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 June 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
incorporation or organization) Identification No.)
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
August 13, 1998.
CONCORDE STRATEGIES GROUP, INC.
Form 10-QSB Quarterly Report
For Period Ended June 30, 1998
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Balance Sheets at
June 30, 1998 and December 31, 1997 4-5
Unaudited Consolidated Statement of Operations
For Three and Six Months Ended June 30, 1998 and 6
June 30, 1997
Unaudited Consolidated Statement of Cash Flows For Six
Months Ended June 30, 1998 and Unaudited Statement of 7
Cash Flows For Six Months Ended June 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, and do not include the Subsidiary's
results for the comparable periods in 1997. Operating results for
the six months ended June 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
June 30, December 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 263,735 $ 133,606
Accounts receivable 1,182,358 1,374,546
Inventory (as submitted) 2,003,965 1,819,695
Prepaid Expenses $ 105,750 $ 13,435
TOTAL CURRENT ASSETS: $ 3,555,808 $ 3,341,282
Fixed assets, net of accumulated
depreciation of $ 0 $ 2,496 -
Leasehold improvements net of
accumulated amortization
of $4,313 58,085 58,852
Security Deposits 40,500 40,500
Deferred Offering Costs 12,000 -
TOTAL ASSETS $ 3,668,889 $ 3,440,634
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) Audited
June 30, December 31,
1998 1997
CURRENT LIABILITIES:
Accounts payable $ 1,258,678 $ 1,487,426
Payroll taxes payable 2,369 -
Due to Factor 279,097 361,098
Bank and other loans payable
(current) 72,880 73,130
Corporate income taxes payable 13,171 13,000
Due to Ameristar
Capital Corporation $ 64,383 $ 89,383
TOTAL CURRENT LIABILITIES $ 1,690,758 $ 2,024,037
LONG TERM LIABILITIES:
Bank and other loans $ 223,568 $ 252,414
TOTAL LIABILITIES: $ 1,914,146 $ 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 issuable $ 352,600 $ -
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) (92,954) (111,164)
TOTAL STOCKHOLDERS' EQUITY 1,754,743 1,164,183
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,668,889 $ 3,440,634
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS AND
STATEMENT OF OPERATIONS (Unaudited)
<CAPTION>
For the Three For the Six
Months Ended June 30 Months Ended June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES
Sales $1,016,234 $ - $1,931,803 $ -
COST OF GOODS SOLD $ 762,177 $ $1,453,558 $
GROSS PROFIT: $ 254,057 $ $ 478,245 $
OPERATING EXPENSES:
Transfer and filing fees $ 1,160 1,270 $ 1,586 $ 1,765
Insurance 12,403 - 19,029 -
Payroll and payroll taxes 84,135 - 158,447 -
Other taxes 476 - 476 -
Rent 32,229 - 64,458 -
Utilities and telephone 5,277 485 13,345 694
Commissions 11,088 - 20,921 -
Auto and travel 7,247 - 14,285 -
Entertainment 883 - 4,794 -
Bank charges and interest 9,730 - 23,214 -
Credit and charges 3,073 - 3,073 -
Advertising - - 1,400 -
Office Expenses 7,196 310 14,320 1,004
Repairs and maintenance 2,465 - 4,463 -
Consulting 22,125 43,000 52,750 57,625
Professional Fees 24,671 375 51,632 1,750
Depreciation and amortization 382 - 4,313 -
Dues 1,500 - 1,500 -
Printing expenses $ 1,081 $ - $ 1,081 $ -
TOTAL OPERATING EXPENSES $ 227,121 $ 45,440 $ 455,087 $ 62,838
INCOME(LOSS) FROM OPERATIONS $ 26,936 $ (45,440) $ 23,158 $ (62,838)
OTHER INCOME AND (EXPENSES):
INTEREST INCOME $ - $ - $ 1,122 $ -
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES $ 26,936 (45,440) $ 24,280 $ (62,838)
ESTIMATED PROVISION FOR
INCOME TAXES $ 6,070 $ - $ 6,070 $ -
NET INCOME (LOSS) $ 20,866 $ (45,440) $ 18,210 $ (62,838)
NET (LOSS) PER SHARE $ .01 $ (.04) $ .01 $ (.05)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,332,937 1,250,000 3,317,250 1,225,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENT AND CASH FLOW STATEMENT
For the Three Months Ended June 30, 1998 and 1997 (Unaudited)
Consolidated Cash Cash Flow
