SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the fiscal year ended December 31, 2004.
OR
|_| TRANSITION REPORT PURSUANT TO 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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(Exact name of the Registrant as specified in Charter)
Colorado 84-1191355
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(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
14 Garrison Inn Lane, Garrison, NY 10524
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: 845-424-4100
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, no par value per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
at least the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|
State the issuer's revenues for its most recent fiscal year: $5,286,000.
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of filing.
The aggregate market value of the Registrant's common stock, $.001 par value,
held by non-affiliates as of May 18, 2005 was $7,732,782.
As of May 18, 2005, the number of shares outstanding of the Registrant's common
stock was 89,395,454 shares, no par value.
Transitional Small Business Disclosure Format: Yes |_| No |X|
DOCUMENTS INCORPORATED BY REFERENCE: None
FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED
This Report contains certain forward-looking statements regarding Global
Concepts, 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 materially from the results suggested in this
Report. Factors that might cause such a difference include, but are not limited
to, those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk Factors that
May Affect Future Results." Readers are cautioned not to place undue reliance on
these forward-looking statements. We undertake no obligation to revise or
publicly release the results of any revision to these forward-looking
statements.
PART 1
Item 1. BUSINESS
Global Concepts, Ltd. was organized in 1998 under the name "Transportation
Logistics Int'l, Inc." During its first five years, it was engaged in a number
of transportation-related businesses. Those were gradually terminated or sold,
and in July 2003 the last of our transportation-related subsidiaries terminated
operations. Since July 2003 we have changed our corporate name, and expanded our
focus. We have been investigating business opportunities in a wide variety of
fields, and we continue to do so. Since June 2004 we have invested in three
businesses, each of which is now a subsidiary of Global Concepts. These three
are now the business operations of Global Concepts.
Our parent company, Global Concepts, has only three employees: our
Chairman, our Secretary, and his administrative assistant. The executive offices
of Global Concepts are leased from the family of our Secretary, Michael
Margolies, for a fee of $1,000 per month.
COMPAGNIE LOGISTIQUE DE TRANSPORTS AUTOMOBILES
On October 1, 2004 Global Concepts acquired sixty percent (60%) of the
capital stock of Compagnie Logistique de Transports Automobiles ("CLTA"). The
remaining 40% is owned by four French individuals, two of whom are the senior
management of CLTA. CLTA is a French corporation whose executive offices are
located in Nugent sur Oise, France.
Over 90% of CLTA's business arises from its contract with Compagnie
D'Affretement et de Transport ("CAT"), the company responsible for all
distribution of Peugeot and Citroen automobiles in Europe. CLTA warehouses the
vehicles, completes the final dealer preparation work before the automobiles are
delivered, and delivers the automobiles to dealerships throughout Europe. CLTA
also performs brake installation and testing of new cars for Peugeot. CLTA has
the exclusive contract to perform the warehousing and vehicle preparation
services required by CAT. It currently performs about 12% of the distribution
work required by CAT, but believes that portion can increase if CLTA obtains the
funds needed to purchase additional vehicle transporters.
-1-
CLTA currently leases a fleet of 63 auto transporters as well as 38 other
vehicles used in its warehousing and preparation activities. CLTA's immediate
plans are to expand its fleet of auto transporters in order to increase its
share of CAT's distribution business. CLTA is also actively pursuing other firms
in the same or similar business as potential acquisition targets, its goal being
to accomplish the same end as purchasing a larger fleet. Since the business
potential from its relationship with CAT is considerable, CLTA has no immediate
plans to initiate any other lines of business.
CLTA's largest expense, after rent and labor, is insurance. For 2005 CLTA
will maintain policies with three insurers, and pay over 288,000 Euros (@
$375,000).
CLTA's administrative offices and its warehousing location are located in
a facility leased by CLTA in Chambly, France for a term ending June 2013. CLTA
also has long-term leases for two parking facilities.
CLTA currently has 136 full-time employees. None of them is represented by
a union.
ADVANCED MEDICAL DIAGNOSTICS, LLC
Advanced Medical Diagnostics LLC was organized in the Fall of 2003. In
June 2004 Global Concepts acquired 100% of the equity in Advanced Medical
Diagnostics.
Advanced Medical Diagnostics has developed a kit which enables an
individual to test his or her blood for evidence of HIV infection. The test is
manually-performed and visually read. It can be completed in less than 15
minutes with the blood obtained from a finger puncture. Properly utilized, the
test will identify the presence of HIV-1 infection and/or HIV-2 infection with
over 99% accuracy.
Human Immunodeficiency Viruses type 1 and type 2 ("HIV") are etiological
agents of the acquired immunodeficiency syndrome ("AIDS"). HIV has been isolated
from patients with AIDS, AIDS-related complex, and from healthy individuals at
high risk for AIDS. Infection with HIV is followed by an acute flu-like illness.
This phase may remain unnoticed and the relationship to HIV infection may not be
clear in many cases. The acute phase is typically followed by an asymptomatic
carrier state, which progresses to clinical AIDS in about 50% of infected
individuals within ten years after seroconversion. Serological evidence of HIV
infection may be obtained by testing for HIV antigens or antibodies in serum of
individuals suspected of HIV infection. Antigens can generally be detected only
during the acute phase and during the symptomatic phase of AIDS. Antibodies to
HIV-1 and/or HIV-2 can be detected throughout virtually the total infection
period, starting at or shortly after the acute phase and lasting until the end
stage of AIDS. Therefore the use of highly sensitive antibody assays is the
primary approach in serodiagnosis of HIV infection.
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Our "HIV (1+2) Rapid Self-Test Kit" contains an immunoassay for the
qualitative detection of antibodies to HIV-1 and HIV-2 in human whole blood. The
test is comprised of a single use test device and a single use vial containing a
pre-measured amount of a buffered developer solution. Each component is sealed
in separate compartments of a single couch to form the test. A fingerstick whole
blood specimen is collected and transferred into the sterile pipette, two drops
from the pipette are deposited into the well of the test cassette. Two drops of
the developed solution are then added to the test cassette well. As the diluted
specimen flows through the test cassette, it re-hydrates the protein-A gold
colorimetric reagent contained in the device. As the specimen continues up the
strip, it encounters the T zone. If the specimen contains antibodies that react
with the antigens immobilized on the nitrocellulose membrane, a reddish-purple
line will appear, indicating the presence of antibodies to HIV in the specimen.
Advanced Medical Diagnostics owns no proprietary technology. The
components of its HIV (1+2) Rapid Self-Test Kit are available to the public, and
their utility for testing the presence of HIV infection is well-known. What
Advanced Medical Diagnostics has added to the progress of medicine in this area
is to organize the components into a kit that Advanced Medical Diagnostics is
able to market profitably at a wholesale price of $5.20. To develop the kit,
Advanced Medical Diagnostics has spent approximately $80,000 on research and
development.
The relatively low price of the kit makes it particularly attractive in
the "Third World" countries of Africa, Asia and Latin America. In many of these
countries AIDS is rapidly becoming a social and economic catastrophe. Still
other countries in these regions are seeking pro-active solutions to prevent the
spread of AIDS. For this reason, Advanced Medical Diagnostics has been engaged
in active discussions with governments in each of these regions regarding
distribution of the kit. Within recent months both China and Peru have approved
the kit for sale in their countries. Others are expected to follow in the near
future. To date, however, we have received only preliminary orders for testing
quantities of the kits, which do not produce significant revenues.
Advanced Medical Diagnostics has no plans to seek approval to market the
HIV (1+2) Rapid Self-Test Kit in either the United States or the European Union.
The cost of obtaining approval in these countries precludes us from doing so.
Our market for the foreseeable future will include Asia, Africa and Latin
America only. We have engaged dealers in each of those regions to market the HIV
(1+2) Rapid Self-Test Kit, primarily to governments and
non-governmental-organizations.
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The HIV (1+2) Rapid Self-Test Kit is manufactured for Advanced Medical
Diagnostics by a single contractor located in China. Our arrangement with the
manufacturer requires that we post a letter of credit in the amount that we will
pay for the kits. We are not able at this time, therefore, to maintain an
inventory of kits, but must manufacture to order using our customer's credit to
support our credit.
Advanced Medical Diagnostics employs five individuals, only one of whom is
employed full-time. It will add additional employees as sales warrant. Its
offices are located in an office building in East Orange owned by members of its
management, and are provided free-of-charge.
J & J MARKETING, LLC
On October 1, 2004 Global Concepts acquired 80% of the equitable interest
in J&J Marketing. The remaining 20% is owned by the founders of J&J Marketing,
Jane and Michael Schub. The Schubs retained an option to repurchase the interest
they sold to Global Concepts if, prior to May 15, 2005, Global Concepts enters
bankruptcy proceedings or is party to a merger or acquisition or sale of assets
in which it is not the surviving entity.
