U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-25319
GLOBAL CONCEPTS, LTD.
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(Name of Small Business Issuer in its Charter)
Colorado 84-1191355
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
14 Garrison Inn Lane, Garrison, NY 10524
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (845) 424-4100
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date:
May 26, 2005
Common Voting Stock: 89,395,454
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Part I - FINANCIAL INFORMATION
Global Concepts, LTD and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Condensed Consolidated Balance Sheet
March 31, 2005
(Unaudited)
Assets
Current Assets
Cash $ 432,000
Accounts receivable 3,963,000
Prepaid expenses 176,000
---------
Total Current Assets 4,571,000
Fixed assets 2,453,000
Goodwill 1,432,000
---------
Total Assets 8,456,000
=========
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable 3,239,000
Accrued expenses 2,021,000
Note payable 878,000
Convertible debenture 200,000
Promissory note 1,000,000
Net liabilities of discontinued operations 61,000
---------
Total Current Liabilities 7,399,000
Officer loans - convertible debenture 2,499,000
Notes payable 1,260,000
----------
Total Liabilities 11,158,000
----------
Minority Interest 108,000
Commitments and Contingencies -
Stockholders' Deficit
Preferred stock, $.01 par value; 5,000,000
shares authorized, and 0 shares issued
and outstanding -
Common stock, no par value; 500,000,000
shares authorized, 89,895,454 shares
issued and 89,659,802 shares outstanding 7,994,000
Additional paid-in capital 193,000
Retained earnings (deficit) (9,403,000)
Other comprehensive loss (69,000)
Less: treasury stock, 235,652 shares at cost (523,000)
Deferred compensation (692,000)
Prepaid consulting (310,000)
---------
Total Stockholders' Deficit (2,810,000)
---------
Total Liabilities and Stockholders' Deficit $ 8,456,000
=========
See notes to the condensed financial statements.
-1-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31,
----------------------------
2005 2004
--------- -----------
Operating Revenues $ 9,954,000 $ 10,000
Direct Operating Expenses 8,341,000 -
--------- ---------
Gross Profit 1,613,000 10,000
Operating Expenses
Selling, general and administrative 1,165,000 36,000
Stock issued for consulting services 91,000 23,000
--------- ---------
Total Operating Expenses 1,256,000 59,000
--------- ---------
Income (Loss) From Operations 357,000 (49,000)
Interest expense (266,000) -
Minority interest (108,000) -
--------- ---------
Loss Before Income Taxes (17,000) (49,000)
Provision Benefit for Income Taxes - -
--------- ---------
Net (Loss) $ (17,000) $ (49,000)
========= =========
Earnings Per Share
Basic and diluted earnings (loss)
per share $ 0.00 $ 0.00
========= =========
Weighted Average Number of Common
Shares Outstanding
Basic 84,503,787 40,396,338
========== ==========
See notes to the condensed consolidated financial statements.
-2-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
----------------------------
2005 2004
--------- -----------
Cash Used in Operating Activities
Net Cash Provided by (Used in)
Operating Activities $ 194,000 $ (19,000)
--------- --------
Cash Flows From Financing Activities
Proceeds from debt 1,081,000 18,000
--------- --------
Net Cash Provided by Financing
Activities 1,081,000 18,000
--------- --------
Cash Flows From Investing Activities
Cash paid purchase of fixed assets (844,000) -
--------- --------
Net Cash Used in Investing Activities (844,000) -
--------- --------
Net Increase (Decrease) in Cash and
Equivalents 431,000 (1,000)
Cash and Equivalents at Beginning of
Period 1,000 2,000
--------- --------
Cash and Equivalents at End of Period $ 432,000 $ 1,000
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ - $ -
========= ========
Income taxes $ - $ -
========= ========
Supplemental schedule of Non Cash Investing and Financing Activities
During the quarter ended March 31, 2005, the Company issued a $1,500.000
promissory note in exchange for $500,000 cash and the extinguishment of an
outstanding obligation of $400,000. Additionally a discount of $600,000
was recorded.
See notes to the condensed consolidated financial statements.
-3-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Three Month Period Ended March 31, 2005
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Item 310 of
Regulation S-B. Accordingly, they do not include all of the information
and disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months
ended March 31, 2005 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2005. The unaudited condensed
financial statements should be read in conjunction with the consolidated
financial statements and disclosures thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 2004.