Flow Statement Statement
June 30, 1998 June 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 18,210 $ (62,838)
Adjustments to reconcile
net loss to net cash flow
from operating activities:
Depreciation and amortization 4,313 -
Decrease in accounts receivable 192,188 -
(Increase)in inventory (184,270) -
Decrease in prepaid expenses (92,315) -
Increase (Decrease)in due to
Ameristar Capital Corporation (25,000) 14,508
(Increase) in deferred
offering costs (12,000) -
Increase (Decrease)in payables (226,379) 18,760
Other - Net Rounding 1 -
Increase in corporate income
taxes payable $ 171 $
Cash Used by Operating Activities $ (325,081) $ (29,570)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in fixed assets (2,496) -
Increase in leasehold improvements (3,547) -
Net Cash used in investing
activities (6,043) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
preferred stock and warrants 431,350 -
Issuance of common stock 141,000 30,000
Reduction in amount due
to factor - net (82,001) -
Repayment of bank and other loans (29,096) -
Net Cash Provided by
Financing Activities $ 461,253 $ 30,000
Net Increase in Cash $ 130,129 $ 430
CASH, BEGINNING OF THE PERIOD $ 133,606 $ 0
CASH, END OF THE PERIOD $ 263,735 $ 430
The accompanying notes are an integral part of these financial statements.<PAGE>
CONCORDE STRATEGIES GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Consolidated Statement of Stockholders' Equity
for the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Series B
Stock Non- Convertible
Dividend Preferred Total
Bearing Stock Common Stock Additional Stockholders'
Series B Purchase Number of Common 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 -- $352,600 -- -- -- -- 352,600
Convertible
Preferred Stock
Purchase Warrants,
for cash (issuable)
300,000 shares of
Common Stock issued
for services, -- 300,000 141,000 -- -- 141,000
June 22, 1998
Net income for
the Six Months
Ended June 30,
1998 -- -- -- -- -- 18,210 18,210
Balance,
June 30, 1998 $209,383 $352,600 3,600,000 $307,839 $977,875 $ (92,954) $1,754,743
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED June 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
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 June 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 June 30, 1998 was as follows:
Raw material (fabric) $ 841,665
Finished goods 641,268
Consignment 521,032
Total $2,003,965
Effective October 1, 1997, L'Abbigliamento, Ltd. entered into
consignment
Note 4 - Continued
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 June 30, 1998, the subsidiary had outstanding debt in the amount
of $296,448 ($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
Note 7 - Continued
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.
In 1998, the Company commenced a private placement of 750,000
Series B Convertible Preferred Stock Purchase Warrants at a
purchase price of $1.00 per Warrant. The Company will realize
proceeds of $138,000 from the Offering net of offering expenses of
$12,000, if the minimum number of 150,000 Warrants are sold. The
Company will realize proceeds of $738,000 from the Offering, net of
offering expenses in the amount of $12,000, if the maximum number
of Warrants are sold. 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. As of June 30,
1998, the company has sold 352,600 warrants.
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.
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.
Note 8 - Continued
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)
Note 11 - Continued
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 June 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 June 30, 1997
include the results of operations for the parent company 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 six month periods ended June 30, 1998. These results do not
include the Subsidiary's results of operations for the comparable
periods in 1997. The effective date of the acquisition was July 1,
1997.
