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 March 31, 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 March
31, 1999.
<PAGE>
CONCORDE STRATEGIES GROUP, INC.
Form 10-QSB Quarterly Report
For Period Ended March 31, 1999
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Balance Sheets at
March 31, 1999 and December 31, 1998 4 - 5
Unaudited Consolidated Statement of Operations
For Three Months Ended March 31, 1999 and 6
March 31, 1998
Unaudited Consolidated Statement of Cash Flows For Three
Months Ended March 31, 1999 and Unaudited Statement of 7
Cash Flows For Three Months Ended March 31, 1998
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 18
SIGNATURES 19
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 results of the
Company's subsidiary (see Note 11), which is being divested effective March
31, 1999, subject to shareholder approval (see Note 12). Operating
results for the three months ended March 31, 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.
<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited) Audited
March 31, December 31,
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,430 $ 2,337
Accounts receivable 1,371,528 1,361,173
Inventory (as submitted) 2,163,643 2,014,517
Prepaid Expenses $ 63,568 $ 76,347
TOTAL CURRENT ASSETS: $ 3,602,169 $ 3,454,374
Fixed assets, net of accumulated
depreciation of $29,010 $ 45,943 46,031
Leasehold improvements net of
accumulated amortization of $2,917 56,934 57,317
Security Deposits 40,500 40,500
TOTAL ASSETS $ 3,745,546 $ 3,598,222
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) Audited
March 31, December 31,
1999 1998
CURRENT LIABILITIES:
Accounts payable $1,413,309 $ 1,340,483
Payroll taxes payable 584 591
Due to Factor 447,289 394,185
Bank and other loans payable
(current) 46,350 46,350
Corporate income taxes payable 67,382 63,147
Due to Ameristar
Capital Corporation $ 34,921 $ 23,383
TOTAL CURRENT LIABILITIES $2,009,835 $ 1,868,139
LONG TERM LIABILITIES:
Bank and other loans $ 164,313 $ 173,381
TOTAL LIABILITIES: $2,174,148 $ 2,041,520
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 $ 209,383
Series B Convertible Preferred
Stock Purchase Warrants,337,600 $ 325,600 $ 325,600
issued 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 $ 307,839
Additional paid-in-capital 977,875 977,875
Retained earnings(Deficit) (249,299) (263,995)
TOTAL STOCKHOLDERS' EQUITY 1,571,398 1,556,702
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,745,546 $ 3,598,222
The accompanying notes are an integral part of these financial
statements.
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three
Months Ended March 31,
1999 1998
REVENUES
Sales $ 837,486 $ 915,569
COST OF GOODS SOLD $ 595,713 $ 691,381
GROSS PROFIT: $ 241,773 $ 224,188
OPERATING EXPENSES:
Transfer and filing fees $ 536 426
Insurance $ 16,026 6,626
Payroll and payroll taxes $ 71,913 74,312
Rent $ 23,438 32,229
Utilities and telephone $ 6,330 8,068
Commissions $ 10,188 9,833
Auto and travel $ 8,062 7,038
Entertainment $ 3,168 3,911
Bank charges and interest $ 27,978 13,484
Advertising $ 6,350 1,400
Office Expenses $ 1,298 7,124
Repairs and maintenance $ 729 1,998
Consulting $ 38,039 30,625
Professional Fees $ 2,594 26,961
Depreciation and amortization $ 3,096 3,931
Other expenses $ 533 $ -
TOTAL OPERATING EXPENSES $ 220,278 $ 227,966
NET INCOME(LOSS) BEFORE
PROVISION FOR INCOME TAXES 21,495 $ (3,778)
ESTIMATED PROVISION FOR
INCOME TAXES 6,799 -
NET INCOME (LOSS) $ 14,696 $ (3,778)
NET INCOME (LOSS) PER SHARE $ .004 $ (.001)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,600,000 3,300,000
The accompanying notes are an integral part of these financial
statements.
