carry customer accounts receivable and
to purchase fabric inventory in advance of the selling season.
The Company is continuing to look for suitable acquisition
candidates. As of the date of this Report, no additional
acquisition candidates have been found, and there is no assurance
that any additional candidates will be found.
Liquidity and Capital Resources
At September 30, 1998, the Company and its subsidiary had cash
totalling $37,672, which is not adequate for working capital
requirements, There is no assurance that the Company will be able
to raise the amount of capital needed to meet its working capital
needs.
In a Private Placement Offering which was completed in August,
1998, the Company sold 337,600 Series B Convertible Preferred Stock
Purchase Warrants and received proceeds of $325,600, net of
offering costs of $12,000. As of the date of this report, there is
no trading market for the Warrants, and there is no assurance that
there will be a trading market in the future. See Note 7 to
Financial Statements.
Year 2000 Compliance
The Company has completed a preliminary review of its management
information systems and structure for the year 2000 compliance.
The parent Company utilizes basic software packages only, which
should not result in any system failures or miscalculations. The
parent Company does not currently have any information regarding
the year 2000 compliance of its suppliers, but is not dependent on
any significant supplier in conducting its business.
The Company's Subsidiary is presently conducting a review of its
management information systems for the year 2000 compliance. At
present, there is no indication that there may be any problems with
the year 2000 compliance. The Subsidiary does not currently have
any information regarding the year 2000 compliance of its
suppliers.
General Risk Factors Affecting the Company and its Subsidiary
Various factors could cause the actual results of the Company to
differ materially from those indicated by forward-looking
statements made from time to time in news releases, reports, proxy
statements, registration statements and other written
communications (including the preceding sections of this document),
as well as oral statements made from time to time by
representatives of the Company. Except for historical information,
matters discussed in such oral and written communications are
forward-looking statements that involve risks and uncertainties,
including, but not limited to, economic and business conditions in
the United States and abroad; the level of demand for apparel
products and success of planned marketing programs; the intensity
of competition and the pricing pressures that may result; changes
in labor and import and export regulations; the ability of the
Subsidiary to timely and effectively manage inventory levels and
sourcing; the ability to finance capital expenditures; and currency
fluctuation.
OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable.
Item 2. Change in Securities
Item 2(c). On August 12, 1998, the registrant issued 337,600
Series B Convertible Preferred Stock Purchase Warrants .
The Warrants were sold through a private placement offering
pursuant to exemption from registration provisions of the
Securities Act of 1933, as amended, afforded by Rule 504 of
Regulation D promulgated thereunder and state small corporate
offering registration provisions. (See Note 7 - Capitalization)
Item 3. Defaults Upon Senior Securities. Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K. None.
Exhibit 27 - Financial Data Schedule (Electronic Filing Only)
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed in its behalf by the undersigned,
thereunto duly authorized.
Date: November 13, 1998 CONCORDE STRATEGIES GROUP, INC.
By:/s/ Robert Gordon
Robert Gordon, President
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] SEP-30-1998
[CASH] 37,672
[SECURITIES] 95,025
[RECEIVABLES] 1,105,546
[ALLOWANCES] 0
[INVENTORY] 2,248,169
[CURRENT-ASSETS] 3,486,412
[PP&E] 117,394
[DEPRECIATION] (4,946)
[TOTAL-ASSETS] 3,598,860
[CURRENT-LIABILITIES] 1,612,300
[BONDS] 285,627
[PREFERRED-MANDATORY] 0
[PREFERRED] 546,983
[COMMON] 307,839
[OTHER-SE] 846,111
[TOTAL-LIABILITY-AND-EQUITY] 3,598,860
[SALES] 2,785,295
[TOTAL-REVENUES] 2,785,295
[CGS] 2,101,683
[TOTAL-COSTS] 667,506
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 33,429
[INCOME-PRETAX] (17,323)
[INCOME-TAX] 3,277
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (20,600)
[EPS-PRIMARY] (.01)
[EPS-DILUTED] (.01)<F1>
<FN>
<F1>The accompanying notes are an integral part of these financial
statements.
</FN>
</TABLE>
