UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to___________
Commission file number 0-5186
OCG TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-2643655
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
56 Harrison Street, New Rochelle, New York 10801
(Address of principal executive offices)
(914) 576- 8457
(Issuer's telephone number)
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
Class Shares Outstanding at February 14, 2005
Common Stock ($.01 par value) 49,901,121 Shares
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
December 31, 2005 and June 30, 2005
Three and Six Months Ended December 31, 2005 and 2004
the Three and Six Months Ended December 31, 2005 and 2004
Financial Condition and Results of Operations
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
(UNAUDITED)
| | | December 31, 2005 | | June 30, 2005 | |
| ASSETS | | | | | | | |
| Current Assets: | | | | | | | |
Total current assets from discontinued operations | | $ | - | | $ | 21,565 | |
| | | | | | | | |
| Other assets from discontinued operations | | | | | | 66,789 | |
Total assets | | $ | - | | $ | 88,354 | |
| | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
Current liabilities from discontinued operations | | $ | - | | $ | 249,363 | |
| | | | | | | | |
| Other liabilities from discontinued operations | | | | | | 188,700 | |
Total liabilities | | | - | | | 438,063 | |
| | | | | | | | |
| Shareholders' deficit: | | | | | | | |
| Series C Preferred stock $.10 par value (200,000 authorized, issued & outstanding) | | | 20,000 | | | 20,000 | |
| Series E Preferred stock $.10 par value (100,000 authorized; 33,333 issued and outstanding) | | | 3,333 | | | 3,333 | |
| Series F Preferred stock $.10 par value (400,000 authorized; 147,569 issued and outstanding) | | | 14,757 | | | | |
| Common stock $.01 par value (50,000,000 authorized; 49,901,121 issued & outstanding) | | | 499,011 | | | 499,011 | |
| Additional paid-in capital | | | 19,299,184 | | | 26,696,445 | |
| Accumulated deficit | | | (19,773,785 | ) | | (27,505,998 | ) |
| Less: Treasury stock, at cost (12,500 shares) | | | (62,500 | ) | | (62,500 | ) |
Total shareholders' deficit | | | - | | | (349,709 | ) |
Total liabilities and shareholders' deficit | | $ | - | | $ | 88,354 | |
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
(UNAUDITED)
Three Months Ended Six Months Ended
| | | | December 31, | | | December 31, | |
| | | | 2005 | | | 2004 | | | 2005 | | | 2004 | |
| | | | | | | | | | | | | | |
| Net loss from discontinued operations | | $ | (82,994 | ) | $ | (342,142 | ) | $ | (139,863 | ) | $ | (468,683 | ) |
| | | | | | | | | | | | | | |
| Weighted average number of shares outstanding during the period | | | 49,901,121 | | | 47,743,783 | | | 49,901,121 | | | 47,743,783 | |
| | | | | | | | | | | | | | |
Loss per common share - basic and diluted | | $ | (.00 | ) | $ | (.00 | ) | $ | (.00 | ) | $ | (.00 | ) |
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
(UNAUDITED)
Six Months Ended December 31,
| | | 2005 | | 2004 | |
| Cash flows from operating activities: | | | | | | | |
Net loss from discontinued operations | | $ | (139,863 | ) | $ | (468,683 | ) |
Adjustments to reconcile net loss to net cash used | | | | | | | |
in operating activities: | | | | | | | |
Depreciation and amortization | | | 3,526 | | | 60,581 | |
Issuance of stock and warrants for services | | | 10,339 | | | 215,033 | |
Loss from sale of securities | | | - | | | 41,300 | |
| | | | | | | | |
| Changes in assets and liabilities | | | | | | | |
Receivables | | | 787 | | | 13,409 | |
Prepaid expenses and other current assets | | | - | | | 41,700 | |
Inventory | | | 13,918 | | | (6,006 | ) |
| Deferred income | | | 60,000 | | | | |
Other current asset | | | - | | | (3,564 | ) |
Accounts payable and accrued expenses | | | 27,865 | | | 46,461 | |
Total adjustment | | | 116,435 | | | 408,914 | |
Net cash used in operating activities | | | (23,428 | ) | | (59,769 | ) |
| | | | | | | | |
| Cash flows from investing activities: | | | | | | | |
| | | | | | | | |
Capitalized software development costs | | | (47,604 | ) | | (45,340 | ) |
Proceeds from sale of marketable securities | | | - | | | 5,000 | |
Increase in property and equipment | | | (1,947 | ) | | - | |
Net cash used in investing activities | | | (49,551 | ) | | (40,340 | ) |
| | | | | | | | |
| Cash flows from financing activities: | | | | | | | |
Increase (decrease) in loans payable - shareholder | | | 57,000 | | | 30,000 | |
Increase in credit line | | | (400 | ) | | 8,814 | |
Proceeds from sale of common stock | | | - | | | 43,205 | |
| Decrease in notes payable | | | (175,000 | ) | | - | |
| Proceeds from sale of Series F Preferred Stock | | | 275,000 | | | - | |
| Dividend distribution in spin-off | | | (89,725 | ) | | - | |
Net cash provided by financing activities | | | 66,875 | | | 82,019 | |
| | | | | | | | |
