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, 1999
[ ] 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
June
30, 1999
CONCORDE STRATEGIES GROUP, INC.
Form 10-QSB Quarterly Report
For Period Ended June 30, 1999
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Balance Sheets at
June 30, 1999 and December 31, 1998 (audited) 4-5
Unaudited Consolidated Statement of Operations
For Three and Six Months Ended June 30, 1999 and 1998 6
Unaudited Consolidated Statement of Cash Flows For Six
Months Ended June 30, 1999 and 1998 7
Statement of Stockholders' Equity (Deficit) 8
Notes to Financial Statements 9-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16
PART II -- OTHER INFORMATION 19
SIGNATURES 20
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 do not include the results of
the Company's subsidiary which was divested, effective March 31,
1999. Operating results for the six months ended June 30, 1999 are
not necessarily indicative of results that may be expected for the
year ending December 31, 1999. For further information, refer to
the consolidated financial statements and footnotes, thereto
included in the Company's annual report on form 10-KSB for the year
ended December 31, 1998.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
BALANCE SHEET AND CONSOLIDATED BALANCE SHEET
Consolidated
Balance Sheet Balance Sheet
(Unaudited) Audited
June 30, December 31,
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 54 $ 2,337
Accounts receivable - 1,361,173
Inventory (as submitted) - 2,014,517
Prepaid Expenses $ 35,250 $ 76,347
TOTAL CURRENT ASSETS: $ 35,304 $ 3,454,374
Fixed assets, net of accumulated
depreciation of
$899 and $26,299 $ 1,597 46,031
Leasehold improvements net of
accumulated amortization
of $0 and $2,534 - 57,317
Security Deposits - $ 40,500
Loan Receivable (Note 12) $ 158,000 -
Interest Receivable (Note 12) $ 1,584 $ -
TOTAL ASSETS $ 196,485 $ 3,598,222
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) Audited
June 30, December 31,
1999 1998
CURRENT LIABILITIES:
Accounts payable $ 99,230 $ 1,340,483
Payroll taxes payable - 591
Due to Factor - 394,185
Bank and other loans payable
(current) - 46,350
Corporate income taxes payable - 63,147
Due to Ameristar
Capital Corporation $ 70,888 $ 23,383
TOTAL CURRENT LIABILITIES $ 170,118 $ 1,868,139
LONG TERM LIABILITIES:
Bank and other loans $ - $ 173,381
TOTAL LIABILITIES: $ 170,118 $ 2,041,520
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
100,000,000 shares authorized.
Series A Convertible, redeemable
Preferred, 0, June 30, (1999) and
1,000 December 31, (1998) shares
issued and outstanding
Series B Convertible,non-dividend
bearing, 940,000 and 765,000 shares
issued and outstanding $ 559,383 $ 209,383
Series B Convertible Preferred
Stock Purchase Warrants $ 325,600 $ 325,600
Common stock, no par value,
500,000,000 shares authorized,
3,600,000 shares
issued and outstanding $ 307,839 $ 307,839
Common stock issuable,
199,995 shares $ 64,995 0
Additional paid-in-capital $ 1,875 977,875
Retained earnings(Deficit) (1,233,325) (263,995)
TOTAL STOCKHOLDERS' EQUITY 26,367 1,556,702
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 196,485 $ 3,598,222
The accompanying notes are an integral part of these financial
statements.
