GLOBAL CONCEPTS, LTD. - SB-2 - 20041207 - BUSINESS
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 two employees:
our Chairman and his administrative assistant. The executive
offices of Global Concepts are leased from the family of our
Chairman, Michael Margolies for a fee of $1,000 per month.
COMPAGNIE LOGISTIQUE DE TRANSPORTS AUTOMOBILES
On October 1, 2004 Global Concepts acquired fifty-four
percent (54%) of the capital stock of Compagnie Logistique de
Transports Automobiles ("CLTA"). The remaining 46% 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.
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
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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.
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
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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.
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.
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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 ."
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.
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 . 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.
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The operations of J&J Marketing are currently 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.
MANAGEMENT
The officers and directors of the Company are:
Name Age Position with Director
the Company Since
----------------------------------------------------------------
Michael Margolies 76 Chairman, Chief
Executive Officer, 2000
Chief Financial
Officer, Secretary
Stanley Chason 76 Director 2001
Michael Margolies organized our first business operations in 1998.
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.
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
The Board of Directors does not have an audit committee
financial expert. The Board of Directors has not attempted to
recruit an audit committee financial expert because the Company
did not have business operations from July 2003 until June 2004,
and has only recently acquired significant business operations.
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.
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Executive Compensation
This table itemizes the compensation we paid to Michael
Margolies, who has served as our Chief Executive Officer since the
formation of our company. There was no other officer whose salary
and bonus for services rendered during the year ended December 31,
2003 exceeded $100,000.
Compensation
Year Salary Stock Grant
------------ -----------
Michael Margolies....... 2003 $ 0
2002 0 (1)
2001 0
________________________
(1) Mr. Margolies received a restricted stock grant of 10,000,000 shares
during 2002. The restrictions were removed at the beginning of 2004.
Employment Agreements
All of our employment arrangements with our executives are on
an at will basis.
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.
Equity Grants
The following tables set forth certain information regarding
the stock options acquired by the Company's Chief Executive
Officer during the year ended December 31, 2003 and those options
held by him on December 31, 2003.
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 ($/share) Date 5% 10%
M. Margolies 0 N.A. N.A. N.A. 0 0
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Aggregated Fiscal Year-End Option Values
Number of securities underlying Value of unexercised in-the-
unexercised options at fiscal money options at fiscal
Name year-end (#) (All exercisable) year-end ($) (All exercisable)
-------------------------------------------------------------------------------
Michael Margolies 0 0
Limitation of Liability and Indemnification
Our bylaws, as well as Colorado corporation law, provides
that our directors and officers may be indemnified by us, at the
discretion of our Board of Directors, against liabilities arising
from their service as directors and officers. Insofar as
indemnification for liabilities under the Securities Act of 1933
may be permitted to our directors, officers or controlling persons
pursuant to the foregoing provision or otherwise, we have been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable.
PRINCIPAL SHAREHOLDERS
The following table sets forth information known to us with
respect to the beneficial ownership of our voting stock as of the
date of this prospectus by the following:
* each shareholder known by us to own beneficially more than
5% of either class of our voting stock;
* Michael Margolies;
* each of our directors; and
* all directors and executive officers as a group.
There are 67,645,454 shares of our common stock outstanding
on the date of this prospectus. Except as otherwise indicated, we
believe that the beneficial owners of the voting 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 voting 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.
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Amount and
Nature of
Name and Address Beneficial Percentage
of Beneficial Owner(1) Ownership(2) of Class
---------------------------------------------------------------
Michael Margolies 17,497,439(2) 25.9%
Stanley Chason 0 0%
All officers and
directors as a
group (2 persons) 17,497,439(2) 25.9%
Kevin Waltzer 8,439,000(3) 12.5%
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.
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 June 30, 2004.
Number of
securities
Number of remaining
securities to be Weighted available
issued upon average for future
exercise of exercise price issuance
outstanding of outstanding under equity
options, warrants options,warrants compensation
and rights and rights plans
--------------------------------------------------------------------------------
Equity compensation plans
approved by security
holders.......... 0 -- 0
Equity compensation plans
not approved by security
holders*......... 0 -- 0
Total............ 0 -- 0
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SELLING SHAREHOLDERS
The table below lists the selling shareholders and other information
regarding the beneficial ownership of our common stock by the selling
shareholderss. As the selling shareholders acquire and/or resell shares
of common stock, we will file prospectus supplements as necessary to update
the number of shares of common stock that the selling shareholders intend
to sell, reflecting prior resales.
Shares
Shares Owned Owned
--------------------------------- After
Shares Put by Shares Acquired Offering
Global Concepts on Conversion of Shares Is
Name Per SEDA 5% Debenture Other Offered Complete
-------------------------------------------------------------------------------
Cornell Capital
Partners 159,489,633(1) 15,151,515(2) 4,242,424 4,242,424 0
Newbridge
Securities Corp. - - 303,030 303,030 0
_____________________________
(1) Represents the maximum number of shares that Global Concepts may
sell to Cornell Capital Partners pursuant to the Standby Equity
Distribution Agreement if the market price of Global Concepts common
stock is $.035.
(2) Represents number of shares that may be acquired on conversion when
market price is $.035.
Standby Equity Distribution Agreement
On November 16, 2004 Global Concepts signed a Standby Equity
Distribution Agreement with Cornell Capital Partners. Global
Concepts issued 4,242,424 shares to Cornell Capital Partners on
that date to compensate it for entering into the Agreement.
Global Concepts also issued 303,030 shares to Newbridge
Securities Corp. to compensate it for acting as an advisor to
Global Concepts in connection with the negotiation of the
Agreement.
The Standby Equity Distribution Agreement provides that
during the two years commencing on November 16, 2004 Global
Concepts may demand that Cornell Capital Partners purchase shares
of common stock from Global Concepts. Global Concepts may make a
demand no more than once every six trading days. The maximum
purchase price on each demand is $250,000. The aggregate maximum
that Global Concepts may demand from Cornell Capital Partners is
$5,000,000. The number of shares that Cornell Capital Partners
will purchase after a demand will be determined by dividing the
dollar amount demanded by a per share price. The per share price
used will be 95% of the lowest daily volume-weighted average
price during the five trading days that follow the date a demand
is made by Global Concepts. Cornell Capital Partners is required
by the Agreement to pay each amount demanded by Global Concepts,
unless (a) there is no prospectus available for Cornell Capital
Partners to use in reselling the shares, (b) the purchase would
result in Cornell Capital Partners owning over 9.9% of Global
Concepts outstanding shares, or (c) the representations made by
Global Concepts in the Agreement prove to be untrue.
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The Standby Equity Distribution Agreement requires that we
register the shares for resale by the Cornell Capital Partners.
We will pay the registration and filing fees, printing expenses,
listing fees, blue sky fees, if any, and fees and disbursements
of our counsel in connection with this offering. Cornell Capital
Partners will pay the fees and disbursements of its own counsel,
as well as any underwriting discounts, selling commissions, and
similar expenses relating to the sale of the shares. We have
agreed to indemnify Cornell Capital Partners and some of its
affiliates against certain liabilities, including liabilities
under the Securities Act, in connection with this offering. In
turn, Cornell Capital Partners has agreed to indemnify us and our
directors and officers, as well as any person who controls us,
against certain liabilities, including liabilities under the
Securities Act. Insofar as indemnification for liabilities under
the Securities Act may be permitted to our directors and
officers, or persons that control us, we have been informed that
in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable.
5% Secured Convertible Debenture
On November 16, 2004 Global Concepts sold to Cornell Capital
Partners two 5% Secured Convertible Debentures. Each Debenture is
in the principal sum of $200,000. Cornell Capital Partners paid
$360,000 for the Debentures, from which it paid a $10,000 fee for
Cornell Capital Partner's legal counsel in connection with the
Debentures and a $10,000 fee for Cornell Capital Partner's legal
counsel in connection with the Standby Equity Distribution
Agreement.
The principal and interest on the Debentures may be
converted by Cornell Capital Partners into shares of Global
Concepts common stock. On November 16, 2006, if a Debenture
remains outstanding, Global Concepts must either pay the
principal and accrued interest or convert same into shares of
common stock. The conversion price in either event will be the
lesser of $.042 or 80% of the lowest closing bid price for the
five trading days preceding conversion. Global Concepts'
obligations under the Debentures are secured by a pledge of all
of Global Concepts' assets.
Other Relationships with Global Concepts
Neither Cornell Capital Partners nor Newbridge Securities
Corp. has had any relationship with Global Concepts or its
subsidiaries or affiliates within the past three years, other
than the relationships created by the Equity Line of Credit
Agreement and the 5% Secured Convertible Debenture described
above.
Plan of Distribution
The selling shareholders may sell shares from time to time
in public transactions, on or off the OTC Bulletin Board, or in
private transactions, at prevailing market prices or at privately
negotiated prices, including, but not limited to, one or more of
the following types of transactions:
* purchases by brokers, dealers or underwriters as
principal and resale by such purchasers for their own
accounts pursuant to this prospectus;
* "at the market" to or through market makers or into an
existing market for our common stock;
* in other ways not involving market makers or established
trading markets, including direct sales to purchasers or
sales effected through agents;
* through transactions in options, swaps or other
derivatives (whether exchange-listed or otherwise);
* in privately negotiated transactions; or
* to cover short sales.
In effecting sales, brokers or dealers engaged by the
selling shareholders may arrange for other brokers or dealers to
participate in the resales. The selling shareholders may enter
into hedging transactions with broker-dealers, and in connection
with those transactions, broker-dealers may engage in short sales
of the shares. The selling shareholders may also sell shares
short and deliver the shares to close out the short position.
The selling shareholders may also enter into option or other
transactions with broker-dealers that require the delivery to the
broker-dealers of the shares, which the broker-dealer may resell
using this prospectus. The selling shareholders may also pledge
the shares to a broker-dealer and, upon a default, the broker or
dealer may effect sales of the pledged shares using this
prospectus.
Brokers, dealers or agents may receive compensation in the
form of commissions, discounts, or concessions from selling
shareholders in amounts to be negotiated in connection with the
sale. The selling shareholders and any participating brokers or
dealers will be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales, and any such
commission, discount or concession may be deemed to be
underwriting compensation.
Information as to whether underwriters whom the selling
shareholders may select, or any broker-dealer, is acting as
principal or agent for the selling shareholders, the compensation
to be received by underwriters that the selling shareholders may
select or by any broker or dealer acting as principal or agent
for the selling shareholders, and the compensation to be paid to
other broker-dealers, in the event the compensation of such other
broker-dealers is in excess of usual and customary commissions,
will, to the extent required, be set forth in a supplement to
this prospectus. Any dealer or broker participating in any
distribution of the shares may be required to deliver a copy of
this prospectus, including a prospectus supplement, if any, to
any person who purchases any of the shares from or through such
broker or dealer.
We have advised the selling shareholders that, during any
time when they are engaged in a distribution of the shares, they
are required to comply with Regulation M promulgated under the
Securities Exchange Act. With certain exceptions, Regulation M
precludes any selling shareholder, any affiliated purchasers and
any broker-dealer or other person who participates in a
distribution from bidding for or purchasing or attempting to
induce any person to bid for or purchase any security that is the
subject of the distribution until the entire distribution is
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complete. Regulation M also prohibits any bids or purchases made
in order to stabilize the price of a security in connection with
the distribution of that security. All of the foregoing may
affect the marketability of our common stock.
We will not receive any of the proceeds from the selling
shareholders' sale of their common stock.
LEGAL MATTERS
The validity of the common stock which the selling
shareholders are selling by means of this prospectus has been
passed upon by our counsel, Robert Brantl, Esq., 322 Fourth
Street, Brooklyn, New York 11215.
EXPERTS
The financial statements of Global Concepts, Ltd. and of
Advanced Medical Diagnostics, LLC included in this prospectus and
in the registration statement have been audited by Rosenberg Rich
Baker Berman & Company, independent certified public accountants,
to the extent and for the periods set forth in their report
appearing elsewhere in this prospectus and in the registration
statement, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and
accounting.
The financial statements of J&J Marketing, LLC included in
this prospectus and in the registration statement have been
audited by Thomas J. Kellerman, CPA, to the extent and for the
periods set forth in his report appearing elsewhere in this
prospectus and in the registration statement, and are included in
reliance upon such report given upon the authority of Mr.
Kellerman as an expert in auditing and accounting.
The financial statements of Compagnie Logistique de
Transports Automobiles included in this prospectus and in the
registration statement have been audited by _____________
__________________________, to the extent and for the periods set
forth in their report appearing elsewhere in this prospectus and
in the registration statement, and are included in reliance upon
such report given upon the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2, including exhibits and
schedules, under the Securities Act with respect to the shares to
be sold in the offering. This prospectus does not contain all the
information set forth in the registration statement. In
particular, the statements in this prospectus regarding the
contents of contracts, agreements or other documents are not
necessarily complete. You can find further information about us
in the registration statement and the exhibits and schedules
attached to the registration statement. In addition, we file
annual, quarterly and current reports, proxy statements and other
information with the Commission, which may assist you in
understanding our company.
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You may read and copy the registration statement or any
reports, statements or other information that we file at the
Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the Commission.
Please call the Commission at 1-800-SEC-0330 for further information
on the operation of the Public Reference Room. Our Commission filings,
including the registration statement, are also available to you on
the Commission's Web site at http://WWW.SEC.GOV.
We do not currently send annual reports to our shareholders,
due to the expense involved. Until our resources permit, we do
not expect to send annual reports unless we are soliciting
proxies for an annual meeting of shareholders. You may, however,
obtain a copy of our annual or our quarterly report to the
Commission by writing to us at our executive offices.
