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 June 30, 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)
501 Bloomfield Avenue, Montclair, NJ 07042
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (973) 233-1233
14 Garrison Inn Lane, Garrison, NY 10524
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(Former Address, if Changed Since Last Report)
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:
August 5, 2005
Common Voting Stock: 98,066,454
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
Global Concepts, LTD and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Condensed Consolidated Balance Sheet
June 30, 2005
(Unaudited)
Assets
Current Assets
Cash $ 929,000
Accounts receivable 4,496,000
Prepaid expenses 287,000
----------
Total Current Assets 5,712,000
Fixed assets 2,511,000
Other assets 210,000
Goodwill 1,432,000
----------
Total Assets 9,865,000
==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 4,664,000
Accrued expenses 1,072,000
Note payable 934,000
Convertible debenture 100,000
Promissory note (net of discount
of $350,000) 1,150,000
Net liabilities of discontinued
operations 61,000
----------
Total Current Liabilities 7,981,000
Convertible debenture 2,499,000
Notes payable 1,260,000
----------
Total Liabilities 11,740,000
----------
Minority Interest 294,000
Commitments and Contingencies -
Stockholders' Equity
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,
91,216,454 shares issued and
90,980,802 shares outstanding 8,166,000
Additional paid-in capital 193,000
Retained earnings (deficit) (8,920,000)
Other comprehensive loss (55,000)
Less: treasury stock, 235,652
shares at cost (523,000)
Deferred compensation (598,000)
Prepaid consulting (432,000)
----------
Total Stockholders' Equity (2,169,000)
----------
Total Liabilities and Stockholders'
Equity $ 9,865,000
==========
See notes to the condensed financial statements.
-2-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -------------------------
2005 2004 2005 2004
---------- --------- ----------- ---------
Operating Revenues $ 11,328,000 $ 10,000 $ 21,282,000 $ 10,000
Direct Operating Expenses 9,173,000 - 17,514,000 -
----------- --------- ----------- ---------
Gross Profit 2,155,000 10,000 3,768,000 10,000
----------- --------- ----------- ---------
Operating Expenses
Selling, general and
administrative 1,079,000 36,000 2,244,000 37,000
Stock issued for
consulting services 143,000 23,000 234,000 268,000
----------- --------- ----------- ---------
Total Operating Expenses 1,222,000 59,000 2,478,000 305,000
----------- --------- ----------- ---------
Income (Loss) From
Operations 933,000 (49,000) 1,290,000 (294,000)
Interest expense (264,000) - (530,000) -
Minority interest (186,000) - (294,000) -
----------- --------- ----------- ---------
Income (Loss) Before
Income Taxes 483,000 (49,000) 466,000 (294,000)
Provision Benefit for
Income Taxes - - - -
----------- --------- ----------- ---------
Net Income (Loss) $ 483,000 $ (49,000) $ 466,000 $ (294,000)
=========== ========= =========== =========
Earnings Per Share
Basic earnings (loss)
per share $ 0.01 $ 0.00 $ 0.01 $ (0.01)
=========== ========= =========== =========
Diluted earnings per
share $ - $ - $ - $ -
=========== ========= =========== =========
Weighted Average Number of
Common Shares Outstanding
Basic 90,040,619 46,496,338 87,280,199 40,396,338
=========== ========== =========== ==========
Fully Diluted 130,026,102 46,496,338 107,390,697 40,396,338
=========== ========== =========== ==========
See notes to the condensed consolidated financial statements.
-3-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
---------------------
2005 2004
----------- ----------
Cash Used in Operating Activities
Net Cash Provided by (Used in)
Operating Activities $ 751,000 $ (36,000)
--------- ---------
Cash Flows From Financing Activities
Proceeds from debt 1,151,000 37,000
--------- ---------
Net Cash Provided by Financing Activities 1,151,000 37,000
--------- ---------
Cash Flows From Investing Activities
Cash paid purchase of fixed assets (974,000) -
--------- ---------
Net Cash Used in Investing Activities (974,000) -
--------- ---------
Net Increase in Cash and Equivalents 928,000 1,000
Cash and Equivalents at Beginning of Period 1,000 2,000
--------- ---------
Cash and Equivalents at End of Period $ 929,000 $ 3,000
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest $ 435,000 $ -
========= =========
Income taxes $ - $ -
========= =========
Supplemental schedule of Non Cash Investing and Financing Activities
During the six months ended June 30, 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.
During the six months ended June 30, 2005, the Company issued
23,571,000 shares to consultants valued at $234,000.
See notes to the condensed consolidated financial statements.