NOTE 2 - GOING CONCERN
The accompanying condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
As reflected in the condensed consolidated financial statements, the Company
has incurred recurring net losses from operations, an accumulated deficit, and
recurring negative cash flows from operations. Further, at March 31, 2005,
current liabilities exceed current assets by $2,828,000 and total liabilities
exceed total assets by $2,700,000. These factors all raise substantial doubt
about the ability of the Company to continue as a going concern.
Management's plan in regard to the going concern issue is to increase revenues
and profitability through acquisitions and internal growth as well as raising
capital.
NOTE 3 - NOTE PAYABLE
In March of 2005, the Company borrowed $400,000 from another publicly traded
entity whose Chief Executive Officer is also the Chief Executive Officer of
Global Concepts, Inc. The loan bears interest at the rate of 10% per annum.
The interest is to be paid on the first day of each month, commencing April
2005. The note is to be repaid in eleven monthly installments of $33,333
commencing on June 1, 2006. A final payment in the amount of $33,337 is due
on May 1, 2007.
NOTE 4 - PROMISSORY NOTE
On January 26, 2005 the Company issued a $1,500,000 promissory note to Cornell
Capital Partners in exchange for $500,000 cash and retirement of $400,000 in
prior debt. Additionally, the company discounted the note by $600,000. This
discount on the note is being amortized on a straight line basis with the
amortization being recognized as interest expense. The unamortized discount
on the note at March 31, 2005 was $ 500,000. The promissory note bears
interest at the rate of 12% per annum with monthly principal payments of
$250,000 plus accrued interest to be paid commencing August 26, 2005 through
January 26, 2006.
NOTE 5 - NOTE PAYABLE
In March of 2005, the Company borrowed $125,000 from a director of the company
repaying $100,000 with a remaining balance of $25,000 at March 31, 2005.
-4-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Three Month Period Ended March 31, 2005
(Unaudited)
NOTE 6 - JOINT MANAGEMENT AGREEMENT
On March 7, 2005 the Company entered into a joint management agreement with
Headliners Entertainment Group, Inc., Eduardo Rodriguez, Michael Margolies, the
Rodriguez Family Trust and the Margolies Family Trust. Headliners
Entertainment Group, Inc. is a publicly traded company of which Eduardo
Rodriguez is the Chief Executive Officer. The joint management agreement
terminated the consulting agreements previously entered into with the Rodriguez
Family Trust and Eduardo Rodriguez.
Per the joint management agreement, the Rodriguez Family Trust and the
Margolies Family Trust organized a limited liability company. The trusts, as
well as Rodriguez and Margolies, will contribute their shares of the Company
to the trust on August 15, 2005. The Company will pay a fee of $5,000 per
month to the limited liability company in compensation for the services of
Rodriguez and Margolies. Also, the Company entered into a ten year employment
agreement with Rodriguez, a ten year advisory agreement with Margolies,
Margolies resigned from his position as Chairman and Chief Executive Officer
and Margolies and Rodriguez agreed to serve as members of the Company's Board
of Directors.
The Company's employment agreement with Rodriguez provides that he will serve
as Chairman and Chief Executive Officer for an annual compensation of $100,000.
The employment agreement terminates on January 31, 2015.
The Company's advisory agreement with Margolies provides that he will consult
with the Board of Directors and the Chief Executive Officer on matters of
business development, investor relations, public relations and finance. The
Company will pay Margolies and annual fee of $100,000 for his services. The
advisory agreement terminates on January 31, 2015.
Also, pursuant to the agreement, the Company issued a $2,499,000 convertible
debenture to the Margolies Family Trust to satisfy the Company's debt to the
Margolies Family Trust as of December 31, 2004. The debenture is convertible
into common stock at the average of the closing bid prices for the five trading
days preceding the conversion, except that the conversion will be limited to
2.77% of the principal amount of the debenture per month. The debenture will
bear interest at 6% per month.
NOTE 7 - FIXED ASSETS
The Company purchased trucks in exchange for $ 1,041,000 and the assumption of
notes payable of $1,285,000 from a company that was in bankruptcy.
NOTE 8 - PROFORMA INFORMATION
The following proforma information is based on the assumption that the
acquisition took place as of January 1, 2004:
Three Months Ended
March 31, 2004
------------------
Net Sales $ 4,072,000
Loss From Operations $ (242,000)
Loss Per Share From Continuing Operations $ (.01)
NOTE 9 - INCREASED EQUITY IN SUBSIDIARY
During the first quarter of 2005 the Company made additional
contributions to the capital of its subsidiary, CLTA. As a result,
the Company's interest in the equity of CLTA increased from 60% to
82%.