<PAGE>
CONCORDE STRATEGIES GROUP, INC. AND SUBSIDIARY
CONSOLIDATED CASH FLOW STATEMENTS
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
Consolidated Cash
Flow Statements
March 31, 1999 March 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,696 $ (3,778)
Adjustments to reconcile
net loss to net cash flow
from operating activities:
Depreciation and amortization 3,096 3,931
(Increase)in accounts receivable (10,355) (4,219)
(Increase)in inventory (149,126) (93,353)
Decrease in prepaid expenses 12,779 13,435
Increase in due to Ameristar
Capital Corporation 11,538 (25,000)
Increase in deferred
offering costs 0 (12,000)
Increase in payables 72,819 (79,586)
Increase in corporate income
taxes payable $ 4,235 (6,375)
Cash Used by Operating Activities $ (40,318) $(206,945)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in fixed assets (2,625) (3,547)
Increase in leasehold improvements - -
Net Cash used in investing
activities (42,943) (3,547)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
preferred stock and warrants - 228,750
Increase (Decrease of amounts
due to factor 53,104 (2,000)
Decrease in Bank and other loans (9,068) (15,700)
Net Cash Provided by
Financing Activities $ 44,036 $ 211,050
Net Increase in Cash $ 1,093 $ 558
CASH, BEGINNING OF THE PERIOD $ 2,337 $ 133,606
CASH, END OF THE PERIOD $ 3,430 $ 134,164
The accompanying notes are an integral part of these financial statements.
<TABLE>
CONCORDE STRATEGIES GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Consolidated Statement of Stockholders' Equity
for the Three Months Ended March 31, 1999
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)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1999 $209,383 $325,600 3,600,000 $307,839 $977,875 $(263,995) $ 1,556,702
Net income for the
Three Months Ended
March 31, 1999 -- -- -- -- -- 14,696 $ 14,696
Balance,
March 31, 1999 $209,383 $325,600 3,600,000 $307,839 $977,875 $(249,299) $ 1,571,398
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 March 31, 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.
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. At March 31, 1999, there were no
cash
equivalents.
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
March 31, 1999 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 March 31, 1999 was as follows:
Raw material (fabric) $ 964,000
Finished goods 1,199,643
Total $2,163,643
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 March 31, 1999, the subsidiary had outstanding debt in the
amount of
$ ($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.
Subsequent to the period covered by this report, in April, 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. The sale of these shares will be reflected in
the
Company's financial statements for the quarterly period ended
June
30,1999.
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 $145,833 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).
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.
Note 12 - SUBSEQUENT EVENTS
On April 21, 1999, the Company entered into an Agreement and Plan
of Share
Exchange with W3 Group, Inc., subject to approval by
shareholders, 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. 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's Management expects to conduct a meeting of
shareholders
on August 12, 1999 to ratify the Agreement which has been
approved by its
Board of Directors.
Subject to ratification by the shareholders, a Termination
Agreement was
executed on May 5, 1999, for the divesture of L'Abbigliamento,
Ltd.,
Concorde's sole operating subsidiary. 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
interested due thereon plus the entire unpaid principal amount.
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial
Conditions and
Results of Operations:
Divesture 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 divesture 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 is subject to
approval by
shareholders, and a special meeting of shareholders has been
scheduled for
August 12, 1999.
The following discussion is included only as historical
information to
comply with disclosure requirements for the quarterly period
ended March
31, 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 Company's subsidiary have been
included
in the consolidated results of the Company for the three month
period
ended March 31, 1999. The effective date of the acquisition was
July 1,
1997.
Sales were $837,486 for the three month period ended March 31,
1999, all
of which resulted from the operation of the subsidiary,
L'Abbigliamento,
Ltd. After cost of revenues of $595,713 gross profit realized
was
$241,773 for the period ended March 31, 1999. All of the gross
profit
resulted from operation of the Company's subsidiary. Gross
profit as a
percentage of sales increased from 24.5 percent for the three
month period
ended March 31, 1998 to 28.9 percent for the three month period
ended
March 31, 1999.
Consolidated operating expenses for the three month period ended
March 31,
1999 were $220,278, which includes the Subsidiary's total of
$174,493 and
the parent Company's total of $45,785. The parent Company's
operating
expenses decreased $21,835 from 1998 primarily due to decreased
professional fees. The Subsidiary's operating expenses were
20.8 per
cent of sales for the period reported compared to 17.5 percent of
sales
for the three month period ended March 31, 1997.
The net income for the three month period ended March 31, 1999
was $14,696
compared to a net loss of $3,778 for the comparable period ended
March 31,
1997, an increase of $18,474.
The total cash and cash equivalents at March 31, 1999 totalled
$3,430. Of
that amount the Subsidiary's total was $3,265, and the parent
company's
total was $165.
Accounts receivable at March 31, 1999 totalled $1,371,528, 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.