<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND
STATEMENT OF OPERATIONS (Unaudited)
Statement of Consolidated Statements of
Operations Operations
For the Three For the Six
Months Ended Months
June 30 Ended June 30
1999 1998 1999 1998
REVENUES
Sales $ 0 $1,016,234 $ 837,486 $1,931,803
COST OF GOODS SOLD $ 0 $ 762,177 $ 595,713 $1,453,558
GROSS PROFIT: $ 0 $ 254,057 $ 241,773 $ 478,245
OPERATING EXPENSES:
Transfer and filing fees $ 2,344 1,160 $ 2,880 $ 1,586
Insurance $ 2,432 12,403 18,458 19,029
Payroll and payroll taxes 63 84,135 71,976 158,447
Other taxes 0 476 0 476
Rent 11,538 32,229 34,976 64,458
Utilities and telephone 687 5,277 7,017 13,345
Commissions 0 11,088 10,188 20,921
Auto and travel 0 7,247 8,062 14,285
Entertainment 0 883 3,168 4,794
Bank charges and interest 73 9,730 31,461 23,214
Credit and charges 0 3,073 0 3,073
Advertising 1,050 - 7,400 1,400
Office Expenses 564 7,196 1,862 14,320
Repairs and maintenance 0 2,465 729 4,463
Consulting 445,620 22,125 483,659 52,750
Professional Fees 7,978 24,671 10,572 51,630
Depreciation and amortization 199 382 3,295 4,313
Dues 0 1,500 0 1,500
Other expenses $ 0 $ 1,081 $ 533 $ 1,081
TOTAL OPERATING EXPENSES $ 472,548 $ 227,121 $ 696,236 $ 455,087
INCOME(LOSS) FROM OPERATIONS $ (472,548)$ 26,936 $ (454,463)$ 23,158
OTHER INCOME AND (EXPENSES):
INTEREST INCOME $ 1,584 $ - $ 1,593 $ 1,122
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES $ (470,964) 26,936 $ (452,870)$ 24,280
ESTIMATED PROVISION FOR
INCOME TAXES $ 0 $ 6,070 $ 6,799 $ 6,070
NET INCOME (LOSS) $ (470,964)$ 20,866 $ (459,669)$ 18,210
NET (LOSS) PER SHARE $ (.13) $ .01 $ (.13) $ .01
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,600,000 3,332,937 3,600,000 3,317,250
The accompanying notes are an integral part of these financial
statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENTS
For the Six Months Ended June 30, 1999 and 1998 (Unaudited)
Consolidated Cash Flow Statements
June 30, 1999 June 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (459,669) $ 18,210
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation and amortization 3,295 4,313
Decrease in accounts receivable 1,361,173 192,188
Decrease (Increase)in inventory 2,014,517 (184,270)
Decrease (increase)in
prepaid expenses 41,097 (92,315)
Decrease in security deposits 40,500 0
(Increase) in loan receivable (158,000) 0
(Increase) in interest receivable (1,584) 0
Increase (Decrease) in payables (1,241,844) (226,378)
Increase (Decrease)in due to
Ameristar Capital Corporation 47,505 (25,000)
(Increase) in deferred offering costs 0 (12,000)
Decrease (Increase) in corporate
income taxes payable $ (63,147) $ 171
Cash Provided (Used)
by Operating Activities $ 1,583,843 $ (325,081)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in fixed assets 41,139 (2,496)
Decrease (Increase) in leasehold
improvements 57,317 (3,547)
Divestiture of Subsidiary (509,661) 0
Net Cash used in investing activities (411,205) (6,043)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
preferred stock and warrants 350,000 431,350
Proceeds from common stock issuable
and issuance of common stock 64,995 141,000
Reduction in additional paid in
capital (976,000) 0
Reduction in amount due
to factor - net (394,185) (82,001)
Repayment of bank and other loans (219,731) (29,096)
Net Cash Provided by
Financing Activities $(1,174,921) $ 461,253
Net (Decrease) Increase in Cash $ (2,283) $ 130,129
CASH, BEGINNING OF THE PERIOD $ 2,337 $ 133,606
CASH, END OF THE PERIOD $ 54 $ 263,735
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, 1999
<TABLE>
Preferred Series B Preferred Stock
Stock Non- Convertible No Par Value
Dividend Preferred Series A Common Total
Bearing Stock Convertible Stock Common Common Additional Stockholders'
Series B Purchase Redeemable Number of Stock Stock Paid-in Deficit Equity
Convertible Warrants Shares Shares Amount Issuable Capital Accumulated (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1999 $209,383 $325,600 1,000 3,600,000 $307,839 $977,875 $(263,995) $ 1,556,702
April 1, 1999
Divestiture of
subsidiary,
L'Abbigliamento,
Ltd. (Note 12) (1,000) $(976,000) (509,661) $(1,485,661)
175,000 shares
of Series B
Convertible
Preferred Stock
issued for services
April 1, 1999 $350,000 350,000
May 21, 1999,
199,995 shares to
be issued for
consulting services 64,995 64,995
Net (loss)for
the Six Months
Ended June 30, 1999 -- -- -- -- -- -- -- $(459,669) $ (459,669)
Balance,
June 30, 1999 $559,383 $325,600 0 3,600,000 $307,839 $64,995 $1,875 $(1,233,325) $ 26,367
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, 1999
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. An agreement for the divestiture of
L'Abbigliamento, Ltd. effective March 31, 1999, was approved by shareholders
on August 12, 1999 (see Note 12 and Item 2).