-5-
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Forward-looking Statements
This Report contains certain forward-looking statements regarding
Global Concepts, Ltd., its business and financial prospects. These
statements represent Management's present intentions and its present
belief regarding the Company's future. Nevertheless, there are numerous
risks and uncertainties that could cause our actual results to differ from
the results suggested in this Report. A detailed discussion of some of
the risks that may cause such a difference has been set forth in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
2004 in the section numbered "Item 6" under the heading "Risk Factors that
May Affect Future Results." Among the more significant factors are:
1. Our current liabilities far exceed our current assets. So we
may have difficulty funding our ongoing operations.
2. Virtually all of our business operations are carried out by our
French subsidiary. Certain covenants limit the amount of cash
that our French subsidiary can distribute to its parent. This
factor may hinder our ability to satisfy the debts of the parent
company.
3. Most of the business of our French subsidiary comes from one
contract with one customer. Loss of that customer would have a
destructive effect on the well-being of our French subsidiary.
Because these and other risks may cause Global Concepts' actual
results to differ from those anticipated by Management, the reader should
not place undue reliance on any forward-looking statements that appear in
this Report. Readers should also take note that Global Concepts will not
necessarily make any public announcement of changes affecting these
forward-looking statements, which should be considered accurate on this
date only.
Results of Operations
In the second half of 2004 the Company acquired its three operating
subsidiaries: Advanced Medical Diagnostics LLC, Compagnie Logistique de
Transports Automobiles ("CLTA"), and J&J Marketing, LLC. Advanced
Medical Diagnostics has not generated any revenue to date. The revenue
and expenses of J&J Marketing are negligible. Accordingly, the results
of operations reported for the first quarter of 2005 effectively
represent the results of CLTA. The results of operations for the first
three months of 2004 represented consulting services provided by Global
Concepts' management, and are not comparable to the 2005 operations.
CLTA carries on its business operations in Euros. In the following
discussion, the financial results realized by CLTA have been expressed in
U.S. Dollars at the conversion rate in effect on March 31, 2005. Any
gain or loss realized by reason of the exchange of Euros into Dollars for
accounting purposes is recorded in the equity section of the balance
sheet as "other comprehensive income."
During the quarter ended March 31, 2005, the Company reported gross
revenue of $9,954,000, almost entirely from CLTA. It incurred $8,341,000
in direct costs in producing those revenues, yielding a gross profit of
$1,613,000. The gross margin of 16.2% realized in the quarter was
typical of the margin that can be expected from the services performed by
CLTA for Peugeot and Citroen, since those revenues are primarily realized
from a fixed price contract. In February, however, the Company acquired
a fleet of trucks that it will provide to CLTA to utilize in expanding
its business. The expansion will, in part, involve new customers and new
contracts. The gross margin from this anticipated new business cannot be
predicted at this time.
-6-
The operations of CLTA yielded a net profit of $602,000. However,
because Global Concepts owns only 82% of the capital stock of CLTA
(increased from 60% at December 31, 2004), a reduction of $108,000
attributable to the "minority interest" was recorded on Global Concepts'
statements of operations. Nevertheless, the Company realized operating
income of $249,000, even after deduction of the minority interest.
Global Concepts incurred an "interest expense" of $266,000 during
the first quarter of 2005. Approximately $150,000 was attributable to the
value of the beneficial conversion feature in the $1,500,000 note issued
to Cornell Capital Partners during the quarter. In addition, $100,000 of
the interest expense was attributable to amortization of the discount
given to Cornell Capital Partners when it purchased the note from Global
Concepts for $900,000. The remaining $500,000 of the discount will be
similarly expensed over the life of the note. The note terminates on
January 26, 2006.
The profit from operations of CLTA exceeded the operating expenses
incurred by Global Concepts that were or will be paid in cash. However,
during the quarter the Company issued 21,750,000 shares of its common
stock to employees and consultants. The market value of those shares
represent expenses of the Company. A portion of the expense was incurred
in the quarter ended March 31, 2005, which resulted in a net loss for the
quarter of $17,000.
A portion of the common stock issued to consultants during the
first quarter was compensation under two year contracts. The market
value of those shares has been recorded as a reduction to equity
identified as "prepaid consulting." In addition, a portion of the shares
issued to employees has been recorded as a reduction to equity identified
as "deferred compensation." The aggregate of $1,002,000 in deferred
compensation and prepaid consulting on Global Concepts' balance sheet at
March 31, 2005 will be expensed in future periods when Global Concepts
expects to realize the benefit of the consulting or employment services.