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INDEX TO FINANCIAL STATEMENTS
I. GLOBAL CONCEPTS, LTD.
1. Audited Financial Statements for the Years
Ended December 31, 2003 and 2002
Pages
Report of Independent Auditors F-1
Balance Sheet F-2
Statements of Operations F-3
Statements of Comprehensive Income F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
2. Unaudited Financial Statements for the Nine
Months Ended September 30, 2004 and 2003
Balance Sheet F-15
Statements of Operations F-16
Statements of Cash Flows F-17
Notes to Financial Statements F-18
II. ADVANCED MEDICAL DIAGNOSTICS, LLC
1. Audited Financial Statements for the Period
Ended December 31, 2003
Report of Independent Auditors F-20
Balance Sheet F-21
Statements of Income and Members' Equity (Deficit) F-22
Statements of Cash Flows F-23
Notes to Financial Statements F-24
2. Unaudited Financial Statements for the Three
Months Ended March 31, 2004
Balance Sheet F-26
Statements of Income and Members' Equity (Deficit) F-27
Statements of Cash Flows F-28
Notes to Financial Statements F-29
III. J&J MARKETING, LLC
1. Audited Financial Statements for the Years
Ended December 31, 2003 and 2002 and the
Six Months Ended June 30, 2004
Report of Independent Auditors F-30
Balance Sheet F-31
Statements of Operations, Members' Equity
and Retained Earnings F-32
Statements of Cash Flows F-33
Notes to Financial Statements F-34
IV. COMPAGNIE LOGISTIQUE DE TRANSPORTS AUTOMOBILES
V. PRO FORMA FINANCIAL STATEMENTS
Independent Auditors' Report
To the Board of Directors and Stockholders of
Global Concepts, Ltd. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Global
Concepts, Ltd. 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 Global
Concepts, Ltd. 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.
/s/ Rosenberg Rich Baker Berman & Company
-----------------------------------------
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
April 9, 2004 F-1
Global Concepts, Ltd. and Subsidiaries
Consolidated Balance Sheet
December 31, 2003
Assets
Cash $ 1,564
----------
Total Assets $ 1,564
==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 132,388
Convertible debenture (NOTE 10) 200,000
Net liabilities of discontinued
operations (NOTE 4) 1,365,927
----------
Total Current Liabilities 1,698,315
Loan payable (NOTE 8) 1,020,210
----------
Total Liabilities 2,718,525
----------
Commitments and Contingencies (NOTE 9) -
Stockholders' Equity
Preferred stock, $.01 par value;
5,000,000 shares authorized, and 0
shares issued and outstanding -
Common stock, no par value;
50,000,000 shares authorized,
40,631,990 shares issued and
40,396,338 shares outstanding 3,659,492
Additional paid-in capital -
stock options (NOTE 3) 36,748
Retained earnings (deficit) (5,430,664)
Consulting services to be provided
(NOTE 7) (460,000)
Less: treasury stock, 235,652 shares
at cost (522,537)
----------
Total Stockholders' Equity (2,716,961)
----------
Total Liabilities and Stockholders' Equity $ 1,564
==========
F-2
See notes to the consolidated financial statements.
Global Concepts, Ltd. and Subsidiaries
Consolidated Statements of Operations
Year Ended December 31,
2003 2002
-----------------------
(Restated)
Operating Revenues (NOTES 1 and 4) $ 65,533 $ -
Direct Operating Expenses - -
---------- --------
Gross Profit 65,533 -
---------- --------
Operating Expenses
Selling, general and administrative 138,489 50,150
Stock based compensation (NOTE 7) 635,500 302,700
---------- --------
Total Operating Expenses 773,989 352,850
---------- --------
(Loss) Before Income Taxes (708,456) (352,850)
(Provision) Benefit for Income Taxes (NOTE 2) - -
---------- --------
(Loss) Before Discontinued Operations (708,456) (352,850)
Discontinued Operations (NOTE 4)
Loss from discontinued operations of subsidiary
(net of tax effect of $0) (1,620,260) (407,201)
---------- --------
Net (Loss) $(2,328,716) $(760,051)
========== ========
Earnings (Loss) Per Share (NOTE 1)
(Loss) from continuing operations $ (0.02) $ (0.01)
(Loss) from discontinued operations (0.04) (0.01)
---------- --------
Basic and diluted earnings (loss) per share $ (0.06) $ (0.02)
========== ========
Weighted Average Number of Common Shares
Outstanding (Restated)
Basic 40,396,338 34,374,627
========== ==========
Diluted 40,396,338 34,374,627
========== ==========
See notes to the consolidated financial statements.
F-3
Global Concepts, Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
Year Ended December 31,
2003 2002
--------------------------
Net (Loss) $(2,328,716) $ (760,051)
Other Comprehensive Income
Foreign Currency Translation Adjustment - 54,706
---------- ----------
Other Comprehensive (Loss) Income Before Tax - 54,706
Income Tax Expense Related to Other
Comprehensive Income - -
---------- ----------
Other Comprehensive (Loss) Income Net of Tax - 54,706
---------- ----------
Comprehensive (Loss) $(2,328,716) $ (705,345)
========== ==========
F-4
See notes to the consolidated financial statements.
Global Concepts, Ltd. and Subsidiaries
Consolidated Statement of Shareholders' Equity
Years Ended December 31, 2003 and 2002
Additional
Accumulted Paid-in Consulting
Preferred Stock Common Stock Other Capital - Services
--------------- ---------------------- Retained Comprehensive Treasury Stock to be
Shares Amount Shares Amount Earnings Income Stock Options Provided Total
----------------------------------------------------------------------------------------------------------------------------------
Balance December
31, 2001 - $ - 22,227,205 $ 2,261,292 $(2,341,897) $ (54,706) $ (456,675) $36,748 $ - $ (555,238)
--------------------------------------------------------------------------------------------------------------
Foreign currency
translation - - - - - 54,706 - - - 54,706
Issuance of common
stock for consulting
services - - 9,110,000 798,200 - - - - (798,200) -
Shares issued for other
compensation - - 10,000,000 600,000 - - - - (600,000) -
Shares surrendered in
connection with sale
of TLI (UK) - - (940,867) - - - (65,862) - - (65,862)
Net loss for the years
ended December 31, 2002 - - - - (760,051) - - - - (760,051)
Amortization of prepaid
consulting services - - - - - - - - 302,700 302,700
----------------------------------------------------------------------------------------------------------
Balance December
31, 2002 - - 40,396,338 3,659,492 (3,101,948) - (522,537) 36,748 (1,095,500) (1,023,745)
Net loss for the year
ended December
31, 2003 - - - - (2,328,716) - - - - (2,328,716)
Amortization of
prepaid consulting
services - - - - - - - - 635,500 635,500
-----------------------------------------------------------------------------------------------------------
Balance December
31, 2003 - $ - 40,396,338 $ 3,659,492 $(5,430,664) $ - $ (522,537) $36,748 $ (460,000) $(2,716,961)
===========================================================================================================
See notes to the consolidated financial statements.
F-5
Global Concepts, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended December 31,
2003 2002
--------------------------
(Restated)
Cash Flows From Operating Activities
Continuing Operations
Loss before income taxes $ (708,456) $ (352,850)
Amortization of stock based compensation 635,500 302,700
Adjustments to Reconcile Net Income to Net
Cash Used In Operating Activities
(Decrease) increase in accounts payable
and accrued expenses 38,304 2,521
--------- ---------
Cash Used by Continuing Operations (34,652) (47,629)
--------- ---------
Discontinued Operations
Loss before income taxes (1,620,260) (407,201)
Adjustments to reconcile net loss to
net cash Used In discontinued operations
(Increase) decrease in net assets of
discontinued operations 1,663,135 433,920
--------- ---------
Cash Provided By Discontinued Operations 42,875 (26,719)
--------- ---------
Net Cash Provided by (Used in) Operating
Activities 8,223 (20,910)
--------- ---------
Cash from financing activities
Proceeds from loan payable 111,417 -
Repayment of long term debt (120,833) -
--------- ---------
Net Cash Used in Financing Activities (9,416) -
--------- ---------
Net Decrease in Cash and Equivalents (1,193) (20,910)
Cash and Equivalents at Beginning of Period 2,757 23,667
--------- ---------
Cash and Equivalents at End of Period $ 1,564 $ 2,757
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ - $ -
========= =========
Income taxes $ - $ -
========= =========
See notes to the consolidated financial statements.
F-6
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Global Concepts, Ltd. (TLI or the Company) 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 by May 2003. 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, 2003. 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.
Effective April 1, 1999 the Company was assigned all of the issued and
outstanding capital stock of Transportation Logistics Int'l (UK), a United
Kingdom corporation, Pupil Transportation, Inc., a New Jersey Corporation
and CDA North America, Inc., a New York corporation (the subsidiaries) from
Transportation Equities, Inc. (assignor). The Company was sold in 2002.
Effective March 26, 1999 the Company acquired all the shares and assets of
Transportation Logistics Int'l UK (TLIUK) formerly Avair Freight Services
Ltd. (UK), an international freight brokerage company. The Company issued
100,000 common shares (524,000 restated common shares) to the former
shareholders of Avair Freight Services (UK) Ltd.
Effective June 4, 2001, the Company entered into an operating agreement
with Humanaforce Logistics, LLC and Subsidiaries. In accordance with the
operating agreement the Company had a 51% interest in Humanaforce Logistics,
LLC and Subsidiaries. The Company ceased operations in October 2002.
Effective May 23, 2002, the Company acquired all of the outstanding capital
stock of Xcalibur Express, Inc., which provided intermodal trucking and
delivery, warehousing and third party logistics for its clients. The
capital stock was acquired in exchange for (1) the Company's understanding
to provide financial services to Xcalibur Express and (2) the agreement by
the Company to forebear immediate collection of $200,000 owed by Xcalibur
Express to the Company. The Company ceased operations and declared
bankruptcy in 2003.
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, 2003 includes
the accounts of the Company and its wholly owned subsidiaries
Transportation Logistics Int'l (UK), Pupil Transportation, Inc. Excalibur
Express, Inc. 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.
F-7
Global Concepts, Ltd. 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. Transportation Logistics Int'l, Inc. 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.
Financial Instruments
The following methods and assumptions were used by the Company to estimate
the fair values of financial instruments as disclosed herein:
Cash and Equivalents: The carrying amount approximates fair value because
of the short period to maturity of the instruments.
Accounts Receivable/Payable: The carrying amount approximated fair value.
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.
Long-lived Assets
In March, 1995 the Financial Accounting Standards Board issued SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets for Long-Lived
Assets to be Disposed of". SFAS 121 required that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and
long-lived assets and certain identifiable intangibles to be disposed of
to be reported at the lower of carrying amount or fair value less cost
to sell. SFAS No. 121 also establishes the procedures for review of
recover ability and measurement of impairment, if necessary, of long-
lived assets and certain identifiable intangibles to be held and used by
an entity. Management has determined that no impairment of the respective
carrying value has occurred as of December 31, 2003.
F-8
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Foreign Currency Transactions
In the normal course of business the Company has accounts receivable and
accounts payable that are transacted in foreign currencies. The Company
accounts for transaction differences, in accordance with Statement of
Financial Standard No. 52, "Foreign Currency Translation", and accounts
for the gains and losses in operations.
Comprehensive Income
For foreign operations outside the United States that prepare financial
statements in currencies other than the U.S. dollar, results of operations
and cash flows are translated at average exchange rates. Translation
adjustments are included as a separate component of accumulated other
comprehensive income (loss) in shareholders' equity. The foreign currency
translation at December 31, 2003 and 2002 was $0 and $54,706,
respectively.
Earnings Per Share
The Company computes earnings per share in accordance with Statements
of Financial Accounting Standard ("SFAS") No. 128. Basic EPS excludes
dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Common
equivalent shares have been excluded from the computation of diluted EPS
since their affect is antidilutive.
NOTE 2 - 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 $ 1,920,000
Total valuation allowance (1,920,000)
----------
Net deferred tax assets $ -
==========
During 2003 and 2002 the valuation allowance increased $920,000 and
$400,000, respectively.
F-9
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 2 - 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,
2003 2002
------------------
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, 2003, the Company has approximately $4,800,000
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 2022.
NOTE 3 - 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, 2003
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, 2003, there were 812,500 shares reserved for future grants.
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 2003 and 2002.
F-10
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 3 - STOCKHOLDERS' EQUITY, Continued
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
2003 and 2002.
NOTE 4 - DISCONTINUED OPERATIONS
Effective April 19, 2002 the Company sold Transportation Logistic Int'l to
four individuals, including James Thorpe, who had been a Member of the
Board of Directors and President of the Company. The purchase price
consisted of (a) $35,000 to be paid between November 2002 and April 2003
and (b) 940,867 shares of its common stock which were surrendered by Mr.
Thorpe. As part of the transaction TLI (UK) and its purchasers agreed that
if within the next two years they participated in the Translogistics
Network or any similar cooperative global network of logistics provided,
then 50% of the profits they derive from the network during the next five
years will be paid to the Company. Net sales during 2002 was $858,842.
In September 2002, the Company ceased providing employee leasing options
through its 51% subsidiary Human Force Logistics, LLC and Subsidiaries.
Net sales of Human Force Logistics, LLC was $3,857,071 in 2002.
In December 2002, the Company ceased its operations of student
transportation services through its subsidiary Pupil Transportation, Inc.
Net sales of Pupil Transportation, Inc. was $2,328,074 in 2002.
In 2002 the Company ceased its financial services (factoring) division.
Net sales of the financial services division was $686,129 in 2002.
In 2003 the Company ceased its intermodal trucking operations. Net sales
of this division was $1,693,203 and $3,620,807 in 2003 and 2002,
respectively.
The 2002 income statement has been restated to reflect these changes.
NOTE 5 - 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 2003.
NOTE 6 - 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.
F-11
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 7 - CONSULTING SERVICES TO BE PROVIDED
Consulting services to be provided are recorded in connection with
common stock issued to consultants for future services and are amortized
over the period of the agreement, ranging from one to five years.
NOTE 8 - LOAN PAYABLE
The loan payable of $1,020,210 is 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 and will not be repaid until after 2004.
NOTE 9 - 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 $178,728 are included in net liabilities of
discontinued operations.