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, 1998.
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
December 31, 1998 is as follows:
Accounts Receivable Accounts Payable
Current 25% 100%
30-60 days 25%
over 60 days 50%
100%
Due to the divestiture of L'Abbigliamento, Ltd., effective as of the close
of business on March 31, 1999, the accounts receivable and accounts payable
are listed as zero balances as of June 30, 1999.
Note 4 - INVENTORY
Estimated inventory at December 31, 1998 was as follows:
Raw material (fabric) $ 826,000
Finished goods 1,188,517
Total $2,014,517
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 1999, L'Abbigliamento, Ltd. added two additional
consignment customers. Management believes that this 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 December 31, 1998, the subsidiary had outstanding debt in the amount of
$219,731 ($46,350 - 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.
On April 1, 1999, the Company sold 175,000 shares of Series B
Convertible
Preferred stock to certain parties who had performed services on
behalf of
the Company, including one company which is principally owned by
a Director
of the Company. The shares were sold by the Company in
consideration for the
cancellation of payments owed by the Company at the agreed upon
rate of $2.00
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 May 21, 1999, 199,995 restricted shares of Common Stock were
sold to a
principal of L'Abbigliamento, Ltd. who had performed consulting
services on
behalf of the registrant. As of the date of this report, these
shares are
in the process of being issued in consideration for the
cancellation of
payments in the total amount of $64,995 owed by the registrant
for said
services.
Note 8 - PROVISION FOR TAXES ON INCOME
The estimated provision for income taxes are based on the
statutory federal
and state income tax rates. The State of New York does not allow
a foreign
company to offset its income by the parent company's losses.
Note 9 - 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 10 - 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 9)
The Company has incurred consulting fees of $158,833 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).
On April 1, 1999, the Registrant issued 71,666 of its preferred
stock to a
company principally owned by a Director of the Registrant in
consideration
of $2.00 per share for consulting services performed on behalf of
the
Registrant. (See Note 7 Capitalization).
On May 21, 1999, 199,995 restricted shares of common stock were
sold to a
principal of L'Abbigliamento, Ltd. who had performed consulting
services on
behalf of the registrant. As of the date of this report, these
shares are
in the process of being issued in consideration for the
cancellation of
payments in the total amount of $64,995 owed by the registrant
for said
services.
As discussed in note 9, 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 11 - CONSOLIDATION OF FINANCIAL INFORMATION
The consolidated financial statements of the Company for the
period ended
March 31, 1999 include the results of the acquisition of Concorde
Management,
Ltd. and its wholly owned subsidiary, L'Abbigliamento, Ltd.
All material intercompany accounts and transactions have been
eliminated.
Due to the divestiture of the subsidiary, effective April 1,
1999, the
financial statements from April 1, 1999 thru June 30, 1999
reflect financial
data of the parent company only, or Concorde Strategies Group,
Inc.