Inventory at March 31, 1999 totalled $2,163,643, which was all
maintained
by the Subsidiary. Of that total, approximately $964,000
represented raw
material (fabric) for production.
Accounts payable at March 31, 1999 totalled $1,413,309, all of
which is
current. Of that amount, the Subsidiary's accounts payable total
was
$1,315,409, and the parent company's total was $99,900. The
Subsidiary's
accounts payable total consists mostly of raw material purchases
and cost
of finished goods, consistent with the Subsidiary's Cost of
Goods Sold
and Operating Expense percentages of sales. The parent Company's
accounts
payable represents its normal business overhead expenses.
The amount of $447,289 due to a factor and the long term bank
loans in the
amount of $164,313 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.
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, subject
to
approval by shareholders, for the divestiture of L'Abbigliamento,
Ltd.,
which has been Concorde's sole operating subsidiary. Under the
terms of
the Termination Agreement, which will be effective as of the
close of
business on March 31, 1999, L'Abbigliamento, Ltd. will resume
operations
as an independent private company. Also, L'Abbigliamento, Ltd.
will return
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.
Assuming that the divesture of L'Abbigliamento, Ltd. is approved
by
shareholders, which management anticipates based upon indications
of
shareholders with whom management has spoken, the divesture will
be
effective as of March 31, 1999. If this is the case, then the
Company
will essentially not have any business operations, pending the
results 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
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. 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. 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 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 is subject to approval by shareholders at
the special
meeting of shareholders on August 12, 1999.
Acquisition of New Subsidiary
The Company's proposed 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 March 31, 1999, the Company and its subsidiary had cash
totalling
$3,430, 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.
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
Subsequent to the period covered by this report, on April 21,
1999,
Concorde entered into a formal Agreement and Plan of Share
Exchange with
W3 Group, Inc. subject to approval by shareholders, 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
own 48.6
percent of the issued and outstanding shares of the capital stock
of W3
Group, Inc. Subsequent to the closing of this Agreement, if
approved by
shareholders, current and former Officers and Directors of
Concorde will
own 48.2 percent of the issued and outstanding shares of Common
Stock of
the new entity. A special meeting of Concorde shareholders has
been
scheduled for August 12, 1999.
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. None
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K. Form 8-K was filed
on May
21, 1999 re: resignation of Martin I. Saposnick as
a
Director of the
Registrant,
effective
February 25,
1999,
because of other
business
commitments.
No dispute
existed
between the
resigning
Director and the
Board
of Directors,
and no
replacement has
been
named as of the
date of
this report.
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: July 30, 1999
CONCORDE STRATEGIES GROUP, INC.
By: /s/ Robert Gordon
Robert Gordon
President
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 3-MOS YEAR
[FISCAL-YEAR-END] DEC-31-1998
DEC-31-1998
[PERIOD-END] MAR-31-1999
DEC-31-1998
[CASH] 3430
2337
[SECURITIES] 0
0
[RECEIVABLES] 1371528
1361173
[ALLOWANCES] 0
0
[INVENTORY] 2163643
2014517
[CURRENT-ASSETS] 104068
116847
[PP&E] 134806
132181
[DEPRECIATION] (31929)
(28833)
[TOTAL-ASSETS] 3745546
3598222
[CURRENT-LIABILITIES] 2174148
2041520
[BONDS] 0
0
[PREFERRED-MANDATORY] 0
0
[PREFERRED] 534983
534983
[COMMON] 307839
307839
[OTHER-SE] 728576
713880
[TOTAL-LIABILITY-AND-EQUITY] 3745546
3598222
[SALES] 837486
3845393
[TOTAL-REVENUES] 837486
3845393
[CGS] 595713
3043546
[TOTAL-COSTS] 241773
3043546
[OTHER-EXPENSES] 182300
863043
[LOSS-PROVISION] 0
0
[INTEREST-EXPENSE] 27978
32591
[INCOME-PRETAX] 21495
(93787)
[INCOME-TAX] 6799
59044
[INCOME-CONTINUING] 0
0
[DISCONTINUED] 0
0
[EXTRAORDINARY] 0
0
[CHANGES] 0
0
[NET-INCOME] 14696
(152831)
[EPS-BASIC] .004
(.04)
[EPS-DILUTED] 0
0<F1>
<FN>
<F1>The accompanying notes are an integral part of the financial
statements.
</FN>
</TABLE>
