Asconi (ASCD) 10QSB 2002 Q3 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-QSB

x	Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30,2002
or
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from              to

Commission File No:    000-23712

ASCONI CORPORATION

(Exact name of Small Business Issuer as Specified in Its Charter)

Nevada (State or Other Jurisdiction of Incorporation or Organization)		91-1395124 (I.R.S. Employer Identification No.)
	160  International Parkway, Suite 280 Heathrow, Florida 32746 (407) 833-8000 (Address of Principal Executive Offices)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.

Yes  x        No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of August 12, 2002
Common Stock, $.001 par value	14,586,689

Transitional Small Business Disclosure Format (check one):    ¨Yes    xNo

ASCONI CORPORATION

INDEX

			Page No.
PART I.    FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets—As of September 30, 2002 (unaudited) and December 31, 2001	2
		Condensed Consolidated Statements of Income—For the Three and Nine Months Ended September 30, 2002 and 2001	3
		Condensed Consolidated Statements of Cash Flow For the Nine Months Ended September 30, 2002 and 2001	4
		Notes to Condensed Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis or Plan of Operation	6-7
PART II.    OTHER INFORMATION
	Item 1.	Legal Proceedings	8
	Item 2.	Changes in Securities	8
	Item 3.	Defaults Upon Senior Securities	8
	Item 4.	Submission of Matters to Vote of Security Holders	8
	Item 5.	Other Information	9
	Item 6.	Exhibits and Reports on Form 8-K	9
SIGNATURES			10

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this quarterly report are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events.

The forward-looking statements generally can be identified by the use of terms such as “believe,” “expect,” “anticipate,” “intend,” “ plan,” “foresee,” “likely,” “will” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. You should review carefully all information, including the financial statements and the notes to the financial statements included in this quarterly report. The following important factors could affect future results, causing the results to differ materially from those expressed in the forward-looking statements in this quarterly report.

• the timing, impact and other uncertainties related to pending and future acquisitions by us;

• the impact of new technologies;

• changes in laws or rules or regulations of governmental agencies; and

• currency exchange rate fluctuations.

These factors are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements in this quarterly report. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements in this quarterly report are made only as of the date of this quarterly report, and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. Investors are advised to consult any further disclosures by us on the subject in our filings with the Securities and Exchange Commission, especially on Forms 10-KSB, 10-QSB and 8-K (if any), in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risk, and certainties or potentially inaccurate assumptions. We cannot assure you that projected results will be achieved.

1

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

ASCONI CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2002 (Unaudited) AND DECEMBER 31, 2001

(UNITED STATES DOLLARS)

ASSETS
	SEPTEMBER 30, 2002			DECEMBER 31, 2001
CURRENT ASSETS
Cash and bank balances	$	983,133		$	15,244
Trade receivables		1,803,537			2,128,975
Inventories		5,020,154			2,762,943
Advance payments		853,905			694,843
Other		763,181			602,148
TOTAL CURRENT ASSETS		9,423,910			6,204,153
FIXED ASSETS		4,537,599			2,547,614
INVESTMENT		—			689,988
GOODWILL		335,003			—
OTHER		78,878			79,196
TOTAL ASSETS	$	14,375,390		$	9,520,951
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,357,998		$	2,509,355
Short-term debt		3,536,398			1,004,716
Taxes payable		247,498			314,565
Accrued and other liabilities		1,240,608			395,248
TOTAL CURRENT LIABILITIES		7,382,503			4,223,884
LONG-TERM LIABILITIES
LONG-TERM DEBT		1,247,880			1,720,579
DEFERRED GRANT INCOME		309,617			—
DEFERRED TAXES		281,487			198,560
MINORITY INTEREST		1,570,021			184,181
SHAREHOLDERS’ EQUITY
Common stock $.001 par value 100,000,000 authorized and 14,586,689 issued		14,587			14,587
Paid in capital		5,508,627			5,508,627
Retained earnings (deficit)		(1,564,060	)		(2,072,651	)
Accumulated other comprehensive loss		(375,271	)		(256,816	)
Total Shareholders’ Equity		3,583,883			3,193,747
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,375,390		$	9,520,951

The accompanying notes are an integral part of these consolidated financial statements.