J&J Marketing produces and sells a line of six skin care products,
including cleanser, facial scrub, toner, moisturizer, lifting mask, and
moisturizing eye serum. The products are all natural with many organic
ingredients. They are free of chemicals and preservatives. J&J Marketing sells
them under the trademark "Savage Beauty(TM)."
The market for personal care products in the United States is dominated by
a small number of industry giants, such as Avon, Proctor & Gamble, and Estee
Lauder. Entry into that market is extremely difficult. J&J Marketing is seeking
to enter the portion of that market devoted to natural and organic products, a
niche which is more hospitable to small start-up brands. Nevertheless, even in
that niche, J&J Marketing will face a considerable number of well-established
brands, such as Kiss My Face, Weleda and Dr. Hauska that have already developed
a presence in the market and can apply substantial financial resources to the
task of preserving their market position.
J&J Marketing will attempt to compete in this market by combining an
emphasis on the purity of its contents with sophisticated product packaging. Our
goal is to present a product that is equally at home in health food store or a
luxury boutique, thus differentiating our products from the more "earthy"
character often associated with natural products. We are also seeking to build a
place in the market by developing advantageous marketing relationships with
brokers and independent sales representatives, and the kind of specialty stores
where the style of our products will be advantageous. Our largest customer to
date, for example, has been the specialty food chain, Whole Foods Market.
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J&J Marketing commenced operations in 2002, as a part-time activity of its
founders, Jane and Michael Schub. With the acquisition of J&J Marketing by
Global Concepts in October 2004, our plan is to secure the funding that will
enable this business to expand into a substantial business operation. To date we
have marketed our products direct to stores, since we lacked sufficient
inventory to permit us to engage a distributor. Now, however, J&J Marketing is
engaged in redesigning our packaging in a manner which will substantially reduce
production costs. This redesign will then be implemented in a production run of
each product that will enable us to engage one or more distributors for Savage
Beauty(TM). Once we have a distributor engaged, we will be able to market to the
larger mass market retailers.
Our products are manufactured to our order by an FDA- approved
manufacturer located in South Carolina. We have not incurred any research and
development expense, since product formulation was carried out by the
manufacturer under our direction. We presently carry a $2 million product
liability policy, which we consider sufficient for our current level of
operations.
The operations of J&J Marketing are conducted from offices in New York
State provided by Jane and Michael Schub free of charge. Until we obtain funds
sufficient to expand our operations, Jane and Michael Schub will remain the only
employees of J&J Marketing, and neither of them will be employed on a full-time
basis.
Item 2. PROPERTIES
The executive offices of Global Concepts are leased from the family of our
Secretary, Michael Margolies, for a fee of $1,000 per month.
CLTA's administrative offices and its warehousing location are located in
a facility leased by CLTA in Chambly, France for a term ending June 2013. CLTA
also has long-term leases for two parking facilities.
The offices of Advanced Medical Diagnostics are located in an office
building in East Orange owned by members of its management, and are provided
free-of-charge.
The operations of J&J Marketing are conducted from offices in New York
State provided by Jane and Michael Schub free of charge
Item 3. LEGAL PROCEEDINGS
None.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of the Shareholders was held on November 8, 2004. At the
meeting the Shareholders:
- approved a motion to amend the Articles of Incorporation to
authorize the issuance of 500,000,000 shares of common stock. The
vote was 38,808,494 votes in favor, 1,131,650 votes against, and no
abstentions.
- approved a motion to amend the Articles of Incorporation to change
the corporate name to "Global Concepts, Ltd." The vote was
39,939,044 votes in favor, 1,100 votes against, and no abstentions.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information
Our common stock has been listed for quotation on the OTC Bulletin Board
under the trading symbol "GCCP.OB." The following table sets forth the bid
prices quoted for our common stock on the OTC Bulletin Board during the two
years ended December 31, 2004. The reported bid quotations represent
inter-dealer prices without retail markup, markdown or commissions, and may not
necessarily represent actual transactions.
Bid
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Period: High Low
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Jan. 1, 2003 - Mar. 31, 2003 $ .01 $ .01
Apr. 1, 2003 - June 30, 2003 $ .01 $ .01
July 1, 2003 - Sep. 30, 2003 $ .01 $ .01
Oct. 1, 2003 - Dec. 31, 2003 $ .01 $ .01
Jan.1, 2004 - Mar. 31, 2004 $ .01 $ .01
Apr. 1, 2004 - June 30, 2004 $ .44 $ .01
July 1, 2004 - Sep. 30, 2004 $ .19 $ .05
Oct 1, 2004 - Dec. 31, 2004 $ .14 $ .03
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(b) Shareholders
Our shareholders list contains the names of 93 registered shareholders of
record. Based on recent requests for materials that we mailed to shareholders,
we believe that the number of beneficial shareholders exceeds 800.
(c) Dividends
The Company has never paid or declared any cash dividends on its Common
Stock and does not anticipate doing so in the foreseeable future. The Company
intends to retain any future earnings for the operation and expansion of the
business. Any decision as to future payment of dividends will depend on the
available earnings, the capital requirements of the Company, its general
financial condition and other factors deemed pertinent by the Board of
Directors.
(d) Sale of Unregistered Securities
In October 2004 Global Concepts issued a total of 100,000 shares of common
stock to the owners of J&J Marketing, LLC. The securities were issued in
consideration for their transfer to Global Concepts of ownership of J&J
Marketing LLC. The shares were valued at the market price on the date on which
the shares were issued. 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 who
were acquiring the shares for their own accounts. There were no underwriters.
In November 2004 Global Concepts sold two 5% Secured Convertible
Debentures in the principal amount of $200,000 each. The sale was made to
Cornell Capital Partners, LP in consideration of $360,000. The issuance was
exempt pursuant to Section 4(2) of the Act since the issuance was not made in a
public offering and was made to an entity whose principals had access to
detailed information about Global Concepts and which was acquiring the shares
for its own account. There were no underwriters.
In November 2004 Global Concepts issued a total of 4,545,454 shares of
common stock to Cornell Capital Partners, LP and Newbridge Securities
Corporation. The shares were issued to Cornell Capital Partners, LP in
consideration of its execution of the Standby Equity Distribution Agreement. The
shares were issued to Newbridge Securities Corporation in consideration of
services rendered in assisting Global Concepts in negotiating the Standby Equity
Distribution Agreement. The issuance was exempt pursuant to Section 4(2) of the
Act since the issuance was not made in a public offering and was made to
entities whose principals had access to detailed information about Global
Concepts and which were acquiring the shares for their own accounts. There were
no underwriters.
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(e) Repurchase 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 4th
quarter of 2004.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Global Concepts
Effective as of June 30, 2003, the Company terminated the operations of
Xcalibur Xpress, the only operation which had been continuing prior to that
date. The Company liquidated the assets of Xcalibur Xpress and used the proceeds
to reduce its debts. In its financial statements for 2004 the Company recorded a
$167,000 "gain from discontinued operations of subsidiary."
The only revenue recorded by the Company for the first nine months of 2004
was $10,350 that it was paid for consulting services rendered. Between June 1,
2004 and October 1, 2004, however, the Company acquired three new businesses:
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. CLTA and J&J Marketing were acquired on October 1, 2004
and, accordingly, their financial results for the fourth quarter of 2004 are
reflected in the Company's consolidated financial statements for 2004.
The financial results from J&J Marketing for 2004 were negligible.
Accordingly, the results of operations reported for 2004 effectively represent
the results of CLTA. 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 December 31, 2004.
For the year ended December 31, 2004, the Company reported gross revenue
of $5,286,000, almost entirely from CLTA. It incurred $4,208,000 in direct costs
in producing those revenues, yielding a gross profit of $1,078,000.
The gross profit from operations of CLTA exceeded the operating expenses
incurred by Global Concepts that were or will be settled in cash. However,
because it had little cash for most of 2004, Global Concepts settled some of its
larger debts by issuing stock. This resulted in an expense of $3,662,000
attributable to stock-based compensation. Because of that expense, Global
Concepts incurred a net loss of $3,955,000 for 2004.
-8-
Liquidity and Capital Resources
Global Concepts at December 31, 2004 had a working capital deficit of
$2,232,000, primarily 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.
The sale of the 5% Convertible Debenture in November 2004 provided funds
to Global Concepts that were used, in part, to repay a portion of the $500,000
loan that Global Concepts took for the purpose of acquiring CLTA. Another part
of the proceeds was used to pay a deposit on additional vehicles to be used by
CLTA. Global Concepts, therefore, has no significant cash assets and no source
of credit. This may result in difficulties paying the creditors of Global
Concepts, unless cash flow from CLTA is sufficient to service the debt of its
parent.