Note 12 - DIVESTITURE OF SUBSIDIARY
A Termination Agreement was executed on May 5, 1999, for the
divestiture of
L'Abbigliamento, Ltd., Concorde's sole operating subsidiary and
was ratified
by shareholders on August 12, 1999. Under the terms of the
Agreement, (1)
management of both companies have mutually elected to rescind and
cancel the
acquisition of L'Abbigliamento, Ltd. by Concorde, effective as of
the close
of business on March 31, 1999; (2) L'Abbigliamento, Ltd. shall
return to
Concorde 100 percent of the Class A Preferred Shares in exchange
for which
Concorde shall deliver 100 percent of the L'Abbigliamento, Ltd.
capital
stock held by it; (3) L'Abbigliamento, Ltd. will repay its
outstanding
indebtedness to Concorde in the principal amount of $158,000 in
five equal
monthly payments of $1,300, plus 55 monthly payments of $1,700,
which
payments shall be inclusive of interest at the rate of six
percent per annum,
to be followed by a final payment at the end of aforesaid term
equal to the
sum of any accrued but unpaid interest due thereon plus the
entire unpaid
principal amount.
Note 13 - MERGER AND ACQUISITIONS
On April 21, 1999, the Company entered into an Agreement and Plan
of Share
Exchange with W3 Group, Inc., which was approved by shareholders
on August
12, 1999, whereby Concorde will acquire 100 percent of the Common
Stock of
W3 Group, Inc. in exchange for the issuance of Common Stock of
Concorde
Strategies Group, Inc., at the rate of one Concorde Share for one
W3 Share.
Upon completion of the exchange of shares, W3 Group, Inc. will
become a
wholly owned subsidiary of Concorde and Concorde will amend its
Articles of
Incorporation to change its corporation name to W3 Group, Inc.
Concorde
conducted a meeting of shareholders on August 12, 1999 to ratify
the
Agreement and certain other matters which have been approved by
its Board of
Directors. See "Other Information - Item 4, Submission of
Matters to a Vote
of Security Holders."
Note 14 - SUBSEQUENT EVENTS
Subsequent to the period covered by this report, on August 12,
1999,
shareholders approved the divestiture of the Company's
subsidiary,
L'Abbigliamento, Ltd., effective March 31, 1999 (see Note 12).
Also, on
August 12, 1999, shareholders ratified the restructuring plan
approved by the
Board of Directors. This plan includes the Agreement and Plan of
Share
Exchange with W3 Group, Inc. a privately owned company, whereby
Concorde will
acquire 100 percent of the capital stock of W3 Group, Inc in
exchange for an
equal number of shares of Concorde's post-split Common Stock. W3
Group, Inc.
will then become a wholly owned subsidiary of Concorde, and will
change its
corporation name to W3 Group, Inc., or if such name is not
available in the
State of Colorado, to such other name as may be selected by the
majority vote
of the Board of Directors.
Shareholders, on August 12, 1999, also approved the reverse split
of
Concorde's Common Stock on the basis of one new share for each 30
existing
shares. The number of outstanding shares of Concorde's Series B
Convertible
Preferred Stock and Series B Convertible Preferred Stock Purchase
Warrants
will remain unchanged, however the conversion feature will be
adjusted to
reflect the reverse split.
Also approved by shareholders on August 12, 1999 is a special
distribution
of Common Stock Purchase Warrants to holders of the registrant's
Common
Stock, Series B Convertible Preferred Stock, and Series B
Convertible
Preferred Stock Purchase Warrants. The special distribution will
be made on
the basis of one Common Stock Purchase Warrant for each ten
shares of Common
Stock either currently outstanding or committed to be issued upon
the
conversion of the presently outstanding Preferred Shares, or the
currently
outstanding Warrants to purchase Preferred Shares. The Common
Stock Purchase
Warrants shall be callable and each represent the right to
purchase one share
of Common Stock at a price of $6.00 per share during the exercise
period,
which is two years from the date of their issuance.
All of the foregoing will be implemented by the Company as soon
as
practicable during the quarterly period ended September 30, 1999.