2

ASCONI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(UNITED STATES DOLLARS)

(Unaudited)

	For Quarter Ended				For Nine Months Ended
	SEPTEMBER 30, 2002		SEPTEMBER 30, 2001		SEPTEMBER 30, 2002			SEPTEMBER 30, 2001
SALES	$	3,229,625	$	1,875,065	$	8,778,393		$	6,588,907
COST OF SALES		2,333,044		1,221,542		6,130,548			3,943,340
GROSS PROFIT		896,581		653,523		2,647,845			2,645,567
EXPENSES
Consulting		—		—		—			4,000,000
Merger Costs		—		—		—			504,177
Minority interest expense		152,742		—		378,215			—
Depreciation		109,423		9,909		247,595			182,844
Selling and Administration expenses		302,984		331,216		1,015,748			1,224,191
Interest expense		101,078		68,561		334,354			170,359
TOTAL EXPENSES		666,227		409,686		1,975,912			6,081,571
INCOME BEFORE OTHER ITEMS
AND TAX PROVISION		230,354		243,837		671,933			(3,436,004	)
OTHER INCOME—GRANT		5,666		—		5,666
PROVISION FOR INCOME TAXES		59,008		68,808		169,008			295,372
NET INCOME (LOSS)		177,012		175,029		508,591			(3,731,376	)
OTHER COMPREHENSIVE INCOME (LOSS)
FOREIGN CURRENCY TRANSLATION		48,269		—		(118,455	)		—
COMPREHENSIVE INCOME (LOSS)	$	225,281	$	175,029	$	390,136		$	(3,731,376	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
BASIC AND DILUTED		14,586,689		14,217,459		14,586,689			13,936,140
BASIC NET PER SHARE
(BASIC AND DILUTED)	$	0.02	$	0.01	$	0.03		$	(0.27	)

The accompanying notes are an integral part of these consolidated financial statements.

3

ASCONI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(UNITED STATES DOLLARS)

(Unaudited)

	SEPTEMBER 30,
	2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Comprehensive income	$	390,136		$	(3,731,376	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		247,595			182,844
Deferred income taxes		82,927			(4,721	)
Other income—grant		—
Issuance of common stock for services		—			4,000,000
Issuance of common stock for merger		—			366,540
Minority interest expense		378,215			—
Effect of exchange rate changes on cash		66,663			—
(Increase) decrease in assets:
Trade receivables		768,339			(722,147	)
Advance payments		(159,062	)		—
Inventories		(411,143	)		508,496
Other		(161,034	)		(663,763	)
Increase (decrease) in liabilities
Accounts payable		(313,690	)		(535,417	)
Taxes payable		(67,067	)		4,628
Accrued liabilities		724,151			147,145
Net cash provided (used) by operating activities		1,546,030			(447,771	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(306,027	)		(512,663	)
Investment		(703,707	)		—
Other		319			(8,524	)
Cash used for investing activities		(1,009,415	)		(521,187	)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings (net)		1,523,348			1,216,088
Decrease in long-term debt (net)		(1,120,152	)		285,530
Cash provided by financing activities		403,196			1,501,618
NET INCREASE (DECREASE) IN CASH AND BANK BALANCES		953,161			532,660
Cash and bank balances, at beginning of period		15,244			43,142
Cash purchased		28,078			—
Cash and bank balances, at end of period	$	996,483		$	575,802

The accompanying notes are an integral part of these consolidated financial statements.