NOTE 10 - CONVERTIBLE DEBENTURES
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 $40,000 of accrued
interest and accrued expenses on these debentures. The convertible
debentures are in default.
NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This statement rescinds SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of that statement,
SFAS No. 44, Accounting for Intangible Assets of Motor Carriers, and SFAS
No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.
This statement amends SFAS No. 13, Accounting for Leases, to eliminate
inconsistencies between the required accounting for sales-leaseback
transactions and the required accounting for certain lease modifications
that have economic effects that are similar to sales-leaseback
transactions. Also, this statement amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. Provisions of SFAS
No. 145 related to the rescissions of SFAS No. 4 were effective for the
Company on November 1, 2002 and provisions affecting SFAS No. 13 were
effective for transactions occurring after May 15, 2002. The adoption of
SFAS No. 145 did not have a significant impact on the Company's results of
operations or financial position.
F-12
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS, Continued
In June 2003, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement covers
restructuring type activities beginning with plans initiated after
December 31, 2002. Activities covered by this standard that are entered
into after that date will be recorded in accordance with provisions of
SFAS No. 146. The adoption of SFAS No. 146 did not have a significant
impact on the Company's results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-
Based Compensation-Transition and Disclosure, which provides alternative
methods of transition for a voluntary change to fair value based method
of accounting for stock-based employee compensation as prescribed in
SFAS 123, Accounting for Stock-Based Compensation. Additionally, SFAS
No. 148 required more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. The
provisions of this Statement are effective for fiscal years ending after
December 15, 2002. The adoption of this statement did not have a
significant impact on the Company's results of operations of financial
position.
In April 2003, the FASB issued SFAS Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities", which
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement is effective for
contracts entered into or modified after June 30, 2003, except for
certain hedging relationships designated after June 30, 2003. Most
provisions of this Statement should be applied prospectively. The
adoption of this statement did not have a significant impact on the
Company's results of operations or financial position.
In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities
and Equity". This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as
a liability (or an asset in some circumstances). This statement is
effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003, except for mandatorily
redeemable financial instruments of nonpublic entities, if applicable.
It is to be implemented by reporting the cumulative effect of a
change in an accounting principle for financial instruments created
before the issuance date of the Statement and still existing at the
beginning of the interim period of adoption. The adoption of this
statement is did not have a significant impact on the Company's results
of operations or financial position.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45
requires a company, at the time it issues a guarantee, to recognize an
initial liability for the fair value of obligations assumed under the
guarantees and elaborates on existing disclosure requirements related to
guarantees and warranties. The recognition requirements are effective
for guarantees issued or modified after December 31, 2002 for initial
recognition and initial measurement provisions. The adoption of FIN 45
did not have a significant impact on the Company's results of operations
or financial position.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51. FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the equity
investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated
financial support from other parties. FIN 46 is effective for all new
variable interest entities created or acquired after January 31, 2003.
For variable interest entities created or acquired prior to February 1,
2003, the provisions of FIN 46 must be applied for the first interim or
annual period beginning after June 15, 2003. The adoption of FIN 46
did not have a significant impact on the Company's results of operations
or financial position.
F-13
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Financial Statements
NOTE 12 - 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:
2. All of the restricted shares shall be forfeited if Mr. Margolies'
employment by the Company terminates prior to the date the restrictions
lapse.
3. The shares granted under the Program cannot be sold, assigned, pledged,
transferred or hypothecated in any manner, by operation of law or
otherwise, other than by writ or the laws of descent and distribution,
and shall not be subject to execution, attachment or similar process.
These restrictions will lapse with respect to any At-Risk Shares that
are not forfeited as described above. In addition, the restrictions
will lapse with respect to all unforfeited shares if in any year the
Company's revenue exceeds $12,000,000.
4. The restrictions shall also lapse as to all restricted shares on the
first to occur of (i) the termination of Mr. Margolies' employment with
the Company by reason of his disability, (ii) Mr. Margolies' death,
(iii) termination of Mr. Margolies' employment by the Company without
good reason, or (iv) a change of control of the Company. The Program
defines "Change of Control" as an acquisition by a person or group of
more than 50% of the Company's outstanding shares, a transfer of the
Company's property to an entity of which the Company does not own at
least 50%, or the election of directors constituting a majority of the
Board who have not been approved by the existing Board.
F-14
GLOBAL CONCEPTS LTD AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2004
ASSETS
2004
CURRENT ASSETS
Cash $ 227
---------
Total current assets 227
---------
OTHER ASSETS
Deposit on acquisition 250,000
Goodwill 23,524
---------
Total other assets 273,524
---------
TOTAL ASSETS $ 273,751
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 135,509
Notes payable 350,000
Convertible debentures 200,000
Net liabilities of discontinued operations 1,265,927
---------
Total current liabilities 1,951,436
Loan payable 1,076,619
---------
Total liabilities 3,028,055
STOCKHOLDERS' DEFICIT
Preferred stock, $ no par value,;
5,000,000 shares authorized,
and 1,000,000 shares issued
and outstanding 10,000
Common stock, no par value,
50,000,000 shares authorized,
47,000,000 shares issued and
47,000,000 outstanding 4,405,644
Additional paid-in capital 36,748
Deficit (5,807,780)
Consulting services to be provided (1,398,916)
---------
Total stockholders' deficit (2,754,304)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 273,751
=========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-15
GLOBAL CONCEPTS LTD. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
Three Months Ended Nine Months Ended
2004 2003 2004 2003
---------------------------------------------
Revenues $ - $ - $ 10,350 $ -
Operating expenses - - - -
--------------------- --------------------
Gross profit - - 10,350 -
Operating expenses
Selling, general and
administrative 36,861 - 86,382 -
Stock issued for consulting
services 33,501 - 301,084 123,550
--------------------- --------------------
Total operating expenses 70,362 - 387,466 123,550
--------------------- --------------------
Loss before discontinued
operations (70,362) - (377,116) (123,550)
Income (loss) from discontinued
operations - - - (357,046)
--------------------- --------------------
Net (loss) (70,362) - (377,116) (480,596)
===================== ====================
Earnings per share
(Loss) from continuing operations (0.01) - (0.01) -
(Loss) from discontinued
operations - - - (0.01)
Basic and diluted earnings per
share (0.01) - (0.01) (0.02)
Weighted average number of common
shares outstanding basic
and diluted 46,412,721 40,396,338 42,522,254 40,396,338
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-16
GLOBAL CONCEPTS LTD AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
Nine Months Ended
September 30,
2004 2003
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Continued $ (377,116) $ -
Discontinued - (2,757)
Amortization of stock based compensation 301,084 -
Adjustments to reconcile net (loss) to
net cash used in operating activities
(Increase) in investment (250,000) -
Increase in accounts payable and accrued
expenses 3,121 -
--------- --------
Net cash (used in) operating activities (322,911) (2,757)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable-net 321,574 -
Payment of net liabilites of discountinued
operations (100,000) -
Proceeds from note payable 100,000 -
--------- --------
Net cash provided by financing activites 321,574 -
--------- --------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (1,337) (2,757)
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD 1,564 2,757
--------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 227 $ -
========= ========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-17
Global Concepts, Ltd. and Subsidiaries
Notes to the Consolidated Condensed Interim Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
DISCONTINUATION OF OPERATIONS
As of June 30, 2003 the Company had discontinued all of its operations that
existed prior to that date. Historical results for periods prior to June 30,
2003 have been restated, therefore, to reflect the discontinuation.
ACQUISITION OF ADVANCED MEDICAL DIAGNOSTICS, LLC
On June 1, 2004 the Company acquired the entire membership interest in
Advanced Medical Diagnostics LLC ("AMD"). AMD is engaged in the business of
manufacturing and distributing the "Advanced Medical Diagnostics HIV (1 & 2)
Rapid Test." The membership interests in AMD were acquired by the Company in
exchange for 100,000 shares of the Company's common stock. The Company also
agreed to issue 500,000 shares of its common stock to the management of AMD as
employment incentives.
DEPOSIT TOWARD ACQUISITION OF CLTA
In September 2004 the Company entered into an agreement to acquire sixty
percent (60%) of the capital stock of Compagnie Logistique de Transports
Automobiles ("CLTA"). CLTA is a French corporation located in Nugent sur
Oise, France. Its principal business is warehousing automobiles for Peugeot
and Citroen, then completing the final dealer preparation work before the
automobiles are delivered. The Company paid a deposit of $250,000 pursuant to
the agreement, which is recorded on the Company's balance sheet as "Deposit on
acquisition."
The Company borrowed the funds used to pay the deposit from Kevin Waltzer, a
shareholder of the Company. The terms on which the Company will repay Mr.
Waltzer have not been determined.
F-18
SUBSEQUENT EVENT - ACQUISITION OF CLTA
On October 1, 2004 the Company completed its acquisition of 60% of CLTA by
paying $250,000 in addition to the deposit of $250,000 previously paid. The
Company also agreed to loan up to $500,000 to CLTA if requested by the Board
of Directors of CLTA prior to December 31, 2004. The Company also agreed to
guarantee a lease of ten trucks/trailers needed to fulfill CLTA's new
contract with CAT/Peugeot.
The Company borrowed the additional $250,000 used to purchase CLTA from Kevin
Waltzer, bringing to $500,000 the Company's total debt to Mr. Waltzer. The
terms on which the Company will repay Mr. Waltzer have not been determined.
SUBSEQUENT EVENT - ACQUISITION OF J&J MARKETING
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 ." The Company acquired the interest in J&J
Marketing in exchange for 100,000 shares of the Company's common stock.
F-19
Advanced Medical Diagnostics, LLC
A Development Stage Company
Financial Statements
December 31, 2003
Independent Auditors' Report
To the Members of
Advanced Medical Diagnostics, LLC
We have audited the accompanying balance sheet of Advanced Medical
Diagnostics, LLC as of December 31, 2003 and the related statements
of income and members' equity and cash flows for the period October
30, 2003 (date of inception) through December 31, 2003. 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 audits.
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 Advanced
Medical Diagnostics, LLC as of December 31, 2003, and results of
their operations and cash flows for the period October 30, 2003 (date
of inception) through December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
August 31, 2004
F-20
Advanced Medical Diagnostics, LLC
A Development Stage Company
Balance Sheet
December 31, 2003
Assets $ -
=========
Liabilities and Members' Equity (Deficit)
Short-term loan payable 5,280
---------
Total Current Liabilities 5,280
Commitments and contingencies -
Members' deficit accumulated during
the development stage (5,280)
---------
Total Liabilities and Members' Equity
(Deficit) $ -
=========
See notes to the financial statements
F-21
Advanced Medical Diagnostics, LLC
A Development Stage Company
Statement of Income and Members' Equity (Deficit)
October 30, 2003
(date of inception)
to December 31, 2003
--------------------
Sales $ -
Operating Expenses
General and administrative expenses 3,810
Research and development costs 3,665
-------
Total Operating Expenses 7,475
-------
Net Loss Before Benefit From Income Taxes $ (7,475)
Benefit From Income Taxes -
-------
Net Loss $ (7,475)
=======
Members' Equity (Deficit)
Beginning of Period -
Net Loss, Above (7,475)
Members' Contributions 2,195
-------
End of Period $ (5,280)
=======
See notes to the financial statements
F-22
Advanced Medical Diagnostics, LLC
A Development Stage Company
Statement of Cash Flows
October 30, 2003
(date of inception)
to December 31, 2003
--------------------
Cash Flows From Operating Activities
Net Loss $ (7,475)
------
Net Cash Used by Operating Activities (7,475)
------
Cash Flows From Financing Activities
Short-term loan payable 5,280
Member contributions 2,195
------
Net Cash Provided by Financing Activities 7,475
------
Net Increase (Decrease) in Cash -
Cash at Beginning of Period -
------
Cash at End of Period $ -
======
See notes to financial statements
F-23
Advanced Medical Diagnostics, LLC
A Development Stage Company
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Advanced Medical Diagnostics, LLC (the "Company") was formed on October 30,
2003, for the purpose of developing, manufacturing and marketing "Advanced
Medical Diagnostics HIV (1 & 2) Rapid Test", a HIV diagnostic kit. The Company
has operated as a development stage enterprise since its inception by devoting
substantially all of its efforts to research and development, developing
markets for its product and raising capital to support these efforts. The
Company shall be dissolved and its affairs wound up in accordance with the Act
and the Agreement on November 1, 2023 unless the term shall be extended by
amendment to the Agreement and the Articles.
Research and Development Costs
Research and development costs are charged to operations as incurred and
amounted to $3,665 for the period October 30, 2003 (date of inception) to
December 31, 2003.
Income Taxes
The Company is a limited liability company taxed as a partnership in which
all elements of income and deductions are included in the tax returns of the
members of the Company. Therefore, no income tax provision is recorded by the
Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SHORT-TERM LOAN PAYABLE
Short-term loan payable represents advances by Transportation Logistics
International, Inc. The advances are due on demand and bear no interest.
COMMITMENTS AND CONTINGENCIES
The Company entered into a compensation agreement with its President for
$75,000 per year commencing upon the Company receiving its first bona fide
order of a minimum of 25,000 HIV test kits. As of December 31, 2003, no bona
fide order was received.
On June 3, 2004, the Company entered into an agreement with (Sourcing
Specialists II LLC (SSII) an entity owned by the officers of the Company. The
agreement states that the principles of SSII will provide services to the
Company through December 31, 2006, in exchange for SSII receiving a royalty
equal to $0.235 per diagnostic kit sold by the Company, and a commission equal
to 12% of gross sales prices of any product sold, where the officer introduces
the purchase to the company.
F-24
Advanced Medical Diagnostics, LLC
A Development Stage Company
Notes to the Financial Statements
SUBSEQUENT EVENTS
Subsequent to December 31, 2003, the Company began leasing office space
from a related party on a month to month basis. The monthly rent is $1,912.
On June 1, 2004, the members of the Company sold all of their membership
interests to Transportation Logistics International, Inc., a publicly traded
corporation.