On July 9, W3 Group, Inc. executed an Agreement and Plan of
Share Exchange
to acquire Secure-net Services, Inc., a privately owned company
through an
exchange of shares. Upon closing of this Agreement, Secure-Net
Services,
Inc. will become a wholly owned subsidiary of W3 Group, Inc.
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial
Conditions and
Results of Operations:
Divestiture of L'Abbigliamento, Ltd.
The Company has developed a new business strategy which is
focused on seeking
acquisition opportunities with Internet related technology
companies. As the
first step in its reorganization process, the Company reached an
agreement
in April, 1999 for the divestiture of L'Abbigliamento, Ltd.,
Concorde's sole
operating subsidiary, effective March 31, 1999. L'Abbigliamento,
Ltd. is a
wholesaler of imported menswear, which does not fit the Company's
new
direction. The agreement was approved by shareholders, at a
special meeting
of shareholders on August 12, 1999.
Investors and shareholders should bear in mind that the Company's
only
operating subsidiary was fully divested effective March 31, 1999,
the end of
the first quarter of fiscal 1999.
Results of Operations
The results of operations for the three month period ended June
30, 1999
reflect the divestiture of the Company's operating subsidiary,
effective
March 31, 1999, and thus the Company did not have any revenue for
the current
period being reported. A discussion of operating results for the
Company's
subsidiary was included in the quarterly report (Form 10-QSB) for
March 31,
1999 and annual report (Form 10-KSB) for December 31, 1998.
Operating expenses for the parent company only were $472,548 for
the three
month period ended June 30, 1999, an increase of $408,147 from
the three
month period ended June 30, 1998. This increase was a result of
consulting
fees of $445,620 incurred by the Company in the current quarterly
period.
These consulting fees were for services performed in the past,
and the
amounts owed were cancelled in consideration for the issuance of
shares of
the Company's securities (see Note 7 - Capitalization). For the
six month
period ended June 30, 1999, operating expenses for the parent
company were
$518,333, an increase of $386,310 from the same period in 1998.
This
increase also resulted from the aforementioned consulting fees
recorded in
the three month period ended June 30, 1999.
The parent Company had total cash of $54 at June 30, 1999
compared to
$196,775 at June 30, 1998, a decrease of $196,721. The total
cash at June
30, 1998 included a portion of the proceeds from the Company's
Private
Placement Offering of Series B Convertible Preferred Stock
Purchase Warrants.
The parent Company's Accounts Payable at June 30, 1999 was
$99,230 compared
to $69,575 at June 30, 1998, an increase of $29,655, reflecting
the Company's
lack of working capital needed for normal overhead expenses.
Reorganization of Business Operations
After considerable research and discussion, the Board of
Directors has
determined that it would be in the best interest of the Company
and its
shareholders to focus its acquisition efforts on Internet related
technology
companies. The Internet industry is going through fundamental
and rapid
changes as technology advances, providing significant business
growth
opportunities. The emergence of the Internet into homes and
offices has
provided a powerful new mechanism for such areas as electronic
commerce,
communication via e-mail and the widespread dissemination of
information.
In line with the Company's new business strategy to focus its
acquisition
efforts on Internet related technology companies, the Board of
Directors has
determined that a reorganization will help to achieve its
objectives.
Accordingly the Company reached agreement in April, 1999, which
was approved
by shareholders on August 12, 1999, for the divestiture of
L'Abbigliamento,
Ltd., which has been Concorde's sole operating subsidiary. Under
the terms
of the Termination Agreement, effective as of the close of
business on March
31, 1999, L'Abbigliamento, Ltd. resumed operations as an
independent private
company. Also, L'Abbigliamento, Ltd. returned 100 percent of
Concorde Class
A Preferred Shares in exchange for the return of 100 percent of
the capital
stock of L'Abbigliamento, Ltd. held by Concorde. As part of the
divestiture,
L'Abbigliamento, Ltd. will repay its outstanding indebtedness to
Concorde in
the principal amount of $158,000 in five equal monthly payments
of $1,300,
plus 55 equal monthly payments of $1,700, which payments shall be
inclusive
of interest at the rate of six percent per annum, to be followed
by a final
payment at the end of the aforesaid term equal to the sum of any
accrued but
unpaid interest due thereon plus the entire unpaid principal
amount.