| Net increase (decrease) in cash | | | (6,104 | ) | | (18,090 | ) |
| | | | | | | | |
| Cash and cash equivalents, beginning of period | | | 6,104 | | | 29,257 | |
| | | | | | | | |
| Cash and cash equivalents, end of period | | $ | - | | $ | 11,167 | |
Non-cash investing and financing activities:
Exchange of notes receivable and related accrued interest
for marketable securities $372,300
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the unaudited consolidated condensed financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial statements. Preparing financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. Actual results and outcomes may differ significantly from management's estimates and assumptions. The Company has disposed of all of its operations through a dividend distributions of its wholly owned subsidiary, PrimeCare Systems, Inc. and the assignment of all of its other assets and liabilities PrimeCare Systems, Inc. See Note 2 - Shareholders Equity.
NOTE 2 - SHAREHOLDERS' EQUITY
On December 31, 2005, an aggregate of 147,569 shares of the Company's Series F Preferred Stock were sold to Bobby Vavithis (“Vavithis”) at the closing (the “Closing”) of a share purchase agreement (the “Share Purchase Agreement”), dated December 19, 2005. Each share of Series F Preferred Stock is convertible into 10,000 shares of the Company’s common stock. The sale resulted in a change of control of OCGT, since approximately 95.5% of the Company’s outstanding shares are now owned by Vavithis.
As a condition to the closing of the Share Purchase Agreement, it was agreed that 100% of the shares of PrimeCare Systems, Inc. (“PSI”), owned by the Company, will be distributed prior to the closing, as a dividend, to OCGT stockholders of record on December 29, 2005 (the “Record Date”). The dividend distribution, of approximately 69,901,121 shares of PSI common stock, was made, in escrow, to holders, as of the Record Date, of the Company’s common and convertible preferred stock, on the basis of one share of PSI common stock for each share of the Company’s common stock, or for each share of common stock that the Company’s convertible preferred stock is convertible into. Following the distribution, 100% of the outstanding PSI common stock will be held by the shareholders of the Company as of the Record Date. PSI will file a registration statement with the Securities and Exchange Commission with respect to the dividend distribution. Only those stockholders who owned the Company’s shares on the Record Date will be entitled to receive PSI shares in the dividend distribution.
The share purchase agreement provided that, prior to Closing, the Company would contribute all of its assets to PSI in consideration for PSI assuming all of OCGT’s liabilities and that $275,000.00 of the Purchase Price would be paid to PSI. The transfer of the assets and liabilities took place prior to the Closing and PSI received the $275,000 prior to the Closing. The $275,000 was treated as a contribution of capital by the Company to PSI. The Company has no assets or liabilities since December 31, 2005 and reflected the historical operating results as discontinued operations.
At the Closing of the Share Purchase, two new members were appointed to OCGT’s Board of Directors and Edward C. Levine resigned as a director and as president/treasurer/CFO of OCGT, Jeffrey P. Nelson resigned as a director and as vice president/secretary of OCGT and Jarema S. Rakoczy resigned as a director of OCGT.
Vavithis expects to contribute to OCGT, before the end of March 2006 and as contributed capital, without any additional compensation from OCGT, assets consisting of (a) a 100% working interest in the Redearth Prospect, located in central Alberta, Canada, which Prospect is located adjacent to the Pembina Nisku Reef Prospect and in addition (b) a 20% working interest in the Pembina Nisku Reef Prospect, both of which were acquired by Purchaser from Angels Exploration Fund Inc., a Canadian corporation, together with the cash capital necessary to meet the drilling requirements of the working interests (the “Contributed Capital”).
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A SUMMARY OF INCREASES (DECREASES) IN THE ITEMS INCLUDED IN
THE CONSOLIDATED STATEMENTS OF LOSS IS SHOWN BELOW:
General
The following discussion and analysis should be read in conjunction with the Consolidated Condensed Financial Statements and Notes thereto appearing elsewhere herein. The following discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements include predictions, estimates and other statements that involve a number of risks and uncertainties. While this outlook represents the Company's current judgment on the future direction of the business, such risks and uncertainties could cause actual results to differ materially from any future performance suggested herein.