F-25
Advanced Medical Diagnostics, LLC
A Development Stage Company
Balance Sheet
March 31, 2003
(Unaudited)
Assets $ -
========
Liabilities and Members' Equity
Short-term loan payable 14,524
--------
Total Current Liabilities 14,524
--------
Members' Equity (Deficit) (14,524)
--------
Total Liabilities and Members' Equity $ -
========
See notes to financial statements
F-26
Advanced Medical Diagnostics, LLC
A Development Stage Company
Statement of Income and Members' Equity (Deficit)
Three Months Ended October 30, 2003
March 31, 2004 (date of inception)
(Unaudited) to March 31, 2004
(Unaudited)
------------------ ------------------
Sales $ - $ -
Operating Expenses
General and administrative expenses 16,479 20,289
Research and development costs - 3,665
-------- --------
Total Operating Expenses 16,479 23,954
-------- --------
Net Loss Before Benefit From Income
Taxes (16,479) (23,954)
Benefit From Income Taxes - -
-------- --------
Net Loss $ (16,479) $ (23,954)
======== ========
Members' Equity (Deficit)
Beginning of Period $ (5,280) $ -
Net Loss, Above (16,479) (23,954)
Members' Contributions 7,235 9,430
-------- --------
End of Period $ (14,524) $ (14,524)
======== ========
See notes to financial statements
F-27
Advanced Medical Diagnostics, LLC
A Development Stage Company
Statement of Income and Members' Equity
Three Months Ended October 30, 2003
March 31, 2004 (date of inception)
to March 31, 2004
------------------ ------------------
Cash Flows From Operating
Activities
Net Loss $ (16,479) $ (23,954)
-------- --------
Net Cash (Used) by Operating
Activities (16,479) (23,954)
-------- --------
Cash Flows From Financing Activities
Short-term loan payable 9,244 14,524
Member contributions 7,235 9,430
-------- --------
Net Cash Provided by Financing
Activities 16,479 23,954
-------- --------
Net Increase (Decrease) in Cash - -
Cash at Beginning of Period - -
-------- --------
Cash at End of Period $ - $ -
======== ========
See notes to financial statements
F-28
Advanced Medical Diagnostics, LLC
A Development Stage Company
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Advanced Medical Diagnostics, LLC (the "Company") was formed on October 30,
2003, for the purpose of developing, manufacturing and marketing "Advanced
Medical Diagnostics HIV (1 & 2) Rapid Test", a HIV diagnostic kit. The Company
has operated as a development stage enterprise since its inception by devoting
substantially all of its efforts to research and development, developing
markets for its product and raising capital to support these efforts.
Research and Development Costs
Research and development costs are charged to operations as incurred.
Income Taxes
The Company has elected to file as a Limited Liability Corporation for Federal
and State income tax purposes, thus income is taxed to the shareholders
personally.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SHORT-TERM LOAN PAYABLE
Short-term loan payable represents advances by Transportation Logistics
International, Inc. The advances are due on demand and bear no interest.
COMMITMENTS AND CONTINGENCIES
The Company entered into a compensation agreement with its President for
$75,000 per year commencing upon the Company receiving its first bona fide
order of a minimum of 25,000 HIV test kits. As of March 31, 2004, no bona
fide order was received.
On June 3, 2004, the Company entered into an agreement with (Sourcing
Specialists II LLC (SSII) an entity owned by the officers of the Company.
The agreement states that the principles of SSII will provide services to the
Company through December 31, 2006, in exchange for SSII receiving a royalty
equal to $0.235 per diagnostic kit sold by the Company, and a commission
equal to 12% of gross sales prices of any product sold, where the officer
introduces the purchase to the company.
In March 2004, the Company began leasing office space from a related party
on a month to month basis. The monthly rent is $1,912.
SUBSEQUENT EVENTS
On June 1, 2004, the members of the Company sold all of their membership
interests to Transportation Logistics International, Inc., a publicly traded
corporation.
F-29
INDEPENDENT ACCOUNTANT'S REPORT
To the Members
J & J Marketing, LLC
Garrison, New York
I have audited the accompanying combined balance sheets of J&J Marketing, LLC
as of June 30, 2004, December 31, 2003 & December 31, 2002 and the related
statements of operations, member's equity and retained earnings for the six
months and years then ended with generally accepted auditing standards issued
by the American Institute of Certified Public Accountants. All information
included in these financial statements is the representation of the management
of J & J Marketing, LLC. My responsibility is to express an opinion on
these financial statements based on my audit.
An audit includes assessing the accounting principles used and significant
estimates made by management, as well as evalutating the overall financial
statement presentation. I believe my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of J&J Marketing, LLC in
accordance with generally accepted accounting principles applies on a
consistent basis.
Thomas J. Kellermann
Westbury, New York
November 17, 2004
F-30
J & J MARKETING, LLC
BALANCE SHEET
AS AT JUNE 30, 2004, DECEMBER 31, 2003 & 2002
ASSETS 6/30/04 12/31/03 12/31/02
Current Assets ------- -------- --------
Cash $ 848 $ 1,366 $ 3,117
Accounts receivable, net 3,527 2,076 1,901
Inventories 8,583 6,382 1,753
------- ------- -------
Total Current Assets 12,958 9,824 6,771
TOTAL ASSETS $ 12,958 $ 9,824 $ 6,771
======= ======= =======
LIABILITIES, MEMBERS' AND
STOCKHOLDER'S EQUITY 6/30/04 12/31/03 12/31/02
------- -------- --------
Current Liabilities
Accounts payable and accrued
expenses $ 27,640 $ 16,175 $ 633
Members' Equity
Member's Equity (deficit) (14,683) (6,351) 6,138
------- ------- -------
Total Member's and Stockholder's
Equity (14,683) (6,351) 6,138
------- ------- -------
TOTAL LIABILITIES, MEMBER'S AND
STOCKHOLDER'S EQUITY $ 12,958 $ 9,824 $ 6,771
======= ======= =======
See accompanying Notes and Accountants' Report.
F-31
J & J MARKETING, LLC
COMBINED STATEMENT OF OPERATIONS, MEMBER'S EQUITY AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
AND FOR THE YEARS ENDED DECEMBER 31, 2003 & 2002
2004 2003 2002
(thru June 30)
-----------------------------------------
Sales $ 20,518 $ 45,966 $ 23,250
Cost of sales 9,443 9,515 7,760
-------- -------- --------
Gross profit 11,075 36,450 15,490
Operating expenses:
Selling 5,516 27,798 13,111
General and administrative 18,891 27,174 6,333
-------- -------- --------
Total Operating Expenses 24,407 54,971 19,444
-------- -------- --------
Net Operating income (13,332) (18,521) (3,954)
Member's Equity and Retained
Earnings, beginning of period (6,351) 6,138 -
Contributions from Members 5,000 6,032 10,092
-------- -------- --------
Member's Equity and Retained
Earnings, end of period $ (14,683) $ (6,351) $ 6,138
======== ======== ========
See Accompanying Notes and Accountants' Report.
F-32
J & J MARKETING, LLC
COMBINED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
AND FOR THE YEARS ENDED DECEMBER 31, 2003 & 2002
2004 2003 2002
(thru June 30)
-------------------------------------------
Net income $ (13,332) $ (18,521) $ (3,954)
Adjustments to reconcile
net income to net cash
used for operating activities:
Increase (decrease) in
accounts receivable 11,451 175 1,901
Increase (decrease) in
inventory 2,201 (11,139) 1,753
Increase in accounts
payable and accrued expenses 11,465 15,542 633
-------- -------- -------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 11,785 (13,944) 333
-------- -------- -------
CASH FLOWS (USED IN)
INVESTING ACTIVITIES - - -
-------- -------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES
Loans from (to) members (12,303) 12,193 2,784
-------- -------- -------
CASH FLOWS USED IN FINANCING
ACTIVITIES (12,303) 12,193 2,784
-------- -------- -------
INCREASE IN CASH (518) (1,751) 3,117
CASH - BEGINNING OF PERIOD 1,366 3,117 -
-------- -------- -------
CASH - END OF PERIOD $ 848 $ 1,366 $ 3,117
======== ======== =======
See accompanying Notes and Accountants' Report.
F-33
J & J MARKETING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
AND FOR THE YEARS ENDED DECEMBER 31, 2003 & 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant account policies of J&J Marketing, LLC and
Affiliates (The Company) is presented to assist in understanding the
Company's financial statements. The financial statements and notes are
representations of the Company's management who is responsible for
their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently applied
in the preparation of the financial statements.
Business Operations
J&J Marketing, LLC is a limited liability company organized on June 24, 2002
(the company.) From June 24, 2002 until May 2003, the company produced and
marketed the Jules & Jane skin care products under license from J Group
Holdings, Inc. Subsequent to May 2003, the Company developed and currently
produces and markets the Savage Beauty line of skin care products. Through a
network of independent sales representatives, the company has commercial
distribution of its products within the United States and abroad. Savage
Beauty is currently sold in more than 75 retail stores, including more than
20 Whole Foods Markets across the United States. Savage Beauty is designed
to take advantage of the skyrocketing interest in natural and organic
personal care products both within and outside the category's traditional
customer base, through a combination of strict adherence to the highest
organic and natural standards with upscale, sophisticated packaging.
Accounts Receivbles
Accounts receivable are considered by management to be fully collectible.
Accordingly, an allowance for doubtful accounts has not been provided.
Inventories
Inventories are valued at the lower of cost or market (first-in, first-out
method).
Advertising Costs
The Company's policy is to expense advertising costs as incurred. Advertising
expense for the six months ended June 30, 2004 and the years ended December
31, 2003 & 2002, was $805, $1,371, and $428, respectively.
F-34
J & J MARKETING, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
AND FOR THE YEARS ENDED DECEMBER 31, 2003 & 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company has elected to be taxed as a limited liability company, for
federal and New York State income tax purposes. In lieu of corporate income
taxes, the Company's taxable income is reported by the members on their
personal tax returns.
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 liabilites and disclosure of
contingent assets and liabilities, at the date of the financial statements
and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-35
Part II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Sections 7-109-102 and 7-109-107 of the Colorado Business
Corporation Act authorize a corporation to provide indemnification
to a director, officer, employee, fiduciary or agent of the corporation
against expenses reasonably incurred by him in connection with such
action, suit or proceeding, if such party acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful, except that with respect to any action which results in a
judgment against the person and in favor of the corporation or with
respect to an action in which it is determined that the person derived an
improper personal benefit, the corporation may not indemnify unless a
court determines that the person is fairly and reasonably entitled to the
indemnification. Section 7-109-103 of the Act further provides that
indemnification shall be provided if the party in question is successful on
the merits.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of Global Concepts pursuant to
the foregoing provisions, or otherwise, the small business issuer
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than payment by Global Concepts of expenses incurred or
paid by a Director, officer or controlling person of Global
Concepts in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling
person in connection with the securities being registered, Global
Concepts will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 25. Other Expenses of Issuance and Distributions
The following are the expenses that Global Concepts expects
to incur in connection with the registration and distribution of
the shares being registered. All of these expenses (other than
the filing fee) are estimated, and will not be certain until
after the registration statement is declared effective. Global
Concepts will pay all of these expenses; the selling shareholders
will pay none of them.
In May 2002 Global Concepts issued 10,000,000 shares of
common stock to Michael Margolies. The securities were issued in
consideration for services to be valued at the market price on
the date the shares were issued. The sale was exempt pursuant to
Section 4(2) of the Act since the sale was not made in a public
offering and was made to an individual who had access to detailed
information about Global Concepts and was acquiring the shares
for his own account. There were no underwriters.
In September 2002 Global Concepts issued 1,000,000 shares
of common stock to Michael Gluck. The securities were issued in
consideration for a loan of $125,000 made to Global Concepts.
The shares were valued at the market price on the date the shares
were issued. The sale was exempt pursuant to Section 4(2) of the
Act since the sale was not made in a public offering and was made
to an individual who had access to detailed information about
Global Concepts and was acquiring the shares for his own account.
There were no underwriters.
In September 2002 Global Concepts issued 250,000 shares of
common stock to Rick Kelly. The securities were issued in
consideration for the transfer of shares in Xcalibur Xpress, Inc.
The shares were valued at the market price on the date the shares
were issued. The sale was exempt pursuant to Section 4(2) of the
Act since the sale was not made in a public offering and was made
to an individual who had access to detailed information about
Global Concepts and was acquiring the shares for his own account.
There were no underwriters.
In December 2002 Global Concepts issued 80,000 shares of
common stock to Steven Frisone. The securities were issued in
consideration for services to be valued at the market price on
the date on which the shares were issued. The sale was exempt
pursuant to Section 4(2) of the Act since the sale was not made
in a public offering and was made to an individual who had access
to detailed information about Global Concepts and was acquiring
the shares for his own account. There were no underwriters.
In June 2004 Global Concepts issued a total of 100,000
shares of common stock to the owners of Advanced Medical
Diagnostics LLC. The securities were issued in consideration for
their transfer to Global Concepts of ownership of Advanced
Medical Diagnostics 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 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.
II
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.
Item 27. Exhibits and Financial Statement Schedules
Exhibits
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-a(1) Articles of Amendment of Articles of Incorporation -
filed as an exhibit to the Quarterly Report on Form 10-
QSB for the quarter ended September 30, 2004 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.
5 Opinion of Robert Brantl, Esq,
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
10-c Standby Equity Distribution Agreement with Cornell Capital
Partners dated November 16, 2004.
III
10-d Form of 5% Secured Convertible Debenture issued November
16, 2004.
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
23-a. Consent of Rosenberg Rich Baker Berman & Company, PA
23-b Consent of Thomas J. Kellerman, CPA
23-c Consent of
23-d Consent of Robert Brantl, Esq. is contained in his
opinion.
Item 28. Undertakings
See Item 24 for the undertaking regarding the indemnification of
officers, directors and controlling persons.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, post-effective amendments to this registration
statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was registered) and
any deviation from the low or high end of estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material information
on the plan of distribution.