As a result of the divestiture of L'Abbigliamento, Ltd.,
effective March 31,
1999, the Company will essentially not have any business
operations, pending
the completion of its acquisition of W3 Group, Inc. and the
possible
successful closing of W3's acquisition of Secure-Net Services,
Inc., of which
there can be no assurance.
In further regard to the Company's Reorganization Plan, on April
21, 1999,
Concorde entered into an Agreement and Plan of Share Exchange
(the
"Agreement") with W3 Group, Inc., a privately held company
engaged in the
business of acquiring and developing young companies whose
businesses involve
the development of Internet related technology and applications.
Subsequent
to the period covered by this report, on August 12, 1999,
shareholders
approved the Agreement and a change of the Company's name to W3
Group, Inc.,
or if such name is not available in the State of Colorado, to
such other name
as may be selected by the majority vote of the Board of
Directors. The
Agreement calls for Concorde to effect a reverse split of its
Common Stock
of one new share for each 30 existing shares, after which
approximately
3,125,000 new shares of Concorde Common Stock will be issued to
W3
shareholders in exchange for 100 percent of the capital stock of
W3 Group,
Inc. The number of outstanding shares of Concorde's Series B
Convertible
Preferred Stock and Series B Convertible Preferred Stock Purchase
Warrants
will remain unchanged, however, the conversion feature will be
adjusted to
reflect the reverse split. Upon consummation of the exchange of
shares, W3
Group, Inc. will become a wholly owned subsidiary of Concorde
Strategies
Group, Inc. Certain present and former officers and directors of
Concorde
also have an interest in W3 Group, Inc.
A special distribution of Common Stock Purchase Warrants was also
approved
by shareholders on August 12, 1999 and will be made at the time
of the
reverse split to holders of Concorde's Common Stock, Series B
Convertible
Preferred Stock and Series B Convertible Preferred Stock Purchase
Warrants.
The special distribution will be made on the basis of one Common
Stock
Purchase Warrant for each 10 shares of Common Stock either
currently
outstanding or committed to be issued upon the conversion of the
presently
outstanding Preferred Shares, or the currently outstanding
Warrants to
purchase Preferred Shares. The Common Stock Purchase Warrants
shall be
callable and each represent the right to purchase one share of
Common Stock
at a price of $6.00 per share during the exercise period, which
is two years
from the date of their issuance. All of the foregoing was
approved by
shareholders at the special meeting of shareholders on August 12,
1999.
Acquisition of New Subsidiary
The Company's new subsidiary, W3 Group, Inc. intends to
acquire, finance,
and restructure profitable companies that can utilize the
Internet to expand
their business and distribution channel. W3's plan is based on
analysis and
evaluation of the current industry environment, trends, and
perceived
opportunities in certain industries within the Internet. W3
intends to focus
on existing companies that have proven markets, profitability,
and
management. W3's objective is to provide a platform for selected
companies
to expand their markets via use of the Internet, strengthen
internal
functions by providing consulting services and professional
management
support, and expansion capital, while allowing the companies to
continue
management of daily operations.
On July 9, 1999, W3 Group, Inc. executed an Agreement and Plan
of Share
Exchange to acquire Secure-Net Services, Inc., a privately owned
company,
through an exchange of shares. Upon closing of this Agreement,
Secure-Net
Services, Inc. will become a wholly owned subsidiary of W3
Group, Inc.
Secure-Net Services, Inc. is located in San Juan, Puerto Rico
and was
founded in 1996. The company is marketing an authentication
software
security product for Windows 95/98 based systems. This leading
edge software
requires both a password and hand held token in order to gain
entry into
secured systems.