Critical Accounting Policies and Estimates
In preparing our financial statements we are required to formulate working
policies regarding valuation of our assets and liabilities and to develop
estimates of those values. In our preparation of the financial statements for
2004, there were three estimates made which were (a) subject to a high degree of
uncertainty and (b) material to our results:
o Our determination, detailed in Note 3 to the Consolidated Financial
Statements, that we should record a valuation allowance for the full
value of the deferred tax asset created by our net operating loss
carryforward. The primary reason for the determination was our lack
of certainty as to if and when Global Concepts would commence
profitable operations.
o Our determination, referred to in Note 9 to the Consolidated
Financial Statements, concerning the allowance for doubtful accounts
that we maintain. As needed based on each customer's circumstances,
we reserve an allowance for losses we may incur as a result of the
customer's inability to make required payments. Any increase in the
allowance results in a corresponding increase in our general and
administrative expenses. In establishing this allowance, and then
evaluating the adequacy of the allowance for doubtful accounts each
quarter, we analyze historical bad debts, customer concentrations,
customer credit-worthiness, current economic trends and changes in
our customer payment terms. If the financial condition of one or
more of our customers deteriorates, resulting in their inability to
make payments, or if we otherwise underestimate the losses we incur
as a result of our customers' inability to pay us, we could be
required to increase our allowance for doubtful accounts which could
adversely affect our operating results.
o Our determination, described in Note 6 to the Consolidated Financial
Statements, regarding the allocation of the purchase price of CLTA
among liquid assets, fixed assets and goodwill. We made a
preliminary allocation based on results to date, but will finalize
the allocation as we accumulate more historical information on which
to base a determination as to the fair value of the assets acquired.
If our final determination results in an increased allocation to
goodwill, and we determine that the goodwill is impaired, we could
incur a write-down of the book value in 2005 (depending on our
determination of the fair value of the goodwill), which would
adversely affect our operating results.
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We have made no material changes to our critical accounting policies in
connection with the preparation of financial statements for 2004.
Off-Balance Sheet Arrangements
We do not have any "off-balance sheet arrangements," as defined in the
Regulations of the Securities and Exchange Commission.
Risk Factors That May Affect Future Results
Our expectations regarding the future of Global Concepts will be realized
only if we are able to avoid the adverse effects of many risks and
contingencies. You should carefully consider the risks described below before
buying our common stock. If any of the risks described below actually occurs,
that event could have a substantial adverse effect on our future financial
results. Those adverse results, in turn, could cause the trading price of our
common stock to decline, and you could lose all or part of your investment.
We may be unable to satisfy our current debts.
Our debts are far in excess of the book value of our assets. We are
engaged in efforts to negotiate compromises and extensions with major creditors.
If those negotiations are unsuccessful, however, our business will fail.
We lack capital to fund our operations.
At the beginning of 2004 Global Concepts had no operating businesses. At
the end of the year we acquired three business operations. All three of them,
however, will require capital in order to prosper. We have no capital at this
time.
The issuance of shares under our agreements with Cornell Capital Partners
could increase our outstanding shares.
-10-
Cornell Capital Partners owns a 5% Secured Convertible Debenture that it
may convert into Global Concepts common stock. At the market price on May 18,
2005, the debenture could be converted into over 6,000,000 shares. The likely
result of Cornell Capital Partners selling such large quantities of stock to the
public would be a steep reduction in the market price of Global Concepts common
stock. Since the conversion feature of the 5% Secured Convertible Debenture is
determined by the market price, a reduction in the market price could result in
even larger numbers of shares being issued, if Global Concepts were to take
advantage of the full line of credit.
None of our subsidiaries has sufficient business history to permit a
reliable estimate of its future prospects.
Our business operations are carried out by three subsidiaries. Advanced
Medical Diagnostics was only recently organized and has no reported revenue. J&J
Marketing was a part-time family business until we acquired it, and has minimal
reported revenue. CLTA has a considerable business history, but only recently
emerged from legal proceedings in France that substantially reorganized it. None
of these companies, therefore, can point to a meaningful history of operations.
In each of these companies we will face all of the risks of a start-up company,
including uncertainty about access to the market, uncertainty about our ability
to service the market, and uncertainty about our ability to operate efficiently.
We may not be able to effectively manage a subsidiary in France.
Our largest business operation is CLTA. CLTA is a French company with all
of its business operations located in France. Its primary customers are French.
No one associated with Global Concepts has any significant experience managing a
business in France. It may occur that our ignorance about French business
practices will prevent us from adequately overseeing the operations of this
subsidiary.
Our largest subsidiary has one primary customer, and would be seriously
affected by any interruption of its business with that customer.
CLTA is the only subsidiary of Global Concepts that currently generates
more than nominal revenues. Over 90% of CLTA's business consists of warehousing,
servicing and delivering automobiles for the company that distributes Peugeot
and Citroen in Europe. If that business relationship were damaged, or if CLTA's
customer suffered a serious business reverse, the adverse effect on CLTA's
business could be dramatic.
A downturn in the French economy would be likely to reduce demand for
CLTA's services.
-11-
The business of CLTA consists of warehousing and delivering new cars,
primarily in France. If the economy of France suffers a recession and the volume
of new car sales is reduced, the revenue earned by CLTA will likewise be
reduced.
Increased fuel prices will reduce the profits of our transportation
subsidiary, CLTA.
A significant portion of the business of CLTA - and the area in which its
plans for expansion are focused - consists of transporting automobiles to
dealerships in Europe. When fuel oil prices are high, as they are now relative
to historical prices, CLTA's profit margins are reduced. If fuel oil prices
remain high or climb even higher, it will have an adverse effect on CLTA's
financial results.
Our HIV testing kit does not contain any proprietary technology, and could
be replicated by competitors.
Our subsidiary, Advanced Medical Diagnostics, LLC developed its HIV (1+2)
Rapid Self-Test Kit from readily-available components known to be effective in
testing for HIV infection. We are already aware of one U.S. competitor who is
following a business plan very similar to ours, distributing an HIV(1+2) testing
kit in Asia and Africa. If we or our competitors are successful in marketing
testing kits, additional competitors could easily introduce similar kits in
competition with us.
Our medical devices subsidiary does not have insurance against product
liability claims.
Advanced Medical Diagnostics, LLC is engaged in the business of
distributing an HIV home-testing kit in Africa, Asia and Latin America. Advanced
Medical Diagnostics does not have an insurance policy that will indemnify it
against any product liability claims. Such a claim, if successfully prosecuted,
could result in a judgment that Advanced Medical Diagnostics would be unable to
pay, forcing it into bankruptcy.
Global Concepts is not likely to hold annual shareholder meetings in the
next few years.
Since it became a public company in 2000, Global Concepts has never held
an annual meeting of shareholders. The Board of Directors of Global Concepts
consists of Michael Margolies, who has served since 2000, and Stanley Chason and
Eduardo Rodriguez, who were appointed to the Board by Mr. Margolies. Management
does not expect to hold annual meetings of shareholders in the next few years,
due to the expense involved. As a result, the shareholders of Global Concepts
will have no effective means of exercising control over the operations of Global
Concepts.
-12-
The volatility of the market for Global Concepts common stock may prevent
a shareholder from obtaining a fair price for his shares.
The common stock of Global Concepts is quoted on the OTC Bulletin Board.
Trading volume is usually relatively small, and prices vary dramatically from
time to time. It is impossible to say that the market price on any given day
reflects the fair value of Global Concepts, since the price sometimes moves up
or down by 50% in a week's time. A shareholder in Global Concepts who wants to
sell his shares, therefore, runs the risk that at the time he wants to sell, the
market price may be much less than the price he would consider to be fair.
Only a small portion of the investment community will purchase "penny
stocks" such as Global Concepts common stock.
Global Concepts' common stock is defined by the SEC as a "penny stock"
because it trades at a price less than $5.00 per share. Global Concepts' common
stock also meets most common definitions of a "penny stock," since it trades for
less than $1.00 per share. Many brokerage firms will discourage their customers
from purchasing penny stocks, and even more brokerage firms will not recommend a
penny stock to their customers. Most institutional investors will not invest in
penny stocks. In addition, many individual investors will not consider a
purchase of a penny stock due, among other things, to the negative reputation
that attends the penny stock market. As a result of this widespread disdain for
penny stocks, there will be a limited market for Global Concepts' common stock
as long as it remains a "penny stock." This situation may limit the liquidity of
your shares.