IV
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time
to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
Global Concepts, Ltd. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and
authorized this registration statement to be signed on its behalf by the
undersigned in the Town of Garrison and the State of New York on
the 6th day of December, 2004.
GLOBAL CONCEPTS, LTD.
By:/s/Michael Margolies
------------------------------
Michael Margolies, Chairman
In accordance with to the requirements of the Securities Act
of 1933, this registration statement has been signed below by the following
persons in the capacities stated on December 6, 2004.
/s/ Michael Margolies
----------------------------
Michael Margolies, Director,
Chief Executive Officer,
Chief Financial Officer,
Chief Accounting Officer
/s/ Stanley Chason
----------------------------
Stanley Chason, Director
ROBERT BRANTL, ESQ.
322 Fourth Street
Brooklyn, NY 11215
718-768-6045
December 6, 2004
Global Concepts, Ltd.
14 Garrison Inn Lane
Garrison, NY 10524
Gentlemen:
I am submitting this letter to be filed as an exhibit to the Registration
Statement on Form SB-2 which Global Concepts, Ltd. proposes to file with the
Securities and Exchange Commission registering 239,792,663 shares of common
stock for resale by the selling shareholders.
I am of the opinion that all corporate proceedings have been taken so that
the shares, if and when sold by the selling shareholders, will be legally
issued, fully paid, and non-assessable.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission in connection with the Registration Statement referred to
above.
Yours,
/s/ Robert Brantl
-------------------------
Robert Brantl
STANDBY EQUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT dated as of the 16th day of November 2004 (the
"Agreement") between CORNELL CAPITAL PARTNERS, LP, a Delaware limited
partnership (the "Investor"), and GLOBAL CONCEPTS, LTD., a corporation
organized and existing under the laws of the State of Colorado (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Investor, from time to time as provided herein, and the Investor shall
purchase from the Company up to Five Million U.S. Dollars ($5,000,000) of
the Company's common stock, no par value (the "Common Stock"); and
WHEREAS, such investments will be made in reliance upon the
provisions of Regulation D ("Regulation D") of the Securities Act of 1933,
as amended, and the regulations promulgated thereunder (the "Securities
Act"), and or upon such other exemption from the registration requirements
of the Securities Act as may be available with respect to any or all of the
investments to be made hereunder.
WHEREAS, the Company has engaged Newbridge Securities
Corporation (the "Placement Agent"), to act as the Company's exclusive
placement agent in connection with the sale of the Company's Common Stock
to the Investor hereunder pursuant to the Placement Agent Agreement dated
the date hereof by and among the Company, the Placement Agent and the
Investor (the "Placement Agent Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
Certain Definitions
Section 1.1. "Advance" shall mean the portion of the Commitment
Amount requested by the Company in the Advance Notice.
Section 1.2. "Advance Date" shall mean the date the David
Gonzalez Attorney Trust Account is in receipt of the funds from the
Investor and David Gonzalez, Esq., is in possession of free trading shares
from the Company and therefore an Advance by the Investor to the Company
can be made and David Gonzalez, Esq. can release the free trading shares to
the Investor. The Advance Date shall be the first (1st) Trading Day after
expiration of the applicable Pricing Period for each Advance.
Section 1.3. "Advance Notice" shall mean a written notice to the
Investor setting forth the Advance amount that the Company requests from
the Investor and the Advance Date.
Section 1.4. "Advance Notice Date" shall mean each date the
Company delivers to the Investor an Advance Notice requiring the Investor
to advance funds to the Company, subject to the terms of this Agreement.
No Advance Notice Date shall be less than five (5) Trading Days after the
prior Advance Notice Date.
Section 1.5. "Bid Price" shall mean, on any date, the closing
bid price (as reported by Bloomberg L.P.) of the Common Stock on the
Principal Market or if the Common Stock is not traded on a Principal
Market, the highest reported bid price for the Common Stock, as furnished
by the National Association of Securities Dealers, Inc.
Section 1.6. "Closing" shall mean one of the closings of a
purchase and sale of Common Stock pursuant to Section 2.3.
Section 1.7. "Commitment Amount" shall mean the aggregate amount
of up to Five Million U.S. Dollars ($5,000,000) which the Investor has
agreed to provide to the Company in order to purchase the Company's Common
Stock pursuant to the terms and conditions of this Agreement.
Section 1.8. "Commitment Period" shall mean the
period commencing on the earlier to occur of (i) the Effective Date, or
(ii) such earlier date as the Company and the Investor may mutually agree
in writing, and expiring on the earliest to occur of (x) the date on which
the Investor shall have made payment of Advances pursuant to this Agreement
in the aggregate amount of Five Million U.S. Dollars ($5,000,000), (y) the
date this Agreement is terminated pursuant to Section 2.5, or (z) the date
occurring twenty-four (24) months after the Effective Date.
Section 1.9. "Common Stock" shall mean the Company's common
stock, no par value.
Section 1.10. "Condition Satisfaction Date" shall have the
meaning set forth in Section 7.2.
Section 1.11. "Damages" shall mean any loss, claim, damage,
liability, costs and expenses (including, without limitation, reasonable
attorney's fees and disbursements and costs and expenses of expert
witnesses and investigation).
Section 1.12. "Effective Date" shall mean the date on which the
SEC first declares effective a Registration Statement registering the
resale of the Registrable Securities as set forth in Section 7.2(a).
Section 1.13. "Escrow Agreement" shall mean the escrow agreement
among the Company, the Investor, and David Gonzalez, Esq., dated the date
hereof.
Section 1.14. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
Section 1.15. "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to enter into and perform any of
its obligations under this Agreement or the Registration Rights Agreement
in any material respect.
-2-
Section 1.16. "Market Price" shall mean the lowest VWAP of the
Common Stock during the Pricing Period.
Section 1.17. "Maximum Advance Amount" shall be Two Hundred Fifty
Thousand U.S. Dollars (US$250,000) per Advance Notice.
Section 1.18. "NASD" shall mean the National Association of
Securities Dealers, Inc.
Section 1.19. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.20. "Placement Agent" shall mean Newbridge Securities
Corporation, a registered broker-dealer.
Section 1.21. "Pricing Period" shall mean the five (5)
consecutive Trading Days after the Advance Notice Date.
Section 1.22. "Principal Market" shall mean the Nasdaq National
Market, the Nasdaq SmallCap Market, the American Stock Exchange, the OTC
Bulletin Board or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
Section 1.23. "Purchase Price" shall be set at ninety five
percent (95%) of the Market Price during the Pricing Period.
Section 1.24. "Registrable Securities" shall mean the shares of
Common Stock to be issued hereunder (i) in respect of which the
Registration Statement has not been declared effective by the SEC, (ii)
which have not been sold under circumstances meeting all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") or (iii) which have not been otherwise
transferred to a holder who may trade such shares without restriction under
the Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a restrictive
legend.
Section 1.25. "Registration Rights Agreement" shall mean the
Registration Rights Agreement dated the date hereof, regarding the filing
of the Registration Statement for the resale of the Registrable Securities,
entered into between the Company and the Investor.
Section 1.26. "Registration Statement" shall mean a registration
statement on Form S-1 or SB-2 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies and which
counsel for the Company shall deem appropriate, and which form shall be
available for the resale of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and the
Registration Rights Agreement, and in accordance with the intended method
of distribution of such securities), for the registration of the resale by
the Investor of the Registrable Securities under the Securities Act.
-3-
Section 1.27. "Regulation D" shall have the meaning set forth in
the recitals of this Agreement.
Section 1.28. "SEC" shall mean the Securities and Exchange
Commission.
Section 1.29. "Securities Act" shall have the meaning set forth
in the recitals of this Agreement.
Section 1.30. "SEC Documents" shall mean Annual Reports on Form
10-KSB, Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and
Proxy Statements of the Company as supplemented to the date hereof, filed
by the Company for a period of at least twelve (12) months immediately
preceding the date hereof or the Advance Date, as the case may be, until
such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.31. "Trading Day" shall mean any day during which the
New York Stock Exchange shall be open for business.
Section 1.32. "VWAP" shall mean the volume weighted average price
of the Company's Common Stock as quoted by Bloomberg, LP.
ARTICLE II.
Advances
Section 2.1. Investments.
(a) Advances. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof), on
any Advance Notice Date the Company may request an Advance by the Investor
by the delivery of an Advance Notice. The number of shares of Common Stock
that the Investor shall receive for each Advance shall be determined by
dividing the amount of the Advance by the Purchase Price. No fractional
shares shall be issued. Fractional shares shall be rounded to the next
higher whole number of shares. The aggregate maximum amount of all
Advances that the Investor shall be obligated to make under this Agreement
shall not exceed the Commitment Amount.
Section 2.2. Mechanics.
(a) Advance Notice. At any time during the Commitment
Period, the Company may deliver an Advance Notice to the Investor, subject
to the conditions set forth in Section 7.2; provided, however, the amount
for each Advance as designated by the Company in the applicable Advance
Notice, shall not be more than the Maximum Advance Amount. The aggregate
amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that the Investor may sell
shares of the Company's Common Stock corresponding with a particular
Advance Notice on the day the Advance Notice is received by the Investor.
There shall be a minimum of five (5) Trading Days between each Advance
Notice Date.
-4-
(b) Date of Delivery of Advance Notice. An Advance Notice
shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior to
12:00 noon Eastern Time, or (ii) the immediately succeeding Trading Day if
it is received by facsimile or otherwise after 12:00 noon Eastern Time on a
Trading Day or at any time on a day which is not a Trading Day. No Advance
Notice may be deemed delivered on a day that is not a Trading Day.
(c) Pre-Closing Share Credit. Within two (2) business days
after the Advance Notice Date, the Company shall credit shares of the
Company's Common Stock to the Investor's counsel's balance account with The
Depository Trust Company through its Deposit Withdrawal At Custodian
system, in an amount equal to the amount of the requested Advance divided
by the closing Bid Price of the Company's Common Stock as of the Advance
Notice Date multiplied by one point one (1.1). Any adjustments to the
number of shares to be delivered to the Investor at the Closing as a result
of fluctuations in the closing Bid Price of the Company's Common Stock
shall be made as of the date of the Closing. Any excess shares shall be
credited to the next Advance. In no event shall the number of shares
issuable to the Investor pursuant to an Advance cause the Investor to own
in excess of nine and 9/10 percent (9.9%) of the then outstanding Common
Stock of the Company.
(d) Hardship. In the event the Investor sells the Company's
Common Stock pursuant to subsection (c) above and the Company fails to
perform its obligations as mandated in Section 2.5 and 2.2 (c), and
specifically fails to provide the Investor with the shares of Common Stock
for the applicable Advance, the Company acknowledges that the Investor
shall suffer financial hardship and therefore shall be liable for any and
all losses, commissions, fees, or financial hardship caused to the
Investor.
Section 2.3. Closings. On each Advance Date, which shall be the
first (1st) Trading Day after expiration of the applicable Pricing Period
for each Advance, (i) the Company shall deliver to the Investor's Counsel,
as defined pursuant to the Escrow Agreement, shares of the Company's Common
Stock, representing the amount of the Advance by the Investor pursuant to
Section 2.1 herein, registered in the name of the Investor which shall be
delivered to the Investor, or otherwise in accordance with the Escrow
Agreement and (ii) the Investor shall deliver to David Gonzalez, Esq. (the
"Escrow Agent") the amount of the Advance specified in the Advance Notice
by wire transfer of immediately available funds which shall be delivered to
the Company, or otherwise in accordance with the Escrow Agreement. In
addition, on or prior to the Advance Date, each of the Company and the
Investor shall deliver to the other through the Investor's Counsel, all
documents, instruments and writings required to be delivered by either of
them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. Payment of funds to the Company and
delivery of the Company's Common Stock to the Investor shall occur in
accordance with the conditions set forth above and those contained in the
Escrow Agreement; provided, however, that to the extent the Company has not
paid the fees, expenses, and disbursements of the Investor, the Investor's
counsel in accordance with Section 12.4, the amount of such fees, expenses,
and disbursements may be deducted by the Investor (and shall be paid to the
relevant party) from the amount of the Advance with no reduction in the
amount of shares of the Company's Common Stock to be delivered on such
Advance Date.
-5-
Section 2.4. Termination of Investment. The obligation of the
Investor to make an Advance to the Company pursuant to this Agreement shall
terminate permanently (including with respect to an Advance Date that has
not yet occurred) in the event that (i) there shall occur any stop order or
suspension of the effectiveness of the Registration Statement for an
aggregate of fifty (50) Trading Days, other than due to the acts of the
Investor, during the Commitment Period, and (ii) the Company shall at any
time fail materially to comply with the requirements of Article VI and such
failure is not cured within thirty (30) days after receipt of written
notice from the Investor, provided, however, that this termination
provision shall not apply to any period commencing upon the filing of a
post-effective amendment to such Registration Statement and ending upon the
date on which such post effective amendment is declared effective by the SEC.
Section 2.5. Agreement to Advance Funds.
(a) The Investor agrees to advance the amount specified in
the Advance Notice to the Company after the completion of each of the
following conditions and the other conditions set forth in this Agreement:
(i) the execution and delivery by the Company, and the
Investor, of this Agreement and the Exhibits hereto;
(ii) Investor's Counsel shall have received the shares
of Common Stock applicable to the Advance in accordance with Section 2.2(c)
hereof;
(iii) the Company's Registration Statement with respect
to the resale of the Registrable Securities in accordance with the terms of
the Registration Rights Agreement shall have been declared effective by the
SEC;
(iv) the Company shall have obtained all material
permits and qualifications required by any applicable state for the offer
and sale of the Registrable Securities, or shall have the availability of
exemptions therefrom. The sale and issuance of the Registrable Securities
shall be legally permitted by all laws and regulations to which the Company
is subject;
(v) the Company shall have filed with the Commission
in a timely manner all reports, notices and other documents required of a
"reporting company" under the Exchange Act and applicable Commission
regulations;
(vi) the fees as set forth in Section 12.4 below shall
have been paid or can be withheld as provided in Section 2.3; and
(vii) the conditions set forth in Section 7.2 shall have
been satisfied.