Liquidity and Capital Resources
At June 30, 1999, the Company had an insignificant amount of
cash, which is
not adequate for working capital requirements. At present, the
Company is
wholly dependent upon the willingness of management and Ameristar
Group
Incorporated to advance to the Company adequate funds to cover
any expenses
incurred in its operations until such time, if ever, as the
Company is able
to raise the amount of capital needed to meet its working capital
needs.
There is no assurance that the Company will be able to raise the
amount of
capital needed to meet its working capital needs.
Year 2000 Compliance
The Company has completed a preliminary review of its management
information
systems and structure for Year 2000 compliance. The parent
Company utilizes
basic software packages and personal computers only, and it is
not
anticipated that any system failures or miscalculations will
result from
their use. 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.
As prospective subsidiaries are evaluated, management will assess
their Year
2000 compliance and develop plans to resolve Year 2000 problems
for acquired
companies. There can be no assurance that Year 2000 problems
will not be
discovered, nor that these problems will not cause any
interruption of
business activities. As of the date of this report, the Company
does not have
any information necessary to estimate the costs of such potential
Year 2000
problems.
General Risk Factors Affecting the Company and its Subsidiary
Various factors could cause 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 the following:
Continued growth, use, and acceptance of the Internet as a
business
medium, and development of the required infrastructure to
support Internet
growth
Rapidly changing technology
Intense competition within the Internet marketplace
Many well established companies and smaller entrepreneurial
companies have
significant resources that will compete with the Company's
limited
resources in the acquisition of Internet technology
companies.
There can be no assurance that the Company will be able to
compete
successfully in the acquisition of subsidiary companies
The management of growth is expected to place significant
pressure on the
Company's managerial, operational, and financial resources
The Company will not be able to accomplish its growth
strategy if it is
not able to consummate future acquisitions
Change in Control
On April 21, 1999, Concorde entered into a formal Agreement and
Plan of Share
Exchange with W3 Group, Inc. which was approved by shareholders
on August 12,
1999, whereby Concorde will acquire 100 percent of the capital
stock of W3
Group, Inc. in exchange for shares of Concorde's Common Stock.
Prior to the
closing of this Agreement, current and former Officers and
Directors of
Concorde owned approximately 48.6 percent of the issued and
outstanding
shares of the capital stock of W3 Group, Inc. Subsequent to the
closing of
this Agreement, which was approved by shareholders on August 12,
1999,
current and former Officers and Directors of Concorde will own
approximately
48.2 percent of the issued and outstanding shares of Common Stock
of the new
entity.
OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable.
Item 2. Change in Securities. None
Item 3. Defaults Upon Senior Securities. Not Applicable.
Item 4. Submission of Matters to a Vote of Security
Holders.
(a) A special meeting of shareholders was held on
August 12, 1999,
subsequent to the period covered by this
report.
(b) The special meeting of shareholders did not
involve the election
of directors.
(c) The following matters were voted on at the
special meeting of
shareholders on August 12, 1999:
1. Divestiture of L'Abbilgiamento, Ltd.
The registrant's
operating subsidiary, L'Abbigliamento,
Ltd. will be divested
effective as of the close of business on
March 31, 1999, will
resume operations as an independent
private company, and
return 100 percent of the Class A
Preferred Shares to the
Company in exchange for the return of 100
of the capital
stock of L'Abbigliamento, Ltd. held by
Concorde.
A total of 2,284,800 votes were cast
for this proposal, no
votes against, no abstentions and
703,357 broker non-votes.
2. Agreement and Plan of Share Exchange
with W3 Group, Inc.
Under the terms of this Agreement, the
registrant will
acquire 100 percent of the capital stock
of W3 Group, Inc.,
a privately owned company, in exchange
for an equal number of
shares of the registrant's post split
Common Stock. W3 Group,
Inc. will become a wholly owned
subsidiary of the
registrant. W3 Group, Inc. intends to
acquire, finance and
restructure companies that can utilize
the Internet to expand
their business.
A total of 2,284,800 votes were cast
for this proposal, no
votes against, no abstentions, and
703,357 broker non-votes.