Item 7. FINANCIAL STATEMENTS
The Company's financial statements, together with notes and the Report of
Independent Certified Public Accountants, are set forth immediately following
Item 14 of this Form 10-KSB.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 8A. CONTROLS AND PROCEDURES
The term "disclosure controls and procedures" is defined in Rules
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The term refers to the controls and procedures of a company
that are designed to insure that information required to be disclosed by a
company in the reports that it files under the Exchange Act is recorded,
processed, summarized, and reported within the required time periods. Eduardo
Rodriguez, our Chief Executive Officer and Chief Financial Officer, performed an
evaluation of the effectiveness of the Company's disclosure controls and
procedures as of December 31, 2004. Based on his evaluation, he concluded that
the controls and procedures in place at that date were sufficient to assure that
material information concerning the Company which could affect the disclosures
in the Company's reports filed under the Exchange Act will be disclosed on a
timely basis in those reports.
-13-
No change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
This table identifies our management team. Directors serve until the next
annual meeting of shareholders and until their successors are elected and
qualify. Officers serve at the pleasure of the Board of Directors. Director
Director
Name Age Position with the Company Since
---- --- ------------------------- -----
Eduardo Rodriguez 43 Chairman, Chief Executive 2005
Officer, Chief Financial
Officer
Michael Margolies 77 Secretary, Director 2000
Stanley Chason 77 Director 2001
Eduardo Rodriguez has served as Chief Executive Officer of Global Concepts
since March 2005. Mr. Rodriguez also serves as Chief Executive Officer of
Headliners Entertainment Group, Inc. (OTCBB: HLEG), which is engaged in the
business of operating comedy clubs and dance clubs throughout the United States.
Mr. Rodriguez has been the Chief Executive Officer and a member of the Board of
Directors of Headliners since 1999.
Michael Margolies organized our first business operations in 1998. Mr.
Margolies served as our Chief Executive Officer from 1998 until March 2005. Mr.
Margolies previously served as Chief Executive Officer of U.S. Transportation
Systems, Inc. from its creation in 1975. USTS was a NASDAQ-listed holding
company involved in a diversified group of transportation-related businesses
(e.g. bus charters, freight-hauling, bus leasing, limousines). Mr. Margolies
left USTS in 1998 when it was sold to Precept Business Services, Inc. for
approximately $43 million. Mr. Margolies currently also serves as a member of
the Board of Directors of Headliners Entertainment Group, Inc. (OTCBB: HLEG).
-14-
Stanley Chason became a director of Global Concepts in November 2001. From
1962 until his retirement in 1984, Mr. Chason held various positions with Gelco
Corporation, a company listed on the New York Stock Exchange which is involved
in all aspects of vehicle leasing. His last position with Gelco was as Executive
Vice President and member of the Board of Directors. Mr. Chason was also
Chairman and Chief Executive Officer of the Fleet and Management Services
Division of Gelco.
Audit Committee; Compensation Committee
The Board of Directors of Global Concepts does not have an audit or a
compensation committee. The Board of Directors also does not have an audit
committee financial expert. The Board of Directors has not been able to recruit
an audit committee financial expert to join the Board of Directors because of
the Company's poor financial condition.
Code of Ethics
The Company does not have a written code of ethics applicable to its
executive officers. The Board of Directors has not adopted a written code of
ethics because there are so few members of management.
Compliance with Section 16(a) of the Exchange Act
None of the directors, officers or beneficial owners of more than 10% of
Global Concepts' common stock failed to file on a timely basis reports required
during 2004 by Section 16(a) of the Exchange Act.
Item 10. EXECUTIVE COMPENSATION
This table itemizes the compensation we paid to Michael Margolies, who
served as our Chief Executive Officer during 2004. There was officer whose
salary and bonus for services rendered during the year ended December 31, 2004
exceeded $100,000.
Compensation
Year Salary Stock Grant
---- ------ -----------
Michael Margolies....... 2004 $ 0
2003 0
2002 0 (1)
----------
(1) Mr. Margolies received a restricted stock grant of 10,000,000 shares
during 2002. The restrictions were removed at the beginning of 2004.
-15-
Employment Agreements
On March 7, 2005 Global Concepts entered into a "Joint Management
Agreement" with Headliners Entertainment Group, Inc., Eduardo Rodriguez, Michael
Margolies, The Rodriguez Family Trust and The Margolies Family Trust. The Joint
Management Agreement contained the following provisions relevant to Global
Concepts:
- The Rodriguez Family Trust and The Margolies Family Trust agreed to
organize a limited liability company. The Trusts, as well as
Rodriguez and Margolies, will contribute their Global Concepts
shares to the Trust on August 15, 2005. Global Concepts will pay a
fee of $5,000 per month to the limited liability company in
compensation for the services of Rodriguez and Margolies.
- Global Concepts entered into five year Employment Agreement with
Rodriguez.
- Margolies resigned from his position as Chairman of Global Concepts.
- Global Concepts entered into a five year advisory agreement with
Margolies.
- Rodriguez and Margolies agreed that they would each serve as members
of Global Concepts' Board of Directors. They also agreed to elect a
third member, to be nominated by Rodriguez.
- Global Concepts, Rodriguez and Margolies agrees that until the death
of Rodriguez or Margolies, the compensation and benefits paid by
Global Concepts to Rodriguez will equal the compensation and
benefits paid by Global Concepts to Margolies.
Global Concepts' Employment Agreement with Rodriguez provides that he will
serve as President. His compensation will be $100,000 per annum. The fee payable
to Rodriguez will continue for the term of the agreement, notwithstanding
Rodriguez' death or disability. The agreement terminates on January 31, 2010,
except that Rodriguez covenanted that for one year after termination he will not
engage in activities that are competitive with Global Concepts.
Global Concepts' Advisory Agreement with Margolies provides that he will
consult with the Board of Directors and the President on matters of business
development, investor relations public relations and finance. Global Concepts
will pay Margolies a fee of $100,000 per annum and provide him the same benefits
as are provided to Global Concepts' executive officers. The fee payable to
Margolies will continue for the term of the agreement, notwithstanding
Margolies' death or disability. The agreement terminates on January 31, 2010,
except that Margolies covenanted that for one year after termination he will not
engage in activities that are competitive with Global Concepts.
-16-
Equity Grants
The following tables set forth certain information regarding the stock
options acquired during 2004 by Michael Margolies, who was the Company's Chief
Executive Officer during the year ended December 31, 2004 and those options held
by him on December 31, 2004.
Option Grants in the Last Fiscal Year
Percent
of total Potential realizable
Number of options value at assumed
securities granted to annual rates of
underlying employees Exercise appreciation of
option in fiscal Price Expiration for option term
Name granted year ($/share) Date 5% 10%
---- ------------ ----------- --------- ---------- -------- --------
M. Margolies 0 N.A. N.A. N.A. 0 0
Aggregated Fiscal Year-End Option Values
Number of securities underlying Value of unexercised in-the-money
unexercised options at fiscal options at fiscal year-end ($)
Name year-end (#) (All exercisable) (All exercisable)
----------------- ------------------------------ ---------------------------------
Michael Margolies 0 0
Compensation of Directors
Our directors are reimbursed for out-of-pocket expenses incurred on our
behalf, but receive no additional compensation for service as directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of the date of this prospectus by
the following:
o each shareholder known by us to own beneficially more than 5% of our
common stock;
-17-
o each officer named in the Executive Compensation table above.
o each of our directors; and
o all directors and executive officers as a group.
There are 89,395,454 shares of our common stock outstanding on the date of
this Report. Except as otherwise indicated, we believe that the beneficial
owners of the common stock listed below have sole voting power and investment
power with respect to their shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission.
In computing the number of shares beneficially owned by a person and the
percent ownership of that person, we include shares of common stock subject to
options or warrants held by that person that are currently exercisable or will
become exercisable within 60 days. We do not, however, include these "issuable"
shares in the outstanding shares when we compute the percent ownership of any
other person.
Amount and
Nature of
Name and Address Beneficial Percentage
of Beneficial Owner(1) Ownership(2) of Class
---------------------- ------------ --------
Eduardo Rodriguez 1,600,000 1.8%
Michael Margolies 17,497,439(2) 19.6%
Stanley Chason 0 0%
All officers and
directors as a
group (3 persons) 19,097,439(2) 21.4%
Kevin Waltzer 8,439,000(3) 9.4%
14 Larkspur Lane
Newtown, PA 18904
----------
(1) Except as otherwise noted, the address of each of these shareholders is
c/o Global Concepts, Ltd., 14 Garrison Inn Lane, Garrison, NY 10524.
(2) Includes 2,180,850 shares owned by the Margolies Family Trust. The Trustee
of the Margolies Family Trust is Mr. Margolies spouse, and the
beneficiaries of the Trust are his spouse and children.
(3) Includes 2,455,000 shares held by Lisa Waltzer, Mr. Waltzer's spouse.
-18-
Equity Compensation Plan Information
The information set forth in the table below regarding equity compensation
plans (which include individual compensation arrangements) was determined as of
December 31, 2004.