The Company has experienced recurring losses from operations and has relied on the sale of equity interests in the Company to fund its operations. If necessary, the Company intends to provide additional working capital through the sale of equity interests in the Company. Although, in the past, the Company has been able to provide working capital through the sale of equity interests in the Company, there can be no assurances that the Company will succeed in its efforts, which creates a doubt about its ability to continue as a going concern.
The Company has disposed of its business through a dividend distribution and intends to commence operations in the oil and gas industry, but at the present time the Company has no assets or liabilities or any business operations. Management does not believe the historical results of operations are relevant since it represents discontinued operations.
An evaluation was carried out under the supervision and with the participation of the Company's management, including the President/Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the President/CFO have concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and timely reported as provided in the Securities and Exchange Commission rules and forms. The Company periodically reviews the design and effectiveness of our internal controls over financial reporting, including compliance with various laws and regulations that apply to the Company's operations. The Company makes modifications to improve the design and effectiveness of its internal control structure, and may take other corrective action, if the Company's reviews identify deficiencies or weaknesses in its controls. No changes occurred during the quarter ended December 31, 2005 in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
On December 31, 2005, an aggregate of 147,569 shares of the Company's Series F Preferred Stock were sold, in an unregistered private placement, pursuant to a share purchase agreement (the “Share Purchase Agreement”), dated December 19, 2005. Each share of Series F Preferred Stock is convertible into 10,000 shares of the Company’s common stock. The sale resulted in a change of control of OCGT, since the purchaser acquired approximately 95.5% of the Company’s outstanding shares.
In consummating the above described private placement, the Company relied upon the exemptions from registration provided by Sections 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated there under based upon: representations from the investor that he, she or it, (a) met one of the categories of accredited investor set forth in Rule 501, (b) was acquiring the securities for his, her or its own account and not with a view towards further distribution and (c) had such sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks connected with the applicable investment, and the fact that (a) no general solicitation of the securities was made by the Company, (b) the securities issued were “restricted securities” as that term is defined under Rule 144 promulgated under the Securities Act, (c) the Company placed appropriate restrictive legends on the certificates representing the securities regarding the restricted nature of these securities and (d) prior to the completion of each transaction, each investor was informed in writing of the restricted nature of the securities, provided with all information regarding the Company as required under Rule 502 of Regulation D and was given the opportunity to ask questions of and receive additional information from the Company regarding its financial condition and operations.
(a) 31.1 Certification pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002
(b) Reports on Form 8-K
A Report on Form 8-K was filed on December 19, 2005, relating to Item 1.01, Entry into a Material Definitive Agreement and relates to the sale of shares and the change in control of the Company.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OCG TECHNOLOGY, INC.
BY /s/ Kevin A. Polis
,
PRESIDENT
(CHIEF FINANCIAL OFFICER)
DATED: February 21, 2005
Exhibit 31
Exhibit 31.1
302 CERTIFICATION -SMALL BUSINEES CERTIFICATION OF PRESIDENT
I, Edward C. Levine, former President of the Registrant, OCG Technology, Inc. hereby certify that:
1) I have reviewed this quarterly Form 10-QSB for the periods ending December 31, 2005 and 2004 of OCG Technology, Inc.;
2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4) I am solely responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15(f) and 15d- 15(f)) for the Registrant and I have:
a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting procedures;
c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and
d) disclosed in this quarterly report any change in the Registrant’s internal control over financial reporting that occurred during the period ending December 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5) I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: February 21 , 2006
By: /s/ Edward C. Levine
Edward C. Levine, former President/Chief Financial Officer
Exhibit 32
Exhibit 32.1
CERTIFICATION OF PRESIDENT/CHIEF EXECUTIVE OFFICER
Pursuant to section 906 of the Sarbanes-Oxkly Act of 2002 (18 U.S.C. ss. 1350), the undersigned, Edward C. Levine, former President and Chief Executive Officer, of OCG Technology, Inc., a Delaware corporation, (the "Company"), does hereby certify, to his knowledge, that :
The Quarterly Report on Form 10-QSB for the period ended December 31, 2005, of the Company (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the report fairly presents, in all material respects, the financial condition and result of operations of the Company.
By: /s/ Edward C. Levine
Edward C. Levine,
President/Chief Financial Officer
February21 , 2006