4

ASCONI CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared by Asconi Corporation (formerly Grand Slam Treasures, Inc.) (the “Company”) without audit and include: the Company; Asconi Holding Company Limited, its wholly-owned subsidiary; and Asconi S.R.L., its wholly-owned subsidiary. Asconi S.R.L. acquired controlling interest (70%) of SA Fabria de Vinuri din Puhoi and (74%) of SA Orhei-vin during October and December, 2000, which were recorded as a purchase. Asconi S.R.L. acquired controlling interest (51%) of Vitis Hincesti S.A. as of June 12, 2002, which was recorded as a purchase. The condensed consolidated financial statements also include the accounts of these three majority owned subsidiaries. The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America.

The condensed consolidated financial statements do not include any operations of Grand Slam Treasures, Inc. The condensed consolidated balance sheets, the condensed consolidated statements of income, and the condensed consolidated statements of cash flow include, in the opinion of management, all the adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of these periods and the financial condition as of that date. Historical interim results are not necessarily indicative of results that may be expected for any future period.

NOTE 2—TAXES

Income taxes are provided on foreign operations in accordance with taxation principles currently effective in the Republic of Moldova.

NOTE 3—CASH FLOW ADDITIONAL INFORMATION

The Company acquired controlling interest of Vitis Hincesti S.A. during June 2002. The following amount represents the non-cash portion of the transaction:

Accounts receivable	$	442,901
Inventory		1,846,068
Fixed Assets		1,701,948
Goodwill		335,003
Accounts payable		(162,333	)
Short-term debt		(1,008,334	)
Accrued expenses		(121,209	)
Long-term debt		(647,453	)
Minority Interest Liability		(1,020,974	)
	$	1,365,617

NOTE 4—GRANT

The Company received an equipment grant valued at approximately $315,000. The Company recorded the equipment as an asset and recognized deferred income in the balance sheet. The asset and the deferred income will be amortized over the life of the equipment.

5

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results Of Operation

The following is derived from, and should be read in conjunction with, our unaudited condensed consolidated financial statements, and related notes, as of and for the three and nine months ended September 30, 2002 and 2001.

Three Months Ended September 30, 2002 As Compared To Three Months Ended September 30, 2001

Revenues.    Revenues increased by $1,354,560 or 72% to $3,229,625 for the three months ended September 30, 2002 from $1,875,065 for the three months ended September 30, 2001. This increase was primarily due to increased production and sales resulting from acquisitions in 2000 through 2002.

Cost of sales.    Cost of sales increased by $1,111,502 or 91% to $2,333,044 for the three months ended September 30, 2002 from $1,221,542 for the three months ended September 30, 2001. This increase was primarily due to increased production volume and price costs.

Selling and Administrative.    Selling and administrative expenses decreased by $28,232 or 9% to $302,984 for the three months ended September 30, 2002 from $331,216 for the three months ended September 30, 2001. This decrease was primarily due to decreased professional fees as well as operational efficiencies due to the integration of processes between subsidiaries.

Income from Operations.    As a result of the foregoing, our income excluding interest expense other than minority interest expense and before income taxes increased by $19,034 or 6% to $331,432 for the three months ended September 30, 2002 from $312,398 for the three months ended September 30, 2001. This increase was primarily due to a combination of revenue growth and increased production costs.

Interest Expense.    Interest expenses increased by $32,517 or 47% to $101,078 for the three months ended September 30, 2002 from $68,561 for the three months ended September 30, 2001. This increase was primarily due to increased borrowings and interest expense related to the increased scale of harvest in 2002.

Income Taxes.    Income taxes decreased by $9,800 or 14% to $59,008 for the three months ended September 30, 2002 from $68,808 for the three months ended September 30, 2001. This decrease was primarily due to a decrease in the effective tax rate in the country of operation of our subsidiaries.

Net Income.    Our net income increased by $1,983 or 1% to $177,012 for the three months ended September 30, 2002 from $175,029 for the three months ended September 30, 2001.

Nine Months Ended September 30, 2002 As Compared To Nine Months Ended September 30, 2001

Revenues.    Revenues increased by $2,189,486 or 33% to $8,778,393 for the nine months ended September 30, 2002 from $6,588,907 for the nine months ended September 30, 2001. This increase was primarily due to increased production and sales resulting from acquisitions in 2000 through 2002.