(viii) the Company shall have provided to the
Investor an acknowledgement, from Rosenberg Rich Baker Berman & Co. as to
its ability to provide all consents required in order to file a
registration statement in connection with this transaction;
(ix) The Company's transfer agent shall be DWAC
eligible.
-6-
Section 2.6. Lock Up Period.
(i) During the Commitment Period, the Company shall not
issue or sell (i) any Common Stock or Preferred Stock without consideration
or for a consideration per share less than the Bid Price on the date of
issuance or (ii) issue or sell any warrant, option, right, contract, call,
or other security or instrument granting the holder thereof the right to
acquire Common Stock without consideration or for a consideration per share
less than the Bid Price on the date of issuance.
(ii) On the date hereof, the Company shall obtain from
each officer and director a lock-up agreement, as defined below, in the
form annexed hereto as Schedule 2.6 agreeing to only sell in compliance
with the volume limitation of Rule 144.
ARTICLE III.
Representations and Warranties of Investor
Investor hereby represents and warrants to, and agrees with, the
Company that the following are true and as of the date hereof and as of
each Advance Date:
Section 3.1. Organization and Authorization. The Investor is
duly incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite power and authority
to purchase and hold the securities issuable hereunder. The decision to
invest and the execution and delivery of this Agreement by such Investor,
the performance by such Investor of its obligations hereunder and the
consummation by such Investor of the transactions contemplated hereby have
been duly authorized and requires no other proceedings on the part of the
Investor. The undersigned has the right, power and authority to execute
and deliver this Agreement and all other instruments (including, without
limitations, the Registration Rights Agreement), on behalf of the Investor.
This Agreement has been duly executed and delivered by the Investor and,
assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with its terms.
Section 3.2. Evaluation of Risks. The Investor has such
knowledge and experience in financial tax and business matters as to be
capable of evaluating the merits and risks of, and bearing the economic
risks entailed by, an investment in the Company and of protecting its
interests in connection with this transaction. It recognizes that its
investment in the Company involves a high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor
acknowledges that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal
counsel and investment and tax advisors. The Investor is relying solely on
such counsel and advisors and not on any statements or representations of
the Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any jurisdiction.
-7-
Section 3.4. Investment Purpose. The securities are being
purchased by the Investor for its own account, for investment and without
any view to the distribution, assignment or resale to others or
fractionalization in whole or in part. The Investor agrees not to assign
or in any way transfer the Investor's rights to the securities or any
interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable
Federal and state securities laws. No other person has or will have a
direct or indirect beneficial interest in the securities. The Investor
agrees not to sell, hypothecate or otherwise transfer the Investor's
securities unless the securities are registered under Federal and
applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such laws is available.
Section 3.5. Accredited Investor. The Investor is an
"Accredited Investor" as that term is defined in Rule 501(a)(3) of
Regulation D of the Securities Act.
Section 3.6. Information. The Investor and its advisors (and
its counsel), if any, have been furnished with all materials relating to
the business, finances and operations of the Company and information it
deemed material to making an informed investment decision. The Investor
and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor
any other due diligence investigations conducted by such Investor or its
advisors, if any, or its representatives shall modify, amend or affect the
Investor's right to rely on the Company's representations and warranties
contained in this Agreement. The Investor understands that its investment
involves a high degree of risk. The Investor is in a position regarding
the Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Investor to obtain information
from the Company in order to evaluate the merits and risks of this
investment. The Investor has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to this transaction.
Section 3.7. Receipt of Documents. The Investor and its counsel
have received and read in their entirety: (i) this Agreement and the
Exhibits annexed hereto; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the year
ended December 31, 2003 and Form 10-QSB for the period ended September 30,
2004; and (iv) answers to all questions the Investor submitted to the
Company regarding an investment in the Company; and the Investor has relied
on the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
Section 3.8. Registration Rights Agreement and Escrow Agreement.
The parties have entered into the Registration Rights Agreement and the
Escrow Agreement, each dated the date hereof.
Section 3.9. No General Solicitation. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of the shares of Common Stock offered hereby.
-8-
Section 3.10. Not an Affiliate. The Investor is not an officer,
director or a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with the Company or any "Affiliate" of the Company (as that term is defined
in Rule 405 of the Securities Act). Neither the Investor nor its Affiliates
has an open short position in the Common Stock of the Company, and the
Investor agrees that it will not, and that it will cause its Affiliates not
to, engage in any short sales of or hedging transactions with respect to
the Common Stock, provided that the Company acknowledges and agrees that
upon receipt of an Advance Notice the Investor will sell the Shares to be
issued to the Investor pursuant to the Advance Notice, even if the Shares
have not been delivered to the Investor.
Section 3.11. Trading Activities. The Investor's trading
activities with respect to the Company's Common Stock shall be in
compliance with all applicable federal and state securities laws, rules and
regulations and the rules and regulations of the Principal Market on which
the Company's Common Stock is listed or traded. Neither the Investor nor
its affiliates has an open short position in the Common Stock of the
Company and, except as set forth below, the Investor shall not and will
cause its affiliates not to engage in any short sale as defined in any
applicable SEC or National Association of Securities Dealers rules on any
hedging transactions with respect to the Common Stock. Without limiting the
foregoing, the Investor agrees not to engage in any naked short
transactions in excess of the amount of shares owned (or an offsetting long
position) during the Commitment Period. The Investor shall be entitled to
sell Common Stock during the applicable Pricing Period.
ARTICLE IV.
Representations and Warranties of the Company
Except as stated below, on the disclosure schedules attached hereto
or in the SEC Documents (as defined herein), the Company hereby represents
and warrants to, and covenants with, the Investor that the following are
true and correct as of the date hereof:
Section 4.1. Organization and Qualification. The Company is
duly incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite power and authority
corporate power to own its properties and to carry on its business as now
being conducted. Each of the Company and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole.
Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Placement Agent Agreement and any
related agreements, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Placement Agent Agreement and any
related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by
the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders,
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(iii) this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and assuming the execution and delivery thereof and acceptance by
the Investor and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies.
Section 4.3. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 500,000,000 shares of
Common Stock, no par value and 5,000,000 shares of Preferred Stock of which
53,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock
were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as disclosed
in the SEC Documents, no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in the SEC Documents, as of
the date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its subsidiaries, (ii)
there are no outstanding debt securities (iii) there are no outstanding
registration statements other than on Form S-8 and (iv) there are no
agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities
under the Securities Act (except pursuant to the Registration Rights
Agreement). There are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by this Agreement or
any related agreement or the consummation of the transactions described
herein or therein. The Company has furnished to the Investor true and
correct copies of the Company's Certificate of Incorporation, as amended
and as in effect on the date hereof (the "Certificate of Incorporation"),
and the Company's By-laws, as in effect on the date hereof (the "By-laws"),
and the terms of all securities convertible into or exercisable for Common
Stock and the material rights of the holders thereof in respect thereto.
Section 4.4. No Conflict. The execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby will not (i) result in a
violation of the Certificate of Incorporation, any certificate of
designations of any outstanding series of preferred stock of the Company or
By-laws or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any material property or
asset of the Company or any of its subsidiaries is bound or affected and
which would cause a Material Adverse Effect. Except as disclosed in the
SEC Documents, neither the Company nor its subsidiaries is in violation of
any term of or in default under its Articles of Incorporation or By-laws or
their organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to
the Company or its subsidiaries. The business of the Company and its
subsidiaries is not being conducted in violation of any material law,
ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and
any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under or contemplated by this Agreement
or the Registration Rights Agreement in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof. The Company
and its subsidiaries are unaware of any fact or circumstance which might
give rise to any of the foregoing.
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Section 4.5. SEC Documents; Financial Statements. Since
November 15, 2000, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
under of the Exchange Act. The Company has delivered to the Investor or
its representatives, or made available through the SEC's website at
http://www.sec.gov, true and complete copies of the SEC Documents. As of
their respective dates, the financial statements of the Company disclosed
in the SEC Documents (the "Financial Statements") complied as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the
financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments).
No other information provided by or on behalf of the Company to the
Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Section 4.6. 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in
light of the circumstances under which they were made, not misleading.
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Section 4.7. No Default. Except as disclosed in the SEC
Documents, the Company is not in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust or other material instrument or
agreement to which it is a party or by which it is or its property is bound
and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any
of the exhibits or attachments hereto will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a
default or result in the creation or imposition of any lien or charge on
any assets or properties of the Company under its Certificate of
Incorporation, By-Laws, any material indenture, mortgage, deed of trust or
other material agreement applicable to the Company or instrument to which
the Company is a party or by which it is bound, or any statute, or any
decree, judgment, order, rules or regulation of any court or governmental
agency or body having jurisdiction over the Company or its properties, in
each case which default, lien or charge is likely to cause a Material
Adverse Effect on the Company's business or financial condition.
Section 4.8. Absence of Events of Default. Except for matters
described in the SEC Documents and/or this Agreement, no Event of Default,
as defined in the respective agreement to which the Company is a party, and
no event which, with the giving of notice or the passage of time or both,
would become an Event of Default (as so defined), has occurred and is
continuing, which would have a Material Adverse Effect on the Company's
business, properties, prospects, financial condition or results of
operations.
Section 4.9. Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their respective businesses as now conducted. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company
or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secret or other similar rights of others,
and, to the knowledge of the Company, there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade
secret or other infringement; and the Company and its subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing.
Section 4.10. Employee Relations. Neither the Company nor any of
its subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such dispute threatened.
None of the Company's or its subsidiaries' employees is a member of a union
and the Company and its subsidiaries believe that their relations with
their employees are good.
Section 4.11. Environmental Laws. The Company and its
subsidiaries are (i) in compliance with any and all applicable material
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
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Section 4.12. Title. Except as set forth in the SEC Documents,
the Company has good and marketable title to its properties and material
assets owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not
material to the business of the Company. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries.
Section 4.13. Insurance. The Company and each of its
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the
Company believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for
and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
Section 4.14. Regulatory Permits. The Company and its
subsidiaries possess all material certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the Company
nor any such subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or
permit.
Section 4.15. Internal Accounting Controls. The Company and each
of its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
Section 4.16. No Material Adverse Breaches, etc. Except as set
forth in the SEC Documents, neither the Company nor any of its subsidiaries
is subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material
Adverse Effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. Except as set forth in the SEC Documents, neither the
Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or
is expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
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Section 4.17. Absence of Litigation. Except as set forth in the
SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company's subsidiaries, wherein an
unfavorable decision, ruling or finding would (i) have a Material Adverse
Effect on the transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the Company
to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of the Company and
its subsidiaries taken as a whole.
Section 4.18. Subsidiaries. Except as disclosed in the SEC
Documents, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association
or other business entity.
Section 4.19. Tax Status. Except as disclosed in the SEC
Documents, the Company and each of its subsidiaries has made or filed all
federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and
(unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) has paid all taxes and
other governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
Section 4.20. Certain Transactions. Except as set forth in the
SEC Documents none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner.
Section 4.21. Fees and Rights of First Refusal. The Company is
not obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers,
agents or other third parties.
Section 4.22. Use of Proceeds. The Company represents that the
net proceeds from this offering will be used for general corporate
purposes. However, in no event shall the net proceeds from this offering
be used by the Company for the payment (or loaned to any such person for
the payment) of any judgment, or other liability, incurred by any executive
officer, officer, director or employee of the Company, except for any
liability owed to such person for services rendered, or if any judgment or
other liability is incurred by such person originating from services
rendered to the Company, or the Company has indemnified such person from
liability.
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Section 4.23. Further Representation and Warranties of the
Company. For so long as any securities issuable hereunder held by the
Investor remain outstanding, the Company acknowledges, represents, warrants
and agrees that it will maintain the listing of its Common Stock on the
Principal Market.
Section 4.24. Opinion of Counsel. Investor shall receive an
opinion letter from Robert Brantl, Esq., counsel to the Company, on the
date hereof.
Section 4.25. Opinion of Counsel. The Company will obtain for
the Investor, at the Company's expense, any and all opinions of counsel
which may be reasonably required in order to sell the securities issuable
hereunder without restriction.
Section 4.26. Dilution. The Company is aware and acknowledges
that issuance of shares of the Company's Common Stock could cause dilution
to existing shareholders and could significantly increase the outstanding
number of shares of Common Stock.
ARTICLE V.
Indemnification
The Investor and the Company represent to the other the following
with respect to itself:
Section 5.1. Indemnification.
(a) In consideration of the Investor's execution and delivery
of this Agreement, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect,
indemnify and hold harmless the Investor, and all of its officers,
directors, partners, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Investor Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Investor Indemnitee is a party to the
action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Investor Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this
Agreement or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of
any covenant, agreement or obligation of the Company contained in this
Agreement or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Investor Indemnitee not
arising out of any action or inaction of an Investor Indemnitee, and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or
agreement executed pursuant hereto by any of the Investor Indemnitees. To
the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
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(b) In consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Investor's other
obligations under this Agreement, the Investor shall defend, protect,
indemnify and hold harmless the Company and all of its officers, directors,
shareholders, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Company Indemnitees") from and against any
and all Indemnified Liabilities incurred by the Company Indemnitees or any
of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement, the Registration Rights Agreement, or any
instrument or document contemplated hereby or thereby executed by the
Investor, (b) any breach of any covenant, agreement or obligation of the
Investor(s) contained in this Agreement, the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or
thereby executed by the Investor, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on
misrepresentations or due to a breach by the Investor and arising out of
or resulting from the execution, delivery, performance or enforcement of
this Agreement or any other instrument, document or agreement executed
pursuant hereto by any of the Company Indemnitees. To the extent that the
foregoing undertaking by the Investor may be unenforceable for any reason,
the Investor shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible
under applicable law.