-4-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Six Month Period Ended June 30, 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 six months ended
June 30, 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 an accumulated deficit. Further, at
June 30, 2005, current liabilities exceed current assets by $2,269,000 and
total liabilities exceed total assets by $1,875,000. 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. The difference of $600,000 was treated as a discount.
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 June 30, 2005 was $350,000. 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. See: Note 12 (Subsequent Events) regarding the
refinancing in August of the promissory note.
-5-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Six Month Period Ended June 30, 2005
(Unaudited)
NOTE 5 - NOTE PAYABLE
During the quarter ending on June 30, 2005, the Company borrowed $165,000
from a third party, due on demand. The company repaid $100,000 of the loan
during the quarter leaving a balance of $65,000 due at June 30, 2005.
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 annum.
NOTE 7 - FIXED ASSETS
The Company purchased trucks at a estimated value of $10,575,000 in
exchange for $1,041,000 and the assumption of notes payable of $1,285,000
from a company that was in bankruptcy.
-6-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Six Month Period Ended June 30, 2005
(Unaudited)
NOTE 8 - PROFORMA INFORMATION
The following proforma information is based on the assumption that the
acquisition of CLTA took place as of January 1, 2004:
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
------------------ ------------------
Net Sales $ 4,062,000 $ 8,134,000
Loss From Operations $ (434,000) $ (676,000)
Loss Per Share From Operations $ - $ (.01)
NOTE 9 - EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share
and the weighted average number of shares of dilutive potential common stock.
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
2005 2004 2005 2004
----------- ---------- ----------- ----------
Weighted average number of common
shares used in basic EPS 90,040,619 46,496,338 87,280,199 40,396,338
Effect of dilutive securities:
Warrants 39,985,483 - 20,110,498 -
----------- ---------- ----------- ----------
Weighted average number of common
shares and dilutive potential
common stock used in diluted EPS 130,026,102 46,496,338 107,390,697 40,396,338
=========== ========== =========== ==========
NOTE 10 - SETTLEMENT OF CONVERTIBLE DEBENTURE
On May 17, 2005, the Company entered into an agreement to settle its
obligation on a $200,000 convertible debenture through issuance of $100,000
of its common stock by September 17, 2005.
-7-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Six Month Period Ended June 30, 2005
(Unaudited)
NOTE 11 - EMPLOYEE STOCK OPTIONS
On April 4, 2005, the Company granted options to purchase up to
40,000,000 shares of common stock at an exercise price of $0.05 per share.
The options were granted to the Company's current and former chairman and
chief executive officers for services rendered. The options expire on
March 31, 2008. The Company applies the recognition and measurement
provisions of APB Opinion 25 to account for employee stock compensation
costs. Accordingly, no compensation cost has been recognized for these
plans.
Had compensation cost for the stock options been determined based on the
fair value at the grant date consistent with FASB Statement No. 123, the
Company's net earnings and earnings per share are estimated below:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -------------------------
2005 2004 2005 2004
---------- --------- ----------- ---------
Net income (loss) as
reported $ 483,000 $ (49,000) $ 466,000 $ (294,000)
Compensation cost based on
fair value method (1,920,000) - (1,920,000) -
---------- -------- ---------- ---------
Proforma net income (loss) $(1,437,000) $ (49,000) $(1,454,000) $ (294,000)
Basic Earnings Per Share
As Reported $ 0.01 $ 0.00 $ 0.01 $ (0.01)
========== ======== ========== =========
Proforma $ (0.02) $ 0.00 $ (0.02) $ (0.01)
========== ======== ========== =========
Diluted Earnings Per Share
As Reported $130,026,102 $40,396,338 $107,390,697 $46,496,338
=========== ========== =========== ==========
Proforma $ (0.01) $ - $ (0.01) $ -
========== ======== ========== =========
The fair value of the option grant was estimated at the date of grant
using the Black-Scholes option pricing model with the following assumptions:
Risk free interest 3.79%
Dividend yield 0.00%
Volatility 233.00%
Expected term 3 years
Fair value of options
granted $ 0.048
-8-
Global Concepts, LTD
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Condensed Consolidated Financial Statements
For the Six Month Period Ended June 30, 2005
(Unaudited)
NOTE 11 - EMPLOYEE STOCK OPTIONS, Continued
Employee stock options outstanding and exercisable at June 30, 2005 were:
Weighted
Number of Average
Shares Exercise Price
------------ --------------
Outstanding at January 1, 2005 - $ -
Granted 40,000,000 0.05
Exercised - -
Forfeited - -
---------- -----
Outstanding at June 30, 2005 40,000,000 $ 0.05
========== =====
Exercisable at June 30, 2005 40,000,000 $ 0.05
========== =====
NOTE 12 - SUBSEQUENT EVENTS
Acquisition of SLATE
Effective July 1, 2005, the Company purchased 80% of the capital stock of
Societe Lyonnaise Altrementet de Transports Europeans (SLATE). The purchase
price was $840,000 payable in installments through June 30, 2006.