Cost of sales.    Cost of sales increased by $2,187,208 or 55% to $6,130,548 for the nine months ended September 30, 2002 from $3,943,340 for the nine months ended September 30, 2001. This increase was primarily due to increased production volume and price costs.

Consulting and merger costs.    Consulting and merger costs decreased by $4,000,000 and $504,177 respectively to zero for the nine months ended September 30, 2002 from $4,000,000 and $504,177 respectively for the nine months ended September 30, 2001. This decrease was due to the non-recurring nature of consulting and merger costs incurred during the nine months ended September 30, 2001.

6

Selling and Administrative.    Selling and administrative expenses decreased by $208,442 or 17% to $1,015,749 for the nine months ended September 30, 2002 from $1,224,191 for the nine months ended September 30, 2001. This decrease was primarily due to decreased professional fees as well as operational efficiencies due to the integration of processes between subsidiaries.

Income from Operations.    As a result of the foregoing, our income excluding interest expense other than minority interest expense and before income taxes increased by $4,271,932 or 130% to $1,006,287 for the nine months ended September 30, 2002 from a loss of $3,265,645 for the nine months ended September 30, 2001. This increase was primarily due to the non-recurring nature of consulting and merger costs incurred during the nine months ended September 30, 2001.

Interest Expense.    Interest expenses increased by $163,995 or 96% to $334,354 for the nine months ended September 30, 2002 from $170,359 for the nine months ended September 30, 2001. This increase was primarily due to increased borrowings and interest expense related to our acquisition of a controlling interest in Vitis Hincesti S.A. as well the increased scale of harvest in 2002.

Income Taxes.    Income taxes decreased by $126,364 or 43% to $169,008 for the nine months ended September 30, 2002 from $295,372 for the nine months ended September 30, 2001. This decrease was primarily due to a decrease in the effective tax rate in the country of operation of our subsidiaries.

Net Income.    Our net income increased by $4,239,967 or 113% to $508,591 for the nine months ended September 30, 2002 from a net loss of $3,731,376 for the nine months ended September 30, 2001. This increase was primarily due to the non-recurring nature of consulting and merger costs incurred during the nine months ended September 30, 2001.

Liquidity and Capital Resources.

For the past few months, we have funded capital requirements through operations as well as through bank loan financing. As of September 30, 2002, we had a cash balance of $983,133 and a working capital surplus of $2,041,407. This compares with a cash balance of $15,244 and a working capital surplus of $1,980,269 at December 31, 2001.

Net cash provided by operating activities increased by $2,459,682 to $1,546,030 for the nine months ended September 30, 2002 from $(913,652) for the nine months ended September 30, 2001. This increase in cash provided by operations resulted primarily from a decrease in trade receivables of $768,339, an increase in minority interest liability of $378,215 and increase in accrued liabilities of $724,151.

Cash flows used in investing activities for the nine months ended September 30, 2002 increased by $488,228 or 93% as the current period used $1,009,415 for investing activities as opposed to $521,187 used for investing activities for the nine months ended September 30, 2001. This change was due primarily to the additional investment in the acquisition of Vitis Hincesti S.A. in the amount of $703,707.

Critical Accounting Policies.

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, collection of accounts receivable and valuation of inventories. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies and related judgments and estimates that affect the preparation of our financial statements is set forth in our Annual Report on Form 10-KSB for the year ended December 31, 2001.

7

PART II—OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Other than as set forth below, we are not a party to any pending legal proceedings or are aware of any pending legal proceedings against us that, individually or in the aggregate, would have a material adverse affect on our business, results of operations or financial condition.