(c) The obligations of the parties to indemnify or make
contribution under this Section 5.1 shall survive termination.
ARTICLE VI.
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof.
Section 6.2. Listing of Common Stock. The Company shall
maintain the Common Stock's authorization for quotation on the National
Association of Securities Dealers Inc.'s Over the Counter Bulletin Board.
Section 6.3. Exchange Act Registration. The Company will cause
its Common Stock to continue to be registered under Section 12(g) of the
Exchange Act, will file in a timely manner all reports and other documents
required of it as a reporting company under the Exchange Act and will not
take any action or file any document (whether or not permitted by Exchange
Act or the rules thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under said
Exchange Act.
Section 6.4. Transfer Agent Instructions. Not later than
two (2) business days after each Advance Notice Date and prior to each
Closing and the effectiveness of the Registration Statement and resale of
the Common Stock by the Investor, the Company will deliver instructions to
its transfer agent to issue shares of Common Stock free of restrictive
legends.
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Section 6.5. Corporate Existence. The Company will take all
steps necessary to preserve and continue the corporate existence of the
Company.
Section 6.6. Notice of Certain Events Affecting Registration;
Suspension of Right to Make an Advance. The Company will immediately
notify the Investor upon its becoming aware of the occurrence of any of the
following events in respect of a registration statement or related
prospectus relating to an offering of Registrable Securities: (i) receipt
of any request for additional information by the SEC or any other Federal
or state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
Federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in
the Registration Statement or related prospectus of any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and that in the case of the related prospectus, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (v) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be
appropriate; and the Company will promptly make available to the Investor
any such supplement or amendment to the related prospectus. The Company
shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
Section 6.7. Expectations Regarding Advance Notices. Within ten
(10) days after the commencement of each calendar quarter occurring
subsequent to the commencement of the Commitment Period, the Company must
notify the Investor, in writing, as to its reasonable expectations as to
the dollar amount it intends to raise during such calendar quarter, if any,
through the issuance of Advance Notices. Such notification shall
constitute only the Company's good faith estimate and shall in no way
obligate the Company to raise such amount, or any amount, or otherwise
limit its ability to deliver Advance Notices. The failure by the Company
to comply with this provision can be cured by the Company's notifying the
Investor, in writing, at any time as to its reasonable expectations with
respect to the current calendar quarter.
Section 6.8. Restriction on Sale of Capital Stock. During the
Commitment Period, the Company shall not issue or sell (i) any Common Stock
or Preferred Stock without consideration or for a consideration per share
less than the bid price of the Common Stock determined immediately prior to
its issuance, (ii) issue or sell any Preferred Stock warrant, option,
right, contract, call, or other security or instrument granting the holder
thereof the right to acquire Common Stock without consideration or for a
consideration per share less than such Common Stock's Bid Price determined
immediately prior to its issuance, or (iii) file any registration statement
on Form S-8.
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Section 6.9. Consolidation; Merger. The Company shall not, at
any time after the date hereof, effect any merger or consolidation of the
Company with or into, or a transfer of all or substantially all the assets
of the Company to another entity (a "Consolidation Event") unless the
resulting successor or acquiring entity (if not the Company) assumes by
written instrument the obligation to deliver to the Investor such shares of
stock and/or securities as the Investor is entitled to receive pursuant to
this Agreement.
Section 6.10. Issuance of the Company's Common Stock. The sale
of the shares of Common Stock shall be made in accordance with the
provisions and requirements of Regulation D and any applicable state
securities law.
ARTICLE VII.
Conditions for Advance and Conditions to Closing
Section 7.1. Conditions Precedent to the Obligations of the
Company. The obligation hereunder of the Company to issue and sell the
shares of Common Stock to the Investor incident to each Closing is subject
to the satisfaction, or waiver by the Company, at or before each such
Closing, of each of the conditions set forth below.
(a) Accuracy of the Investor's Representations and
Warranties. The representations and warranties of the Investor shall be
true and correct in all material respects.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement and the Registration
Rights Agreement to be performed, satisfied or complied with by the
Investor at or prior to such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to
Deliver an Advance Notice and the Obligation of the Investor to Purchase
Shares of Common Stock. The right of the Company to deliver an Advance
Notice and the obligation of the Investor hereunder to acquire and pay for
shares of the Company's Common Stock incident to a Closing is subject to
the fulfillment by the Company, on (i) the date of delivery of such Advance
Notice and (ii) the applicable Advance Date (each a "Condition Satisfaction
Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. The
Company shall have filed with the SEC a Registration Statement with respect
to the resale of the Registrable Securities in accordance with the terms of
the Registration Rights Agreement. As set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become
effective and shall remain effective on each Condition Satisfaction Date
and (i) neither the Company nor the Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless
the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or related prospectus shall
exist. The Registration Statement must have been declared effective by the
SEC prior to the first Advance Notice Date.
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(b) Authority. The Company shall have obtained all permits
and qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of
Common Stock, or shall have the availability of exemptions therefrom. The
sale and issuance of the shares of Common Stock shall be legally permitted
by all laws and regulations to which the Company is subject.
(c) Fundamental Changes. There shall not exist any
fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post-effective
amendment to the Registration Statement.
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement (including,
without limitation, the conditions specified in Section 2.5 hereof) and the
Registration Rights Agreement to be performed, satisfied or complied with
by the Company at or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or adversely
affecting any of the transactions contemplated by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock.
The trading of the Common Stock is not suspended by the SEC or the
Principal Market (if the Common Stock is traded on a Principal Market).
The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of
the Principal Market (if the Common Stock is traded on a Principal Market).
The Company shall not have received any notice threatening the continued
listing of the Common Stock on the Principal Market (if the Common Stock is
traded on a Principal Market).
(g) Maximum Advance Amount. The amount of an Advance
requested by the Company shall not exceed the Maximum Advance Amount. In
addition, in no event shall the number of shares issuable to the Investor
pursuant to an Advance cause the Investor to own in excess of nine and 9/10
percent (9.9%) of the then outstanding Common Stock of the Company.
(h) No Knowledge. The Company has no knowledge of any event
which would be more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective.
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(i) Other. On each Condition Satisfaction Date, the Investor
shall have received the certificate executed by an officer of the Company
in the form of Exhibit A attached hereto.
ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1. Due Diligence Review. Prior to the filing of the
Registration Statement the Company shall make available for inspection and
review by the Investor, its advisors and representatives, and any
underwriter participating in any disposition of the Registrable Securities
on behalf of the Investor pursuant to the Registration Statement, any such
registration statement or amendment or supplement thereto or any blue sky,
NASD or other filing, all financial and other records, all SEC Documents
and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to
supply all such information reasonably requested by the Investor or any
such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with
respect to the Company and the accuracy of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to
the Investor, its advisors, or its representatives, unless prior to
disclosure of such information the Company identifies such information as
being non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to
disclosing any non-public information hereunder, require the Investor's
advisors and representatives to enter into a confidentiality agreement in
form reasonably satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose non-
public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information
to any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives
of the Investor and, if any, underwriters, of any event or the existence of
any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or
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to omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made,
not misleading. Nothing contained in this Section 8.2 shall be construed
to mean that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information)
may not obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of
their opinion that based on such due diligence by such persons or entities,
that the Registration Statement contains an untrue statement of material
fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading.
ARTICLE IX.
Choice of Law/Jurisdiction
Section 9.1. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New Jersey
without regard to the principles of conflict of laws. The parties further
agree that any action between them shall be heard in Hudson County, New
Jersey, and expressly consent to the jurisdiction and venue of the Superior
Court of New Jersey, sitting in Hudson County, New Jersey and the United
States District Court of New Jersey, sitting in Newark, New Jersey, for the
adjudication of any civil action asserted pursuant to this paragraph.
ARTICLE X.
Assignment; Termination
Section 10.1. Assignment. Neither this Agreement nor any rights
of the Company hereunder may be assigned to any other Person.
Section 10.2. Termination. The obligations of the Investor to
make Advances under Article II hereof shall terminate twenty-four (24)
months after the Effective Date.
ARTICLE XI.
Notices
Section 11.1. Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile, provided a copy is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
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If to the Company, to:
Global Concepts, Ltd.
14 Garrison Inn Lane
Garrison, NY 10524
Attention: Michael Margolies
Telephone: (845) 424-4100
Facsimile: (845) 424-4003
With a copy to:
Robert Brantl, Esq.
322 4th Street
Brooklyn, NY 11215
Telephone: (718) 768-6045
Facsimile: (718) 965-4042
If to the Investor(s):
Cornell Capital Partners, LP
101 Hudson Street -Suite 3700
Jersey City, NJ 07302
David Gonzalez, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
ARTICLE XII.
Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in
two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. In the event
any signature page is delivered by facsimile transmission, the party using
such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five
(5) days of the execution and delivery hereof, though failure to deliver
such copies shall not affect the validity of this Agreement.
Section 12.2. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Investor,
the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor the
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be
charged with enforcement.
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Section 12.3. Reporting Entity for the Common Stock. The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the
purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company shall
be required to employ any other reporting entity.
Section 12.4. Fees and Expenses. The Company hereby agrees to
pay the following fees:
(a) Structuring Fees. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby, except that the
Company will pay a structuring fee of Ten Thousand Dollars ($10,000)
to Yorkville Advisors Management, LLC, which shall be paid directly
from the gross proceeds of the First Closing of the Convertible
Debenture transaction pursuant to the Securities Purchase Agreement
dated the date hereof. Subsequently on each Advance Date, the
Company will pay Yorkville Advisors Management, LLC a structuring fee
of Five Hundred Dollars ($500) directly out the proceeds of any
Advances hereunder.
(b) Commitment Fees.
(i) On each Advance Date the Company shall pay to the
Investor, directly from the gross proceeds held in escrow, an amount equal
to five percent (5%) of the amount of each Advance. The Company hereby
agrees that if such payment, as is described above, is not made by the
Company on the Advance Date, such payment will be made at the direction of
the Investor as outlined and mandated by Section 2.3 of this Agreement.
(ii) Upon the execution of this Agreement the Company
shall issue to the Investor shares of the Company's Common Stock in an
amount equal to One Hundred Forty Thousand Dollars ($140,000) divided by
the closing bid price of the Company's Common Stock, as quoted by
Bloomberg, LP, on the date hereof (the "Investor's Shares").
(iii) Fully Earned. The Investor's Shares shall be
deemed fully earned as of the date hereof.
(iv) Registration Rights. The Investor's Shares will
have "piggy-back" registration rights.
-23-
Section 12.5. Brokerage. Each of the parties hereto represents
that it has had no dealings in connection with this transaction with any
finder or broker who will demand payment of any fee or commission from the
other party. The Company on the one hand, and the Investor, on the other
hand, agree to indemnify the other against and hold the other harmless from
any and all liabilities to any person claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on
behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby.
Section 12.6. Confidentiality. If for any reason the
transactions contemplated by this Agreement are not consummated, each of
the parties hereto shall keep confidential any information obtained from
any other party (except information publicly available or in such party's
domain prior to the date hereof, and except as required by court order) and
shall promptly return to the other parties all schedules, documents,
instruments, work papers or other written information without retaining
copies thereof, previously furnished by it as a result of this Agreement or
in connection herein.
IN WITNESS WHEREOF, the parties hereto have caused this Standby
Equity Distribution Agreement to be executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
COMPANY:
GLOBAL CONCEPTS, LTD.
By: /s/ Michael Margolies
---------------------------
Name: Michael Margolies
Title: Chairman & CEO
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ Mark Angelo
--------------------------
Name: Mark Angelo
Title: Portfolio Manager
-24-
EXHIBIT A
ADVANCE NOTICE/COMPLIANCE CERTIFICATE
GLOBAL CONCEPTS, LTD.
The undersigned, Michael Margolies hereby certifies, with respect to
the sale of shares of Common Stock of GLOBAL CONCEPTS, LTD. (the "Company"),
issuable in connection with this Advance Notice and Compliance Certificate
dated ___________________ (the "Notice"), delivered pursuant to the Standby
Equity Distribution Agreement (the "Agreement"), as follows:
1. The undersigned is the duly elected Chairman and CEO of the
Company.
2. There are no fundamental changes to the information set forth in
the Registration Statement which would require the Company to file a post
effective amendment to the Registration Statement.
3. The Company has performed in all material respects all covenants
and agreements to be performed by the Company on or prior to the Advance Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.
4. The undersigned hereby represents, warrants and covenants that it
has made all filings ("SEC Filings") required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings
required under the Securities Exchange Act of 1934, which include Forms 10-Q,
10-K, 8-K, etc. All SEC Filings and other public disclosures made by the
Company, including, without limitation, all press releases, analysts meetings
and calls, etc. (collectively, the "Public Disclosures"), have been reviewed
and approved for release by the Company's attorneys and, if containing
financial information, the Company's independent certified public
accountants. None of the Company's Public Disclosures contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
5. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
GLOBAL CONCEPTS, LTD.
By: ------------------------
Name: Michael Margolies
Title: Chairman & CEO
SCHEDULE 2.6
GLOBAL CONCEPTS, LTD.
The undersigned hereby agrees that for a period commencing on the date
hereof and expiring on the termination of the Agreement dated November 16,
2004 between Global Concepts, Ltd., (the "Company"), and Cornell Capital
Partners, LP, (the "Investor") (the "Lock-up Period"), he, she or it will
not, directly or indirectly, without the prior written consent of the
Investor, issue, offer, agree or offer to sell, sell, grant an option for the
purchase or sale of, transfer, pledge, assign, hypothecate, distribute or
otherwise encumber or dispose of except pursuant to Rule 144 of the General
Rules and Regulations under the Securities Act of 1933, any securities of the
Company, including common stock or options, rights, warrants or other
securities underlying, convertible into, exchangeable or exercisable for or
evidencing any right to purchase or subscribe for any common stock (whether
or not beneficially owned by the undersigned), or any beneficial interest
therein (collectively, the "Securities").