Liquidity and Capital Resources
Global Concepts at March 31, 2005 had a working capital deficit of
$2,828,000, in part due to liabilities in excess of $1.2 million
continuing from the period prior to its acquisition of CLTA. CLTA itself
has adequate working capital to carry on its operations, primarily
because Global Concepts has incurred debt in the past several months to
fund contributions to the capital of CLTA.
In November and January the Company borrowed $900,000 from Cornell
Capital Partners, primarily to fund its acquisition of CLTA and the
purchase of a fleet of vehicles for use by CLTA. Because Global Concepts
is unable to borrow on conventional terms, it was forced to give Cornell
Capital Partners a note in the principal amount of $1,500,000 in exchange
for the $900,000 loan. Payments of $250,000 per month will be due on
that note commencing in August 2005. Global Concepts hopes to satisfy
those payments by issuing common stock to Cornell Capital Partners; but
Cornell Capital Partners has not committed to accept shares in
satisfaction of the debt.
Global Concepts also owes $2,499,000 to the family of its founder,
resulting from loans made to fund the operations of Global Concepts
during the past five years. That debt is now represented by a debenture
bearing interest at 6% that is convertible into common stock at the
market price. The principal and interest on the debenture are payable on
January 1, 2009.
-7-
Global Concepts realized net cash flow of $194,000 during the first
quarter of 2005, entirely from the operations of CLTA. However, because
of the working capital requirements of CLTA and certain covenants
limiting its use of its cash, CLTA distributes only $10,000 per month to
Global Concepts. This situation severely limits the ability of Global
Concepts to settle the obligations that remain from prior years. Because
of these liabilities, the financial condition of Global Concepts will
remain precarious until it is able to leverage its ownership of CLTA into
a source of significant liquidity, either through enhanced cash flow from
CLTA or financing based on its interest in CLTA.
Off-Balance Sheet Arrangements
At March 31, 2005, Global Concepts was indebted to Cornell Capital
Partners pursuant to a promissory note in the principal amount of
$1,500,000. The note was recorded on our balance sheet at the purchase
price paid for it by Cornell Capital Partners. Because Global Concepts
sold the note to Cornell Capital Partners for only $900,000, the
remaining $600,000 due under the note is accounted for as a "discount"
and does not appear on the balance sheet. The unamortized discount at
March 31, 2005 was $500,000. This amount will be amortized over the
life of the note, and will be recognized as interest expense when it is
amortized.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Eduardo
Rodriguez, our Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of Global Concepts'
disclosure controls and procedures as of March 31, 2005. Pursuant to
Rule13a-15(e) promulgated by the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, "disclosure controls
and procedures" means controls and other procedures that are designed to
insure that information required to be disclosed by Global Concepts in
the reports that it files with the Securities and Exchange Commission is
recorded, processed, summarized and reported within the time limits
specified in the Commission's rules. "Disclosure controls and
procedures" include, without limitation, controls and procedures
designed to insure that information Global Concepts is required to
disclose in the reports it files with the Commission is accumulated and
communicated to our Chief Executive Officer and Chief Financial Officer
as appropriate to allow timely decisions regarding required disclosure.
Based on his evaluation, Mr. Rodriguez concluded that Global Concepts'
system of disclosure controls and procedures was effective as of March
31, 2005 for the purposes described in this paragraph.
Changes in Internal Controls. There was no change in internal
controls over financial reporting (as defined in Rule 13a-15(f)
promulgated under the Securities Exchange Act or 1934) identified in
connection with the evaluation described in the preceding paragraph that
occurred during Global Concepts's first fiscal quarter that has
materially affected or is reasonably likely to materially affect Global
Concepts's internal control over financial reporting.
-8-
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Small Business Issuer Purchase of
Equity Securities
(c) Unregistered sales of equity securities
In February 2005 Global Concepts issued 1,750,000 shares of common
stock to two employees of its French subsidiary. The shares were issued
in consideration for their employment services, and were valued at the
market value on the date of grant. The sales were exempt pursuant to
Section 4(2) of the Act since the sales were not made in a public
offering and were made to individuals who had access to detailed
information about Global Concepts and were acquiring the shares for
their own accounts. There were no underwriters.
(e) Purchases of equity securities
The Company did not repurchase any of its equity securities that
were registered under Section 12 of the Securities Exchange Act during
the 3rd quarter of 2004.
Item 6. Exhibits
31 Rule 13a-14(a) Certification
32 Rule 13a-14(b) Certification
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
GLOBAL CONCEPTS, LTD.
Date: May 27, 2005 By: /s/ Eduardo Rodriguez
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Eduardo Rodriguez, Chief Executive Officer,
Chief Financial Officer, Chief Accounting
Officer