Number of securities Number of securities
to be issued upon Weighted average remaining available
exercise of exercise price of for future issuance
outstanding options, outstanding options, under equity
warrants and rights warrants and rights compensation plans
------------------- ------------------- ------------------
Equity compensation plans approved by
security holders.............................. 0 -- 0
Equity compensation plans not approved by
security holders*............................. 0 -- 0
Total.............................. 0 -- 0
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Global Concepts has borrowed money from the Margolies
Family Trust. The trustee of the Margolies Family Trust is the wife of Michael
Margolies, and the beneficiaries of the Trust are his wife and children. The
balance due from Transportation Logistics to the Trust at December 31, 2004 was
$2,499,000. The loan did not bear interest. Although there is no agreement as to
when the loan will be repaid, the Trust waived payment until after 2005.
Accordingly, the loan is classified as a "long-term liability" on our balance
sheet.
In March 2005 Global Concepts issued a convertible debenture to the
Margolies Family Trust in satisfaction of the loan. The debenture converts at
the market price.
-19-
Item 13. EXHIBIT LIST AND REPORTS ON FORM 8-K
(a) Financial Statements
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Comprehensive Income F-4
Consolidated Statements of Shareholders' Equity (Deficit) F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
(b) Exhibit List
3-a Articles of Amendment and Restatement of the Articles of Incorporation -
filed as an exhibit to the Annual Report on Form 8-K for the year ended
December 31, 2000 and incorporated herein by reference.
3-b Restated By-laws - filed as an exhibit to the Current Report on Form 8-K
dated November 17, 2000 and incorporated herein by reference.
10-a Purchase Agreement dated September 15, 2004 among Compagnie Logistique de
Transports Automobiles, Transportation Logistics Int'l, Inc., Mr. M.
Marstal, Mr. S. Taleb, Mr. D. DeMaio and Mr. Jean-Claude Corre - filed as
an exhibit to the Current Report on Form 8-K dated October 1, 2004 and
incorporated herein by reference.
10-b Option Agreement dated October 1, 2004 among Transportation Logistics
Int'l, Inc., J&J Marketing LLC, and Jane and Michael Schub - filed as an
exhibit to the Current Report on Form 8-K dated October 1, 2004 and
incorporated herein by reference
21 Subsidiaries - Transportation Logistics Int'l, Inc., a New York
corporation
Xcalibur Express, Inc.
Advanced Medical Diagnostics LLC
J&J Marketing LLC
Compagnie Logistique de Transports Automobiles
31 Rule 13a-14(a) Certification
32 Rule 13a-14(b) Certification
----------
(1) Filed as an exhibit to the Company's Registration Statement on Form 10-SB
and incorporated herein by reference.
-20-
Item 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
Bagell, Josephs & Company LLC was retained by Global Concepts in April
2005 to serve as its principal accountant. Prior to that date, Bagell, Josephs &
Company LLC did not perform any services nor receive any fees from Global
Concepts.
Audit Fees
Bagell, Josephs & Company LLC billed $18,000 to the Company for
professional services rendered for the audit of our 2004 financial statements.
Audit-Related Fees
Bagell, Josephs & Company LLC billed $0 to the Company in 2004 for
assurance and related services that are reasonably related to the performance of
the 2004 audit or review of the quarterly financial statements.
Tax Fees
Bagell, Josephs & Company LLC billed $0 to the Company in 2004 for
professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees
Bagell, Josephs & Company LLC billed $0 to the Company in 2004 for
services not described above.
It is the policy of the Company's Board of Directors that all services
other than audit, review or attest services, must be pre-approved by the Board
of Directors. All of the services described above were approved by the Board of
Directors.
-21-
BAGELL, JOSEPHS & COMPANY, L.L.C.
200 Haddonfield Berlin Road
Gibbsboro, New Jersey 08026
(856) 346-2828 Fax (856) 346-2882
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Directors and Stockholders of
Global Concepts, Ltd. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Global Concept,
Ltd. and Subsidiaries (the "Company") as of December 31, 2004 and the related
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for the year ended December 31, 2004. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with standards established by the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Concepts,
Ltd. and Subsidiaries as of December 31, 2004, and the results of its operations
and its cash flows for the year ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements for December 31, 2004 have
been prepared assuming that the Company will continue as a going concern. As
discussed in the notes to the consolidated financial statements, the Company has
sustained operating losses and accumulated deficit that raise substantial doubt
about its ability to continue as a going concern. Management's operating and
financing plans in regard to these matters are also discussed in the notes. The
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ BAGELL, JOSEPHS & COMPANY, L.L.C.
BAGELL, JOSEPHS & COMPANY, L.L.C.
Gibbsboro, New Jersey
May 17, 2005
-22-
Independent Auditors' Report
To the Board of Directors and Stockholders of
Transportation Logistics Int'l Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Transportation
Logistics Int'l Inc. and Subsidiaries as of December 31, 2003, and the related
consolidated statements of operations, comprehensive income, shareholders
equity, and cash flows for the years ended December 31, 2003 and 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Transportation Logistics Int'l
Inc. and Subsidiaries as of December 31, 2003, and the results of their
operations and their cash flows for the years ended December 31, 2003 and 2002
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating loss raise substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Bridgewater, New Jersey
April 9, 2004
/s/ Rosenberg Rich Baker Berman & Company
-----------------------------------------
Rosenberg Rich Baker Berman & Company
-23-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Consolidated Balance Sheet
December 31, 2004
Assets
Current Assets
Cash $ 1,000
Accounts receivable 2,317,000
Prepaid expenses 2,451,000
-----------
Total Current Assets 2,451,000
Fixed assets 146,000
Deposits 241,000
Goodwill 1,432,000
-----------
Total Assets 4,270,000
===========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable 1,880,000
Accrued expenses 1,870,000
Note payable 428,000
Convertible debenture 444,000
Net liabilities of discontinued operations 61,000
-----------
Total Current Liabilities 4,683,000
Officer loans 2,499,000
-----------
Total Liabilities 7,182,000
-----------
Commitments and Contingencies --
Stockholders' Equity (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, 67,645,454 shares issued
and 67,409,802 shares outstanding 6,877,000
Additional paid-in capital 193,000
Retained earnings (deficit) (9,386,000)
Other comprehensive loss (73,000)
Less: treasury stock, 235,652 shares at cost (523,000)
-----------
Total Stockholders' Equity (Deficit) (2,912,000)
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 4,270,000
===========
See notes to the consolidated financial statements.
-24-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Consolidated Statements of Operations
Year Ended December 31,
----------------------------
2004 2003
------------ ------------
Operating Revenues $ 5,286,000 $ 66,000
Direct Operating Expenses 4,208,000 --
------------ ------------
Gross Profit 1,078,000 66,000
------------ ------------
Operating Expenses
Selling, general and administrative 1,467,000 138,000
Stock based compensation 3,662,000 636,000
------------ ------------
Total Operating Expenses 5,129,000 774,000
------------ ------------
Loss From Operations (4,051,000) (708,000)
Other expense (71,000) --
Minority interest (151,000) --
------------ ------------
(Loss) Before Income Taxes (4,122,000) (708,000)
(Provision) Benefit for Income Taxes -- --
------------ ------------
(Loss) Before Discontinued Operations (4,122,000) (708,000)
Discontinued Operations
Gain/(Loss)from discontinued operations of subsidiary
(net of tax effect of $0) 167,000 (1,620,000)
------------ ------------
Net (Loss) $ (3,955,000) $ (2,328,000)
============ ============
Earnings (Loss) Per Share
(Loss) from continuing operations $ (0.08) $ (0.02)
(Loss) from discontinued operations -- (0.04)
------------ ------------
Basic and diluted earnings (loss) per share $ (0.08) $ (0.06)
============ ============
Weighted Average Number of Common Shares Outstanding 48,322,141 40,396,338
============ ============
See notes to the consolidated financial statements.
-25-
Global Concepts, Ltd. and Subsidiaries
Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Consolidated Statements of Comprehensive Income (Loss)
Year Ended December 31,
--------------------------
2004 2003
----------- -----------
Net (Loss) $(3,955,000) $(2,329,000)
----------- -----------
Other Comprehensive Loss
Foreign Currency Translation Adjustment (73,000) --
----------- -----------
Other Comprehensive (Loss) Income Before Tax (73,000) --
Income Tax Expense Related to Other Comprehensive Income -- --
----------- -----------
(73,000) --
Other Comprehensive (Loss) Income Net of Tax
----------- -----------
Comprehensive (Loss) $(4,021,000) $(2,329,000)
=========== ===========
See notes to the consolidated financial statements.