Issuance of Convertible Debenture
On August 1, 2005 Global Concepts sold to Cornell Capital Partners a
Secured Convertible Debenture. The Debenture is in the principal amount of
$2,500,000. In exchange for the Debenture Cornell Capital Partners surrendered
the $1.5 million Promissory Note issued to it in January 2005 and paid $900,000
from which it deducted a $20,000 fee for Cornell Capital Partner's legal
counsel. The difference of $100,000 was treated as a discount.
Global Concepts is required to commence payments on the Secured Convertible
Debenture on the first day of the month following the earlier of (a) the date
when the Securities and Exchange Commission declares effective a prospectus
that will permit Cornell Capital Partners to resell to the public the shares
issued on conversion of the Debenture or (b) January 1, 2006. Payments will
be made in equal monthly installments through February 1, 2007. Cornell
Capital Partners is entitled to convert the debenture into common stock at a
price of $.20 per share. However, in the event that Global Concepts commits
a material default in its obligations under the Debenture and related documents,
the conversion price will be reduced to $.06 per share. Cornell Capital
Partners' right to convert the Debenture is limited, however, to the extent
that it cannot convert the Debenture into an amount of shares that would cause
it to own more than 4.9% of Global Concepts' outstanding shares. Global
Concepts' obligations under the Debenture are secured by a pledge of all of
Global Concepts assets.
Issuance of Stock
In July 2005, the Company issued 6,350,000 shares of its common stock to
consultants.
-9-
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
subsidiaries. The working capital of these subsidiaries is retained to
fund the operations of the subsidiaries. This factor may hinder our
ability to satisfy the debts of the parent company.
3. We owe $2,500,000 to Cornell Capital Partners. Payment of the debt will
commence at the end of 2005. It is likely that we will settle the debt
by issuing common stock to Cornell Capital Partners, which it will then
resell to the public. These transactions may reduce the market price
for our common stock.
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
Our French subsidiary, Compagnie Logistique de Transports Automobiles
("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 June 30, 2005, which was
approximately 0.8 U.S. Dollars to 1 Euro. 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."
In the second half of 2004 Global Concepts acquired its first three
operating subsidiaries: Advanced Medical Diagnostics LLC, Compagnie
Logistique de Transports Automobiles ("CLTA"), and J&J Marketing, LLC. Its
fourth, Societe Lyonnaise d'Affretement et de Transports European ("SLATE")
was not acquired until July 2005, and so has not affected our reported
financial results. Advanced Medical Diagnostics has not generated any revenue
-10-
to date. The revenue and expenses of J&J Marketing are negligible.
Accordingly, the results of operations reported for the first six months of
2005 effectively represent the results of CLTA. The results of operations
for the first six months of 2004 represented consulting services provided by
Global Concepts' management, and are not comparable to the 2005 operations.
During the six months ended June 30, 2005, the Company reported gross
revenue of $21,282,000, almost entirely from CLTA. It incurred $17,514,000
in direct costs in producing those revenues, yielding a gross profit of
$3,768,000. The gross margin of 17.7% realized in the period 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, as well as from those performed for CLTA's air freight
delivery customers, since those too are under contract. In July, however, the
Company acquired SLATE and is engaged in integrating SLATE with its existing
French operations. SLATE's operations have some overlap with CLTA's auto
distribution services, but under different contracts. The effect that SLATE
will have on the Company's gross margin, therefore, cannot be predicted at this
time.
The operations of CLTA yielded a net profit of $1,633,000. However,
because Global Concepts owned only 82% of the capital stock of CLTA on June
30, 2005 (increased from 60% at December 31, 2004), a reduction of $294,000
attributable to the "minority interest" was recorded on Global Concepts'
statements of operations.
Global Concepts incurred an "interest expense" of $530,000 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, $200,000 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
$400,000 of the discount will be similarly expensed over the life of the note.
The note was scheduled to terminates on January 26, 2006. In August, however,
Global Concepts and Cornell Capital Partners refinanced the note, replacing
it with a note that terminates on February 1, 2007.