3. Reverse split of registrant's Common
Stock on the basis of
one new share for each 30 existing
shares.
A total of 2,284,800 votes were cast
for this proposal, no
votes against, no abstentions, and
703,357 broker non-votes.
4. A special distribution of Common
Stock Purchase Warrants to
holders of the registrant's Common Stock,
Series B
Convertible Preferred Stock, and Series B
Convertible
Preferred Stock Purchase Warrants. The
special distribution
will be made on the basis of one Common
Stock Purchase
Warrant for each ten shares of Common
Stock either currently
outstanding or committed to be issued
upon the conversion of
the presently outstanding Preferred
Shares, or the currently
outstanding Warrants to purchase
Preferred Shares. The
Common Stock Purchase Warrants shall be
callable and each
represent the right to purchase one share
of Common Stock at
a price of $6.00 per share during the
exercise period, which
is two years from the date of their
issuance.
A total of 2,284,800 votes were cast
for this proposal, no
votes against, no abstentions, and
703,357 broker non-votes.
5. The corporation name of Concorde
Strategies Group, Inc.
will be changed to W3 Group, Inc., or if
such name is not
available in the State of Colorado, to
such other name as may
be selected by the majority vote of the
Board of Directors.
A total of 2,273,800 votes were case
for this proposal,
11,000 votes against, no abstentions, and
703,357 broker non-votes.
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:
CONCORDE STRATEGIES GROUP, INC.
By: /s/ Robert Gordon
Robert Gordon
President
<PAGE>
[ARTICLE] 5
<TABLE>
<S> <C> <C>
<C>
[PERIOD-TYPE] 6-MOS YEAR
3-MOS
[FISCAL-YEAR-END] DEC-31-1998
DEC-31-1998 DEC-31-1998
[PERIOD-END] JUN-30-1999
DEC-31-1998 JUN-30-1999
[CASH] 54
2337 [BLANK]
[SECURITIES] 0
0 [BLANK]
[RECEIVABLES] 0
1361173 [BLANK]
[ALLOWANCES] 0
0 [BLANK]
[INVENTORY] 0
2014517 [BLANK]
[CURRENT-ASSETS] 194834
116847 [BLANK]
[PP&E] 2496
132181 [BLANK]
[DEPRECIATION] (899)
(28833) [BLANK]
[TOTAL-ASSETS] 196485
3598222 [BLANK]
[CURRENT-LIABILITIES] 170118
2041520 [BLANK]
[BONDS] 0
0 [BLANK]
[PREFERRED-MANDATORY] 0
0 [BLANK]
[PREFERRED] 844983
534983 [BLANK]
[COMMON] 372834
307839 [BLANK]
[OTHER-SE] (1231450)
713880 [BLANK]
[TOTAL-LIABILITY-AND-EQUITY] 196485
3598222 [BLANK]
[SALES] 837486
[BLANK] 0
[TOTAL-REVENUES] 837486
[BLANK] 0
[CGS] 837486
[BLANK] 0
[TOTAL-COSTS] 595713
[BLANK] 595713
[OTHER-EXPENSES] 696236
[BLANK] 472548
[LOSS-PROVISION] 0
[BLANK] 0
[INTEREST-EXPENSE] (1593)
[BLANK] (1584)
[INCOME-PRETAX] (452870)
[BLANK] (470964)
[INCOME-TAX] 6799
[BLANK] 0
[INCOME-CONTINUING] 0
[BLANK] 0
[DISCONTINUED] 0
[BLANK] 0
[EXTRAORDINARY] 0
[BLANK] 0
[CHANGES] 0
[BLANK] 0
[NET-INCOME] (459669)
[BLANK] (470964)
[EPS-BASIC] (.13)
[BLANK] (.13)
[EPS-DILUTED] [BLANK]
[BLANK] [BLANK]<F1>
<FN>
<F1>The accompanying notes are an integral part of these
financial statements.
</FN>
</TABLE>