-26-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Consolidated Statement of Shareholders' Equity (Deficit)
Years Ended December 31, 2004 and 2003
Accumulated
Common Stock Other
------------------------- Retained Comprehensive Treasury
Shares Amount Earnings Income Stock
----------- ----------- ----------- ----------- -----------
Balance December 31, 2002 40,396,338 $ 3,660,000 $(3,102,000) $ -- $ (523,000)
----------- ----------- ----------- ----------- -----------
Net loss for the year ended December 31, 2003 -- -- (2,329,000) -- --
Amortization of prepaid consulting services -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance December 31, 2003 40,396,338 3,660,000 (5,431,000) -- (523,000)
=========== =========== =========== =========== ===========
Amortization of prepaid consulting services -- -- -- -- --
Net loss for the year ended December 31, 2004 -- -- (3,955,000) -- --
Foreign currency transaction -- -- -- (73,000) --
Stock issued for acquisitions of J&J Marketing
and AMD 200,000 15,000 -- -- --
Stock issued for consulting services 26,813,464 3,202,000 -- -- --
Value of beneficial conversion feature on
convertible debt -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance December 31, 2004 67,409,802 $ 6,877,000 $(9,386,000) $ (73,000) $ (523,000)
=========== =========== =========== =========== ===========
Additional Consulting
Paid-in Services to
Capital be Provided Total
----------- ----------- -----------
Balance December 31, 2002 $ 37,000 $(1,096,000) (1,024,000)
----------- ----------- -----------
Net loss for the year ended December 31, 2003 -- -- (2,329,000)
Amortization of prepaid consulting services 636,000 636,000
----------- ----------- -----------
Balance December 31, 2003 37,000 (460,000) (2,717,000)
=========== =========== ===========
Amortization of prepaid consulting services -- 460,000 460,000
Net loss for the year ended December 31, 2004 -- -- (3,955,000)
Foreign currency transaction -- -- (73,000)
Stock issued for acquisitions of J&J Marketing
and AMD -- -- 15,000
Stock issued for consulting services -- -- 3,202,000
Value of beneficial conversion feature on
convertible debt 156,000 -- 156,000
----------- ----------- -----------
Balance December 31, 2004 $ 193,000 $ -- $(2,912,000)
=========== =========== ===========
See notes to the consolidated financial statements.
-27-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Consolidated Statements of Cash Flows
Year Ended December 31,
--------------------------
2004 2003
----------- -----------
Cash Flows From Operating Activities
Continuing Operations
Loss before income taxes $(4,122,000) $ (708,000)
Foreign currency translation (73,000) --
Stock based compensation 3,662,000 635,000
Adjustments to Reconcile Net Income to Net Cash
Used n Operating Activities
(Increase) decrease in accounts receivable 556,000 --
(Increase) decrease in inventory 6,000 --
(Increase) in prepaid expenses (4,000) --
Decrease in other assets 186,000 --
Increase in accounts payable and accrued expenses (931,000) 38,000
----------- -----------
Cash Used in Continuing Operations (720,000) (35,000)
----------- -----------
Discontinued Operations
Loss before income taxes 167,000 (1,620,000)
Adjustments to reconcile net loss to net cash Provided by (Used in)
discontinued operations
(Increase) decrease in net assets of discontinued operations (1,305,000) 1,663,000
----------- -----------
Cash Provided by (Used in) Discontinued Operations (1,138,000) 43,000
----------- -----------
Net Cash Provided by (Used in) Operating Activities (1,858,000) 8,000
----------- -----------
Cash Flows From Investing Activities
Purchases of fixed assets (15,000) --
Cash paid for deposit (241,000) --
Cash paid for CLTA acquisition (500,000) --
Cash acquired from acquisition 307,000 --
----------- -----------
Net Cash Used in Investing Activities (449,000) --
----------- -----------
Cash From Financing Activities
Proceeds from officer loans 1,479,000 112,000
Proceeds from debt 828,000 (121,000)
----------- -----------
Net Cash Provided by (Used in) Financing Activities 2,307,000 (9,000)
----------- -----------
Net Increase (Decrease) in Cash and Equivalents 3,000 (1,000)
Cash and Equivalents at Beginning of Year 2,000 3,000
----------- -----------
Cash and Equivalents at End of Year $ 1,000 $ 2,000
=========== ===========
See notes to the consolidated financial statements.
-28-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Consolidated Statements of Cash Flows, Continued
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ -- $ --
==== ====
Income taxes $ -- $ --
==== ====
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
On June 1, 2004, the Company issued 100,000 common shares in exchange for
a 100% interest in a limited liability company.
On October 1, 2004, the Company issued 100,000 common shares in exchange
for an 80% interest in a limited liability company.
See notes to the consolidated financial statements.
-29-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Global Concepts, Ltd. is an international logistics management
company which owned and operated several subsidiaries, each of which
did business within the various facets of transportation including
intermodal trucking, factoring receivables and employee leasing for
logistic companies. In 2003, the Company discontinued all of those
operations. Since May 2003, the Company has been providing
consulting services while seeking new business ventures.
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred substantial losses, and has a
working capital deficit as of December 31, 2004. The Company's
continued existence is dependent upon its ability to secure adequate
financing. The Company plans to raise additional capital in the
future; however there are no assurances that such plan will be
successful. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
On June 1, 2004 the Company acquired the entire membership interest
in Advanced Medical Diagnostics LLC ("AMD"). AMD is a development
stage enterprise, engaged in the business of manufacturing and
distributing the "Advanced Medical Diagnostics HIV (1&2) Rapid
Test", a diagnostic kit which permits an individual to test himself
for the HIV virus and obtain a result in 15 minutes with a 99.4%
accuracy. The membership interests in AMD were acquired by the
Company in exchange for 100,000 shares of the Company's common
stock.
On October 1, 2004 the Company completed its acquisition of 60% of
CLTA for $500,000. CLTA is a corporation located in Nugent sur Oise,
France. CLTA's principal business is the warehousing and final
dealer preparation work for automobile manufacturers, Pugeot and
Citroen. CLTA also performs brake installation and testing of new
vehicles for Peugeot.
On October 1, 2004 the Company acquired an eighty percent 80%
ownership interest in J&J Marketing, LLC. J&J Marketing LLC is a New
York limited liability company that is engaged in the business of
producing and distributing non-medicated pharmaceutical personal
care products under the trademark "Savage Beauty."
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 statement and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from these estimates.
Principles of Consolidation
The accompanying consolidated balance sheet at December 31, 2004
includes the accounts of the Company and its wholly owned and
majority owned subsidiaries. All material inter-company accounts and
transactions have been eliminated.
Property and Equipment
Property and equipment are valued at cost. Gains and losses on
disposition of property are reflected in income. Depreciation is
computed using the straight-line method over three to five year
estimated useful lives of the assets. Repairs and maintenance which
do not extend the useful life of the related assets are expensed as
incurred.
-30-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Cash and Equivalents
For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit and all highly liquid
debt instruments with original maturities of three months or less.
Income Taxes
The Company and its wholly owned subsidiaries file a consolidated
Federal income tax return. The Company uses the asset and liability
method in providing income taxes on all transactions that have been
recognized in the consolidated financial statements. The asset and
liability method requires that deferred taxes be adjusted to reflect
the tax rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred tax
liabilities and deferred tax assets, as well as other changes in
income tax laws, are recognized in net earnings in the period such
changes are enacted. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts expected to be
realized.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheet for
cash, accounts receivable, prepaid expenses, accounts payable, and
accrued expenses approximate their fair values due to the short
maturities of these financial instruments.
The carrying amounts reported in the consolidated balance sheet for
officers loans, notes payable and convertible debentures approximate
their fair values based on current rates at which the Company could
borrow funds with similar maturities.
Revenue Recognition
Revenue from freight brokerage is recognized upon delivery of goods,
and direct expenses associated with the cost of transportation are
accrued concurrently. Revenue from driver temporary services and
leasing is recognized when earned based upon standard billing rates
charged by the hours worked. Factoring revenue is recognized when
the service is provided. Direct expenses associated with the cost of
driver leasing are accrued concurrently. Revenue from subcontracted
transportation services is recognized upon completion of each trip.
Direct expenses associated with the cost of transportation are
accrued concurrently. Monthly provision is made for doubtful
receivables, discounts, returns and allowances.
Goodwill
Goodwill is recognized for the excess of the purchase price over the
fair value of tangible and identifiable intangible net assets of
businesses acquired. The Company adopted SFAS No. 142, "GOODWILL AND
OTHER INTANGIBLE ASSETS" in which goodwill is no longer amortized
but tested for impairment on at least an annual basis. The carrying
value is reviewed if the facts and circumstances, such as
significant declines in sales, earnings or cash flows or material
adverse changes in the business climate, suggest that it may be
impaired. If this review indicates that goodwill will not be
recoverable, the impairment is determined by comparing the carrying
value of goodwill to fair value. Fair value is determined based on
quoted market values, discounted cash flows or appraisals.