During the first half of 2005 the Company issued 23,571,000 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 sixth months ended June 30, 2005, including $234,000 attributable to shares
issued to consultants, as well as a portion of the $2,244,000 "selling, general
& administrative" expense incurred in the six months ended June 30, 2005.
After taking those expenses into account, Global Concepts realized a net income
of $466,000 for the six months ended June 30, 2005.
A portion of the common stock issued to consultants during the first six
months of 2005 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 $1,030,000 in deferred compensation and prepaid consulting on
Global Concepts' balance sheet at June 30, 2005 will be expensed in future
periods when Global Concepts expects to realize the benefit of the consulting
or employment services.
-11-
Liquidity and Capital Resources
Global Concepts at June 30, 2005 had a working capital deficit of
$2,269,000, 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, 2004, and January and August 2005 Global Concepts borrowed
$1,800,000 from Cornell Capital Partners, primarily to fund our acquisition of
CLTA, the purchase of a fleet of vehicles for use by CLTA, and our acquisition
of SLATE. 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 $2,500,000 in exchange for the $1,800,000 loan. The note bears interest at
12% per annum. Monthly payments will be due on that note commencing no later
than January 1, 2006 and ending on February 1, 2007. The monthly payments will
be equal in amount. The amount of the monthly payment will be determined by
dividing the aggregate amount payable during the term of the debenture by
the number of months from the first payment date to February 2007.
The note purchased in January 2005 required Global Concepts to pay
$1,500,000 to Cornell Capital Partners along with interest at a rate of 12%
per annum. However, the note was recorded on our balance sheet at the purchase
price paid for it by Cornell Capital Partners - $900,000 included in
the liability labeled "Promissory note." Because Global Concepts sold the
note to Cornell Capital Partners at a substantial discount from the principal
amounts of the notes, a portion of the note is accounted for as a "discount"
and does not appear on the balance sheet. At June 30, 2005 the aggregate
amount of unamortized discounts on the two notes was $350,000. This amount
will be amortized over the term of the note, and will be recognized as
interest expense when it is amortized. Accordingly, the interest rate on
the notes, while stated to be 12%, actually exceeds 78%.
In order to satisfy our debt to Cornell Capital Partners we have entered
into a "Standby Equity Distribution Agreement" with Cornell Capital Partners.
The Standby Equity Distribution Agreement becomes effective when we provide
Cornell Capital Partners with a prospectus that will permit it to resell to
the public any shares it acquires from Global Concepts. During the two years
after the Securities and Exchange Commission declares that prospectus effective,
Global Concepts may demand that Cornell Capital Partners purchase shares of
common stock from Global Concepts. Global Concepts may make a demand no more
than once every five trading days. The maximum purchase price on each
demand is $250,000. The Standby Equity Distribution Agreement recites that
-12-
Global Concepts may demand from Cornell Capital Partners up to $5,000,000
during its term. The number of shares that Cornell Capital Partners will
purchase after a demand will be determined by dividing the dollar amount
demanded by a per share price. The per share price used will be 95% of the
lowest daily volume-weighted average price during the five trading days that
follow the date a demand is made by Global Concepts. Cornell Capital
Partners is required by the Agreement to pay each amount demanded by Global
Concepts, unless (a) there is no prospectus available for Cornell Capital
Partners to use in reselling the shares, (b) the purchase would result in
Cornell Capital Partners owning over 9.9% of Global Concepts outstanding shares,
or (c) the representations made by Global Concepts in the Agreement prove to
be untrue.
Our plan is to sell common stock to Cornell Capital Partners in order to
meet our debt service obligations. This will result in a significant increase
in our outstanding common stock. At the closing market price of $.20 per
share on August 5, 2005, satisfaction of our entire debt to Cornell Capital
Partners would require that we issue over 13 million. However, the influx of
shares in that quantity into the market is likely to result in a reduction
in the market price for our common stock. Therefore it is likely that
considerably more shares will have to be sold in order to satisfy our
obligations to Cornell Capital Partners.
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.
Global Concepts realized net cash flow of $751,000 during the first six
months of 2005, entirely from the operations of CLTA. However, because CLTA
is currently expanding its operations, it has significant working capital
requirements. Therefore, to date CLTA has made no cash distributions to Global
Concepts other than a monthly management fee of $10,000. 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 unstable 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
We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial
condition or results of operations.
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 June 30, 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
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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 June 30, 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.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Small Business Issuer Purchase of Equity
Securities
(c) Unregistered sales of equity securities
None.
(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
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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: August 10, 2005 By: /s/ Eduardo Rodriguez
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Eduardo Rodriguez, Chief Executive Officer,
Chief Financial Officer, Chief Accounting
Officer