We filed a complaint on July 17, 2001, in the Circuit Court of the Ninth Judicial circuit in and for Orange County, Florida, against Vadim Enikeev, an individual; Serguei Melnick, an individual; La-Sal Capital, Inc., a Florida corporation; Icara, Inc. a Florida corporation, Stoneside Development Limited, a personal services corporation, Goldberg Law Group, PA., a Florida corporation; Glenn E. Goldberg, an individual; Alan S. Lipstein, an individual; George Carapella, an individual; Thomas L. Tedrow, an individual; Larry Eastland, an individual; Robert Klosterman, an individual; and John Does and Jane Does, fictitious parties, the true parties intended to be those individuals or entities liable to plaintiff.

The amended complaint seeks damages for breach of contract (defendants Enikeev, La-Sal, Icara, Goldberg Law Group, Stoneside); rescission (defendants La-Sal, Icara, Goldberg Law Group, Stoneside); breach of fiduciary duty (defendants Enikeev, Melnick, Goldberg Law Group, Goldberg, Eastland and Klosterman); aiding and abetting breach of fiduciary duty (defendants Stoneside, La-Sal, Icara, Goldberg Law Group, Goldberg, Carapella, Lipstein and Tedrow); declaratory relief (defendants Klosterman and Eastland); civil conspiracy (defendants Enikeev, Melnick, Goldberg, Goldberg Law Group, La-Sal, Icara, Stoneside, Lipstein, Carapella, Tedrow, Eastland and Klosterman); violation of Florida Securities Investors Protection Act (defendants La-Sal, Goldberg Law Group, Stoneside and Icara); fraudulent inducement (defendants Stoneside, La-Sal, Icara, Goldberg Law Group, Goldberg, Carapella, Lipstein and Tedrow).

We allege that defendants Melnick and Enikeev abused limited authority given to them to act as corporate promoters and entered into a civil conspiracy with the remaining defendants to issue corporate stock without our approval for their individual and collective profit. We further allege that many of the defendants entered into, or facilitated entry into, unapproved “consulting agreements” as a vehicle to justify issuance of the stock, and that the “consultants” provided little or no services to Asconi but received stock valued at as much as $11,200,000. The complaint seeks monetary damages, rescission and return of the stock still possessed by any of the defendants, and other relief.

Defendant Enikeev has been defaulted and we obtained an entry of final judgment against him on July 8, 2002, in the amount of $12.8 million. The remaining defendants have in some instances answered the amended complaint while also filing motions to dismiss, or have moved to dismiss only. Defendants Klosterman and Eastland have filed “General Denials” but have raised no defenses. No counterclaims have been filed against us at this time.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

(a)    None.

(b)    None.

(c)    None.

(d)    None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

8

ITEM 5.    OTHER INFORMATION

None.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits

Exhibit	Description of Exhibit
3.1	Restated Articles of Incorporation.(1)
3.2	Amended and Restated Bylaws.(1)
99.1	Certification by Constantin Jitaru, Chief Executive Officer, and Anatolie Sirbu, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(2)

(1) Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 20, 2001, file no. 0-23712.

(2) Filed Herewith.

(b)    Reports on Form 8-K.

On August 26, 2002, we filed a Current Report on Form 8-K/A to amend the Current Report on Form 8-K filed on June 27, 2002, pursuant to Item 2, regarding our acquisition, through our wholly owned subsidiary Asconi S.R.L., of a controlling interest in Vitis Hincesti S.A., a Republic of Moldova entity.

9

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

		ASCONI CORPORATION
Date:	November 13, 2002	/S/    CONSTANTIN JITARU
		Constantin Jitaru, President and Chief Executive Officer
Date:	November 13, 2002	/S/    ANATOLIE SIRBu
		Anatolie Sirbu, Chief Financial Officer

10

EXHIBIT INDEX

Exhibit	Description of Exhibit
3.1	Restated Articles of Incorporation.(1)
3.2	Amended and Restated Bylaws.(1)
99.1	Certification by Constantin Jitaru, Chief Executive Officer, and Anatolie Sirbu, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(2)

(1) Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 20, 2001, file no. 0-23712.

(2) Filed Herewith.