Long-lived Assets
The Company assesses long-lived asset for impairment is required
under SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OF DISPOSAL OF
LONG-LIVED ASSETS". The Company reviews for impairment whenever
events or circumstances indicate that the carrying amount of these
assets may not be recoverable. The Company assesses these assets for
impairment based on estimated future cash flow from these assets.
-31-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Foreign Currency Transactions
Operations of one of the Company's majority owned subsidiaries are
conducted in France and the financial statements of that subsidiary
are translated from the Euro, Frances' functional currency, into U.
S. Dollars in accordance with SFAS No. 52, "Foreign Currency
Translation". Accordingly, all foreign currency assets and
liabilities are translated at the period-end exchange rate and all
revenues and expenses are translated at the average exchange rate
for the period. The effects of translating the financial statements
of foreign subsidiaries into U. S. Dollars are reported as a
cumulative translation adjustment, a separate component of
comprehensive income in stockholders' equity. Foreign currency
transaction gains and losses are reported in earnings and consisted
of $73,000 of losses in 2004, $0 of losses in 2003.
Earnings (Loss) Per Share
Earnings (Loss) per common share represents the amount of earnings
(loss) for the period available to each share of common stock
outstanding during the reporting period. Diluted earnings (loss per
share reflects the amount of earnings (loss) for the period
available to each share of common stock outstanding during the
reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period, such as
common shares that could result from the potential exercise or
conversion of securities into common stock. The computation of
diluted earnings (loss) per share does not assume conversion,
exercise, or contingent issuance of securities that would have an
antidilutive effect on earnings (loss) per share.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The accompanying balance sheets includes assets of $3,435,000 relating to
the Company's majority owned subsidiary in Nugent sue Oise, France.
Although France is politically and economically stable, it is always
possible that unanticipated events in foreign countries could disrupt the
Company's operations.
NOTE 3- INCOME TAXES
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax
purposes in different periods. Deferred taxes are classified as current or
noncurrent, depending on the classification of the assets and liabilities
to which they relate. Deferred taxes arising from temporary differences
that are not related to an asset or liability are classified as current or
noncurrent depending on the periods in which the temporary differences are
expected to reverse. In addition deferred taxes are also recognized from
operating losses that are available to offset future federal and state
income taxes.
The deferred tax assets are attributable to net operating losses.
Deferred taxes consist of the following:
Total deferred tax assets, non current $ 3,420,000
Total valuation allowance (3,420,000)
-----------
Net deferred tax assets $ --
===========
During 2004 and 2003 the valuation allowance increased $1,500,000 and
$920,000, respectively.
-32-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 3 - INCOME TAXES, Continued
The reconciliation of income tax computed at the U.S. Federal statutory
rates to income tax expense is as follows:
December 31,
---------------
2002 2000
---- ---
Tax at US statutory rate 34% 34 %
State income taxes, net of federal benefit 6% 6 %
Foreign taxes -- (21)%
Other reconciling items and valuation allowance (40)% (19)%
--- ---
Income tax provision 0% (0)%
=== ===
As of December 31, 2004, the Company has approximately $8,700,000
available net operating loss carryforwards which may be used to reduce
Federal and State taxable income and tax liabilities in future years. The
net operating loss carryforward expires in 2023.
NOTE 4 - DEPOSIT
The deposit at December 31, 2004 represent a downpayment towards the
acquisition of a fleet of tractor-trailers. The transaction closed on
February 1, 2005 and required an additional $800,000 to be paid and the
assumption of capital leases.
NOTE 5 - STOCKHOLDERS' EQUITY
Stock and Stock Option Plan
On November 15, 2000, the Company adopted its 2000 Stock and Stock
Option Plan (the "Plan"). The Plan provides that certain options to
purchase the Company's common stock granted thereunder are intended
to qualify as "incentive stock options" within the meaning of
Section 422A of the United States Internal Revenue Code of 1986,
while non-qualified options may also be granted under the Plan. The
initial plan provides for authorization of up to 2,000,000 shares.
The option price per share of stock purchasable under an Incentive
Stock Option shall be determined at the time of grant but shall not
be less than 100% of the Fair Market Value of the stock on such
date, or, in the case of a 10% Stockholder, the option price per
share shall be no less than 110% of the Fair Market Value of the
stock on the date an Incentive Stock Option is granted to such 10%
Stockholder.
Qualified and Non-Qualified Shares Under Option as of December 31, 2004
Weighted
Average
Option
Options Price
------- -----
Outstanding, January 1, 2003 $ -- $1.75
Granted during the year -- --
Canceled during the year -- 1.75
Exercised during the year -- --
----- -----
Outstanding, December 31, 2003 $ -- $ --
-----
Eligible for exercise, end of year $ -- $ --
----- -----
At December 31, 2004, there were 812,500 shares reserved for future
grants.
-33-
Global Concepts, Ltd and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 5 - STOCKHOLDERS' EQUITY, Continued
The Company follows Accounting Principles Board Opinion 25, Accounting for
Stock Issued to Employees, to account for its stock option plan. An
alternative method of accounting for stock options is SFAS 123, Accounting
for Stock-Based Compensation. Under SFAS 123, employee stock options are
valued at grant date using the Black-Scholes valuation model, and this
compensation cost is recognized ratably over the vesting period. Had
compensation cost for the Company's stock option plan been determined as
prescribed by SFAS 123, there would have been no effect on the pro forma
income statements for 2004 and 2003.
For stock transactions with other than employees, the Company adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock Based Compensation". Accordingly, compensation
expense of $0 has been recognized for stock options and warrants during
2004 and 2003.
NOTE 6 - ACQUISITIONS
During 2004, the Company acquired three businesses for stock, cash and the
assumption of liabilities aggregating $5,064,000. The businesses acquired
were (1) a 100% interest in Advanced Medical Diagnostics, LLC, ("AMD"), a
development stage enterprise which is developing and marketing the
"Advanced Medical Diagnostics HIV (1 & 2) Rapit Test", a diagnostic kit,
which permits an individual to test himself for the HIV virus and obtain a
result in 15 minutes with a 99.4% accuracy. (2) An 80% interest in J&J
Marketing, LLC, ("J&J"), a producer and marketer of a line of skin care
products under the trademark "Savage Beauty," and (3) a 60% interest in
Compagnie Logistique de Transports Automobiles ("CLTA"), a French
corporation in the business of warehousing and completing the final dealer
preparation work for automobile manufactures, Peugeot and Citroen. CLTA
also performs brake installation and testing of new vehicles for Peugeot.
All of the acquisitions have been accounted for using the purchase method
of accounting for business combinations and, accordingly, their results of
operations have been included in the consolidated financial statements
since their respective dates of acquisition.
The acquisition of AMD occurred on June 1, 2004. Under the terms of the
acquisition agreement, the Company issued 100,000 shares of its common
stock in exchange for 100% of the interest in AMD. The shares were valued
at $9,000, their fair market value on the date of the agreement. 76.5% of
the membership interest in AMD was acquired from the three officers of
AMD. The remaining 23.5% was acquired from the Margolies Family Trust. The
trustee of the Margolies Family Trust is the wife of Michael Margolies.
Michael Margolies was the Chairman and Chief Executive Officer of the
Company as of the date of the acquisition. Additionally, pursuant to the
acquisition agreement, the Company issued 50,000 common shares under the
Company's 2004 Equity Incentive Plan to the officers of AMD.
The acquisition of J&J occurred on October 1, 2004. Under the terms of the
acquisition agreement, the Company issued 100,000 common shares to the
members of J&J in exchange for an 80% ownership interest in J&J. The
shares were valued at $6,000, which represents their fair market value on
the date of the agreement. In connection with the acquisition, the Company
granted to the sellers an option to purchase the Company's interest in
J&J. The option may be exercised only in the event of a liquidity event. A
liquidity event is defined in the acquisition agreement as a liquidation,
dissolution or winding up of the Company, a merger or acquisition
involving the Company in which it is not the surviving entity, a sale of
substantially all of its assets, certain bankruptcy or insolvency
proceedings, or the delisting of the common stock of the Company by the
OTC Bulletin Board. The exercise price of the option will be the market
value of 250,000 shares of the Company's common stock or, if prices are
not quoted for the common stock, $12,500. The option expired on May 15,
2005.
-34-
Global Concepts, Ltd and Subsidiaries
Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 6 - ACQUISITIONS, Continued
The acquisition of CLTA occurred on October 1, 2004. The Company paid
$500,000 for 60% of the outstanding shares of CLTA. This acquisition was
primarily financed through a loan from a shareholder, which bears no
interest and is due on demand. Pursuant to the acquisition agreement, the
Company is required to loan $500,000 to CLTA if needed and agreed upon by
the Board of Directors by December 31, 2004. As of December 31, 2004, no
such loans was made. Further, the Company has agreed to serve as guarantor
on the lease of ten trucks/trailers needed by CLTA to fulfill a contract
with one of its customers. As a result of the execution of the agreement,
a new Board of Directors of CLTA was elected, consisting of five persons,
three of which were appointed by the Company and the remaining two seats
being occupied by the two minority shareholders of CLTA.