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-transfer
orders with the transfer agent of the Company's securities with respect to
any of the Securities registered in the name of the undersigned or
beneficially owned by the undersigned, and the undersigned hereby confirms
the undersigned's investment in the Company.
Dated: _______________, 2004
Signature
Address:
City, State, Zip Code:
Print Social Security Number
or Taxpayer I.D. Number
THIS SECURED DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE
(COLLECTIVELY, THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE
OFFERED OR SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT
TO REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
SECURED DEBENTURE
GLOBAL CONCEPTS, LTD.
5% Secured Convertible Debenture
November 16, 2006
No. CCP-1 US $200,000.00
This Secured Debenture (the "Debenture") is issued on November ___, 2004
(the "Closing Date") by Global Concepts, Ltd., a Colorado corporation (the
"Company"), to CORNELL CAPITAL PARTNERS, LP (together with its permitted
successors and assigns, the "Holder") pursuant to exemptions from registration
under the Securities Act of 1933, as amended.
ARTICLE I.
Section 1.01 Principal and Interest. For value received, the
Company hereby promises to pay to the order of the Holder on November 16,
2006 in lawful money of the United States of America and in immediately
available funds the principal sum of Two Hundred Thousand U.S. Dollars
(US$200,000), together with interest on the unpaid principal of this
Debenture at the rate of five percent (5%) per year (computed on the basis of
a 365-day year and the actual days elapsed) from the date of this Debenture
until paid. At the Company's option, the entire principal amount and all
accrued interest shall be either (a) paid to the Holder on the second (2nd)
year anniversary from the date hereof or (b) converted in accordance with
Section 1.02 herein provided, however, that in no event shall the Holder be
entitled to convert this Debenture for a number of shares of Common Stock in
excess of that number of shares of Common Stock which, upon giving effect to
such conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the Holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such conversion.
Section 1.02 Optional Conversion. The Holder is entitled, at its
option, to convert, and sell on the same day, at any time and from time to
time, until payment in full of this Debenture, all or any part of the
principal amount of the Debenture, plus accrued interest, into shares (the
"Conversion Shares") of the Company's common stock, no par value ("Common
Stock"), at the price per share (the "Conversion Price") equal to the lesser
of (a) an amount equal to one hundred twenty percent (120%) of the closing
bid price of the Common Stock as listed on a Principal Market (as defined
herein), as quoted by Bloomberg L.P. (the "Closing Bid Price") as of the date
hereof, or (b) an amount equal to eighty (80%) of the lowest closing bid
price of the Company's Common Stock, as quoted by Bloomberg, LP, for the five
(5) trading days immediately preceding the Conversion Date (as defined
herein). Subparagraphs (a) and (b) above are individually referred to as a
"Conversion Price". As used herein, "Principal Market" shall mean The
National Association of Securities Dealers Inc.'s Over-The-Counter Bulletin
Board, Nasdaq SmallCap Market, or American Stock Exchange. If the Common
Stock is not traded on a Principal Market, the Closing Bid Price and/or the
VWAP shall mean, the reported Closing Bid Price or the VWAP for the Common
Stock, as furnished by the National Association of Securities Dealers, Inc.,
for the applicable periods. No fraction of shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. To convert this
Debenture, the Holder hereof shall deliver written notice thereof,
substantially in the form of Exhibit "A" to this Debenture, with appropriate
insertions (the "Conversion Notice"), to the Company at its address as set
forth herein. The date upon which the conversion shall be effective (the
"Conversion Date") shall be deemed to be the date set forth in the Conversion
Notice.
Section 1.03 Reservation of Common Stock. The Company shall
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of this
Debenture, such number of shares of Common Stock as shall from time to time
be sufficient to effect such conversion, based upon the Conversion Price. If
at any time the Company does not have a sufficient number of Conversion
Shares authorized and available, then the Company shall call and hold a
special meeting of its stockholders within thirty (30) days of that time for
the sole purpose of increasing the number of authorized shares of Common
Stock.
Section 1.04 Right of Redemption. The Company at its option shall
have the right to redeem, with fifteen (15) business days advance written
notice (the "Redemption Notice"), a portion or all outstanding convertible
debenture. The redemption price shall be one hundred twenty percent (120%)
of the amount redeemed plus accrued interest.
Section 1.05 Registration Rights. The Company is obligated to
register the resale of the Conversion Shares under the Securities Act of
1933, as amended, pursuant to the terms of a Registration Rights Agreement,
between the Company and the Holder of even date herewith (the "Investor
Registration Rights Agreement").
-2-
Section 1.06 Interest Payments. The interest so payable will be
paid at the time of maturity or conversion to the person in whose name this
Debenture is registered. At the time such interest is payable, the Holder,
in its sole discretion, may elect to receive the interest in cash (via wire
transfer or certified funds) or in the form of Common Stock. In the event of
default, as described in Article III Section 3.01 hereunder, the Holder may
elect that the interest be paid in cash (via wire transfer or certified
funds) or in the form of Common Stock. If paid in the form of Common Stock,
the amount of stock to be issued will be calculated as follows: the value of
the stock shall be the Closing Bid Price on: (i) the date the interest
payment is due; or (ii) if the interest payment is not made when due, the
date the interest payment is made. A number of shares of Common Stock with a
value equal to the amount of interest due shall be issued. No fractional
shares will be issued; therefore, in the event that the value of the Common
Stock per share does not equal the total interest due, the Company will pay
the balance in cash.
Section 1.07 Paying Agent and Registrar. Initially, the Company
will act as paying agent and registrar. The Company may change any paying
agent, registrar, or Company-registrar by giving the Holder not less than
ten (10) business days' written notice of its election to do so, specifying
the name, address, telephone number and facsimile number of the paying agent
or registrar. The Company may act in any such capacity.
Section 1.08 Secured Nature of Debenture. This Debenture is
secured by all of the assets and property of the Company as set forth on
Exhibit A to the Security Agreement dated the date hereof between the Company
and the Holder (the "Security Agreement"). As set forth in the Security
Agreement, Holder's security interest shall terminate upon the occurrence of
an Expiration Event as defined in the Security Agreement.
ARTICLE II.
Section 2.01 Amendments and Waiver of Default. The Debenture may
not be amended. Notwithstanding the above, without the consent of the
Holder, the Debenture may be amended to cure any ambiguity, defect or
inconsistency, or to provide for assumption of the Company obligations to the
Holder.
ARTICLE III.
Section 3.01 Events of Default. An Event of Default is defined as
follows: (a) failure by the Company to pay amounts due hereunder within
fifteen (15) days of the date of maturity of this Debenture; (b) failure by
the Company to comply with the terms of the Irrevocable Transfer Agent
Instructions attached to the Securities Purchase Agreement; (c) failure by
the Company's transfer agent to issue freely tradeable Common Stock to the
Holder within five (5) days of the Company's receipt of the attached Notice
of Conversion from Holder; (d) failure by the Company for ten (10) days after
notice to it to comply with any of its other agreements in the Debenture;
(e) events of bankruptcy or insolvency; (f) a breach by the Company of its
obligations under the Securities Purchase Agreement or the Investor
Registration Rights Agreement which is not cured by the Company within ten
(10) days after receipt of written notice thereof. Upon the occurrence of an
Event of Default, the Holder may, in its sole discretion, accelerate full
repayment of all debentures outstanding and accrued interest thereon or may,
notwithstanding any limitations contained in this Debenture and/or the
Securities Purchase Agreement dated the date hereof between the Company and
Cornell Capital Partners, L.P. (the "Securities Purchase Agreement"), convert
all debentures outstanding and accrued interest thereon into shares of Common
Stock pursuant to Section 1.02 herein.
-3-
Section 3.02 Failure to Issue Unrestricted Common Stock. As
indicated in Article III Section 3.01, a breach by the Company of its
obligations under the Investor Registration Rights Agreement shall be deemed
an Event of Default, which if not cured within ten (10) days, shall entitle
the Holder to accelerate full repayment of all debentures outstanding and
accrued interest thereon or, notwithstanding any limitations contained in
this Debenture and/or the Securities Purchase Agreement, to convert all
debentures outstanding and accrued interest thereon into shares of Common
Stock pursuant to Section 1.02 herein. The Company acknowledges that failure
to honor a Notice of Conversion shall cause irreparable harm to the Holder.
ARTICLE IV.
Section 4.01 Rights and Terms of Conversion. This Debenture, in
whole or in part, may be converted at any time following the Closing Date,
into shares of Common Stock at a price equal to the Conversion Price as
described in Section 1.02 above.
Section 4.02 Re-issuance of Debenture. When the Holder elects to
convert a part of the Debenture, then the Company shall reissue a new
Debenture in the same form as this Debenture to reflect the new principal
amount.
Section 4.03 Termination of Conversion Rights. The Holder's right
to convert the Debenture into the Common Stock in accordance with paragraph
4.01 shall terminate on the date that is the second (2nd) year anniversary
from the date hereof and this Debenture shall be automatically converted on
that date in accordance with the formula set forth in Section 4.01 hereof,
and the appropriate shares of Common Stock and amount of interest shall be
issued to the Holder.
ARTICLE V.
Section 5.01 Anti-dilution. In the event that the Company shall
at any time subdivide the outstanding shares of Common Stock, or shall issue
a stock dividend on the outstanding Common Stock, the Conversion Price in
effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and in the event that the Company shall
at any time combine the outstanding shares of Common Stock, the Conversion
Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision, dividend or combination as the case may be.
-4-
Section 5.02 Consent of Holder to Sell Capital Stock or Grant
Security Interests. Except for the Standby Equity Distribution Agreement
dated the date hereof between the Company and Cornell Capital Partners, LP,
so long as any of the principal of or interest on this Debenture remains
unpaid and unconverted, the Company shall not, without the prior consent of
the Holder, issue or sell (i) any Common Stock or Preferred Stock without
consideration or for a consideration per share less than its fair market
value determined immediately prior to its issuance, (ii) issue or sell any
Preferred Stock, warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than such Common
Stock's fair market value determined immediately prior to its issuance, (iii)
enter into any security instrument granting the holder a security interest in
any of the assets of the Company, or (iv) file any registration statement on
Form S-8.
ARTICLE VI.
Section 6.01 Notice. Notices regarding this Debenture shall be
sent to the parties at the following addresses, unless a party notifies the
other parties, in writing, of a change of address:
If to the Company, to:
Global Concepts, Ltd.
14 Garrison Inn Lane
Garrison, NY 10524
Attention: Michael Margolies
Telephone: (845) 424-4100
Facsimile: (845) 424-4003
With a copy to:
Robert Brantl, Esq.
322 4th Street
Brooklyn, NY 11215
Telephone: (718) 768-6045
Facsimile: (718) 965-4042
If to the Holder:
Cornell Capital Partners, LP
101 Hudson Street, Suite 3700
Jersey City, NJ 07303
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
With a copy to:
David Gonzalez, Esq.
101 Hudson Street - Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
-5-
Section 6.02 Governing Law. This Debenture shall be deemed to be
made under and shall be construed in accordance with the laws of the State of
New Jersey without giving effect to the principals of conflict of laws
thereof. Each of the parties consents to the jurisdiction of the
U.S. District Court sitting in the District of the State of New Jersey or the
state courts of the State of New Jersey sitting in Hudson County, New Jersey
in connection with any dispute arising under this Debenture and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens to the bringing of any such
proceeding in such jurisdictions.
Section 6.03 Severability. The invalidity of any of the
provisions of this Debenture shall not invalidate or otherwise affect any of
the other provisions of this Debenture, which shall remain in full force and
effect.
Section 6.04 Entire Agreement and Amendments. This Debenture
represents the entire agreement between the parties hereto with respect to
the subject matter hereof and there are no representations, warranties or
commitments, except as set forth herein. This Debenture may be amended only
by an instrument in writing executed by the parties hereto.
Section 6.05 Counterparts. This Debenture may be executed in
multiple counterparts, each of which shall be an original, but all of which
shall be deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
Company as executed this Debenture as of the date first written above.
GLOBAL CONCEPTS, LTD.
By: /s/ Michael Margolies
------------------------------
Name: Michael Margolies
Title: Chairman & CEO
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EXHIBIT "A"
NOTICE OF CONVERSION
(To be executed by the Holder in order to Convert the Debenture)
TO:
The undersigned hereby irrevocably elects to convert US$ -----------
of the principal amount of the above Debenture into Shares of Common Stock of
Global Concepts, Ltd., according to the conditions stated therein, as of the
Conversion Date written below.
Conversion Date:
Applicable Conversion Price:
Signature:
Name:
Address:
Amount to be converted:
US$
Amount of Debenture ----------------------------------------
unconverted:
US$
----------------------------------------
Conversion Price per
share: US$
----------------------------------------
Number of shares of
Common Stock to be issued:
-------------------------------------------
Please issue the shares
of Common Stock in the
following name and to the
following address:
Issue to:
-------------------------------------------
Authorized Signature:
-------------------------------------------
Name:
-------------------------------------------
Title:
-------------------------------------------
Phone Number:
-------------------------------------------
Broker DTC Participant Code:
-------------------------------------------
Account Number:
-------------------------------------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement on Form SB-2 of our
report dated April 9, 2004, relating to the consolidated financial
statements of Global Concepts, Ltd., formerly known as "Transportation
Logistics Int'l, Inc." and Subsidiaries. We also consent to the use in
this Registration Statement on Form SB-2 of our report dated August 31,
2004, relating to the financial statements of Advanced Medical Diagnostics
LLC. We also consent to the reference to our Firm under the caption
"Experts" in the Prospectus.
/s/ Rosenberg Rich Baker Berman & Company
-----------------------------------------
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
December 6, 2004
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I consent to the use in this Registration Statement on Form SB-2 of my report
dated November 17, 2004, relating to the financial statements of J&J
Marketing, LLC, and to the reference to me under the caption "Experts" in the
Prospectus.
/s/Thomas J. Kellerman
---------------------------
Thomas J. Kellermann
Westbury, New York
December 6, 2004
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