Sales were $1,016,234 for the three month period ended June 30,
1998 compared to sales of $915,569 for the three month period ended
March 31, 1998, all of which resulted from the Company's
acquisition of its operating Subsidiary, L'Abbigliamento, Ltd.,
which was completed effective July 1, 1997. Sales were $1,931,803
for the six month period ended June 30, 1998. The Company did not
have any revenue in the comparable periods for 1997. After cost of
revenues of $762,177 gross profit realized was $254,057 for the
three month period ended June 30, 1998, compared to cost of
revenues of $691,381 and gross profit of $224,188 for the three
month period ended March 31, 1998. All of the gross profit
resulted from operations of the Company's Subsidiary, and the
Company did not have any gross profit in the comparable period for
1997 which was prior to the acquisition of the Subsidiary. Gross
profit as a percentage of sales increased slightly from 24.48
percent for the three month period ended March 31, 1998 to 25.0
percent for the three month period ended June 30, 1998.
Consolidated operating expenses for the three month period ended
June 30, 1998 were $227,121, which includes the Subsidiary's total
of $162,720 and the parent Company's total of $64,401. The parent
Company's operating expenses increased $18,961 from 1997 primarily
due to commencement of rent payments of $3,743 per month, increased
professional fees for accounting services related to the
acquisition of the Subsidiary, increased consulting services and
increased office expenses. The Subsidiary's operating expenses
were 16.0 per cent of sales for the period reported compared to
17.5 percent of sales for the three month period ended March 31,
1998.
Consolidated operating expenses for the six month period ended June
30, 1998 were $455,087, which includes the Subsidiary's total of
$323,064 and the parent Company's total of $132,023. The parent
Company's operating expenses for this six month period increased
$69,185 from 1997 primarily due to the factors listed above.
The net income for the three month period ended June 30, 1998 was
$26,936 compared to a net loss of $45,440 for the comparable period
ended June 30, 1997, an increase of $72,376. All of the increase
in net income during this period resulted from operation of the
Subsidiary. The net income for the six month period ended June 30,
1998 was $24,280 compared to a net loss of $62,838 for the
comparable period ended June 30, 1997, an increase of $87,118. All
of the increase in net income during the six month period resulted
from operation of the Subsidiary.
The total cash and cash equivalents at June 30, 1998 totalled
$263,735. Of that amount, the Subsidiary's total was $66,960, and
the parent company's total was $196,775.
Accounts receivable at June 30, 1998 totalled $1,182,358, a
decrease of $196,407 from the total of $1,378,765 at March 31,
1998, all of which is owed to the Subsidiary. Of that total, 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 June 30, 1998 totalled $2,003,965, compared to
$1,913,048 at March 31, 1998, an increase of $90,917. The increase
in inventory is related to the Subsidiary's increased sales and
anticipated sales during the Fall season. The total inventory at
June 30, 1998 includes approximately $841,665 of raw material
(fabric) for production. All inventory is maintained by the
Subsidiary.
Accounts payable at June 30, 1998 totalled $1,258,678, a decrease
of $131,536 from March 31, 1998. The total at June 30, 1998
included the Subsidiary's accounts payable in the amount of
$1,189,103 and the parent Company's total of $69,575. All of the
accounts payable at June 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 $279,097 due to a factor and the long term bank loans
in the amount of $223,568 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 June 30, 1998, the Company and its subsidiary had cash totalling
$263,735, 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.
As of the date of this Report, in a Private Placement Offering, the
Company has sold 337,600 Series B Convertible Preferred Stock
Purchase Warrants and received proceeds of $325,600, net of
offering costs of $12,000. 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 June 22, 1998, the registrant issued 300,000 shares
of its Common Stock to a company principally owned by
a Director of the registrant for consulting services
performed 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.
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.
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: August 13, 1998
CONCORDE STRATEGIES GROUP, INC.
By: /s/ Robert Gordon
Robert Gordon, President