The preliminary allocation of the purchase prices resulted in goodwill of
$1,432,000. The Company has not yet obtained all information required to
complete the purchase price allocation related to these acquisitions. The
final allocation will be completed in 2005.
The following is an allocation showing the estimated fair values of the
assets acquired and the liabilities assumed as of the dates of the
acquisitions:
AMD J&J CLTA
----------- ----------- -----------
Cash $ -- $ 1,000 $ 306,000
Accounts receivable -- 4,000 2,869,000
Inventory -- 9,000 --
Other assets -- -- 312,000
Fixed assets -- -- 131,000
Goodwill arising from the acquisition 23,000 17,000 1,392,000
Accounts payable and accrued expenses (14,000) (25,000) (4,510,000)
----------- ----------- -----------
Consideration paid $ 9,000 $ 6,000 $ 500,000
=========== =========== ===========
The following pro forma information is based on the assumption that the
acquisition took place as of January 1, 2003:
For the Year Ended December 31,
---------------------------
2004 2003
------------ ------------
Net Sales $ 16,785,000 $ 5,743,000
============ ============
Loss Before Discontinued Operations $ (4,832,000) $ (3,082,000)
============ ============
Net Loss $ (4,832,000) $ (3,082,000)
============ ============
Loss Per Share From Continuing Operations $ (0.09) $ (0.08)
============ ============
NOTE 7 - DISCONTINUED OPERATIONS
In 2003 the Company ceased its intermodal trucking operations. Net sales
of this division was $1,693,203 in 2003.
-35-
Global Concepts, Ltd. and Subsidiaries
Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 8 - EMPLOYMENT AND CONSULTANT AGREEMENTS
The Company has an employment agreement with its principal officer
expiring April 2007. This agreement provides for minimum compensation
levels and for incentive bonuses which are payable if specified management
goals are attained. The Company did not meet its goals in 2004. Subsequent
to December 31, 2004, this employment agreement has been terminated. See
Subsequent Event Note.
NOTE 9 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of non-interest bearing
cash deposit and accounts receivable.
At times throughout the year, the Company may maintain certain bank
accounts in excess of FDIC insured limits.
The Company provides credit in the normal course of business. The Company
performs ongoing credit evaluations of its customers and maintains
allowances for doubtful accounts based on factors surrounding the credit
risk of specific customers, historical trends, and other information.
NOTE 10 - STANDBY EQUITY DISTRIBUTION AGREEMENT
During 2004, the Company was party to a Standby Equity Distribution
Agreement ("SEDA") with Cornell Capital Partners, LP. Pursuant to the
SEDA, the Company was entitled to "put" shares of its common stock to
Cornell Capital Partners at 98% of the market price, defined in the SEDA
as the lowest daily volume weighted average price during the five
consecutive trading days after an advance is made by the Company. Cornell
Capital Partners was required by the SEDA to pay each advance demanded by
the Company, unless (a) there is no prospectus available for Cornell
Capital Partners to use in re-selling the shares, (b) the purchase would
result in Cornell Capital Partners owning over 9.9% of the Company's
outstanding shares or (c) the representations made by the Company in the
SEDA proved to be untrue. No advances were made under the SEDA during
2004. Subsequent to December 31, 2004, the SEDA agreement was terminated.
NOTE 11 - NOTE PAYABLE
During 2004, a shareholder loaned the Company $428,000. The proceeds from
the loan were used to partially finance the acquisition of Compagnie
Logistique de Transports Automobiles made by the Company on October 1,
2005. The loan is due on demand and bears no interest.
NOTE 12 - LOAN PAYABLE
The loan payable of $2,499,000 from a family trust, of which the wife of
the chairman of the Company is the trustee. The loan is unsecured with no
specific repayment terms. Subsequent to the year ended December 31, 2004,
the Company converted this loan into a convertible debenture. See
Subsequent Event Note.
-36-
Global Concepts, Ltd. and Subsidiaries
Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 13 - LITIGATION
The Company, several related companies, its chairman and certain employees
are defendants in a lawsuit filed by an alleged acquisition candidate for
alleged breach of contract. The complaint does not specify an amount for
damages. The Company believes the suit is completely without merit and
intends to vigorously defend its position.
The Company, several related companies, its chairman and its subsidiaries
are defendants in a lawsuit filed by one of its former vendors. At this
stage in the proceedings, the probable outcome is unknown. The Company has
a counter claim based upon defective services provided by the vendor. The
Company believes the settlement of the lawsuit will not exceed amounts
already recorded in the financial statements.
The Company and its subsidiaries are defendants in lawsuits filed by its
former vendors. The Company has judgements filed against them. These
judgements that amounted to $61,000 are included in net liabilities of
discontinued operations.
NOTE 14 - CONVERTIBLE DEBENTURES
On November 16, 2004, the Company issued two $200,000 convertible
debentures to Cornell Capital Partners, LP in exchange for $400,000. The
debentures bear interest at the rate of 5% per annum with the principal
and interest due November 16, 2006. At the Company's option, the entire
principal amount and all accrued interest may be converted on the due
date. Cornell Capital Partners has the option to convert all or any part
of the principal and accrued interest at any time. The debenture may be
converted into shares of the Company's common stock at the price per share
equal to the lesser of (a) and amount equal to 120% of the closing bid
price of the common stock on November 16, 2004, or (b) an amount equal to
80% of the lowest closing bid price of the Company's common stock for the
five trading days immediately preceding the date of conversion. As the
convertible debentures may be converted into common stock at the lower of
a fixed rate at the commitment date or a fixed discount to the market
price of the underlying common stock at the conversion date, the Company
has recognized a beneficial conversion feature. The Company recorded a
charge due to the beneficial conversion feature of $156,000 in accordance
with EITF Issue No. 98-5, "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion
Instruments". The value of the beneficial conversion feature was measured
using the intrinsic value and was being amortized to interest expense over
the life of the convertible debenture. On January 6, 2005, the Company
converted the debenture into a promissory note. Consequently, on that
date, the remaining amount of the unamortized discount has been charged to
interest expense.
On June 14, 2001, the Company issued a convertible debenture for $200,000
which bears interest at the rate of 20% per annum and is due one year from
the date of issue. In accordance with the agreement the debenture is
convertible into common stock of the Company at a conversion rate of $.75
from the date of issuance through September 30, 2001. The conversion
period has been extended. In addition, the debenture includes warrants to
purchase 20,000 shares of common stock at $1.50 that expired on June 30,
2003. Included in accounts payable is $80,000 of accrued interest on this
debenture. The convertible debenture are in default and were settled in
April 2005.
-37-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 15 - RESTRICTED STOCK GRANT PROGRAM
On May 28, 2002 the Company granted 10,000,000 shares of its common stock
to Michael Margolies, its Chief Executive Officer, pursuant to the
Company's Restricted Stock Grant Program (the "Program"). The grant
represented the entirety of the 10,000,000 shares included in the Program.
The shares issued under the Program are subject to the following
restrictions:
1. After this fiscal year and each of the following four fiscal years
(2002 through 2006) one-fifth of the shares granted (the "At-Risk
Shares") will be forfeited if the Company's revenue during the year
does not exceed the following thresholds:
2004 - $ 8,000,000
2005 - $10,000,000
2006 - $12,000,000
During the year ended December 31, 2004, the Company lifted the
restrictions on stock grant.
NOTE 16 - SUBSEQUENT EVENTS
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.
-38-
Global Concepts, Ltd. and Subsidiaries
(Formerly Known as Transportation Logistics Int'l Inc. and Subsidiaries)
Notes to the Consolidated Financial Statements
NOTE 16 - SUBSEQUENT EVENTS (Continued)
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 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 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, LTD. The note bears
interest at the rate of 10% per annum. The interest is to be paid on
the first day of each month, commencing April 1, 2005. The note is
to be repaid in eleven monthly installments of $33,000 commencing
June 1, 2006.
-39-
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Global Concepts, Ltd.
By: /s/ Eduardo Rodriguez
------------------------------------------
Eduardo Rodriguez, Chief Executive Officer
In accordance with the Exchange Act, this Report has been signed below on May
19, 2005 by the following persons, on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ Eduardo Rodriguez Chief Executive Officer, Chief Financial Officer,
------------------------ Chief Accounting Officer
Eduardo Rodriguez
/s/ Michael Margolies Director
------------------------
Michael Margolies
Director
------------------------
Stanley Chason
* * * * *