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, 2001
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 91-1395124
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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 November 9, 2001
----- ---------------------------------
Common Stock, $.001 par value 14,586,689
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
ASCONI CORPORATION
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2001 (unaudited) and December 31, 2000........................................... 1
Condensed Consolidated Statements of Income -
For the Quarter and Nine Months Ended September 30, 2001 and 2000.............................. 2
Condensed Consolidated Statements of Cash Flow
For the Nine Months Ended September 30, 2001 and 2000........................................... 3
Notes to Condensed Consolidated Financial Statements.............................................. 4
Item 2. Management's Discussion and Analysis or Plan of Operation.................................... 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................ 6
Item 2. Changes in Securities........................................................................ 6
Item 3. Defaults Upon Senior Securities.............................................................. 6
Item 4. Submission of Matters to Vote of Security Holders............................................ 6
Item 5. Other Information............................................................................. 6
Item 6. Exhibits and Reports on Form 8-K.............................................................. 6
SIGNATURES................................................................................................... 8
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ASCONI CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2001 (Unaudited) AND DECEMBER 31, 2000
(UNITED STATES DOLLARS)
ASSETS
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- -----------
CURRENT ASSETS
Cash and bank balances $ 575,802 $ 43,142
Trade receivables 1,934,141 1,211,994
Inventories 2,239,225 2,747,721
Other 942,621 278,858
---------- ----------
TOTAL CURRENT ASSETS 5,691,789 4,281,715
FIXED ASSETS 2,557,789 2,228,174
OTHER 6,518 29,503
---------- ----------
TOTAL ASSETS $8,256,300 $6,539,392
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,590,230 $2,125,647
Current portion of long-term debt 763,669 262,782
Short-term borrowings 885,200 170,000
Taxes payable 386,519 381,891
Accrued liabilities 363,466 216,321
---------- ----------
TOTAL CURRENT LIABILITIES 3,989,084 3,156,641
LONG-TERM DEBT 1,025,092 739,562
DEFERRED TAXES 121,953 126,674
MINORITY INTEREST 118,491 150,000
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 14,509 --
100,000,000 shares authorized and
14,586,689 issued in 2001
Paid-in capital 5,811,532 --
Retained earnings (deficit) (2,703,053) --
Comprehensive loss (121,308) --
Members' equity -- 2,366,515
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,001,680 2,366,515
TOTAL LIABILITIES AND MEMBERS' EQUITY $8,256,300 $6,539,392
========== ==========
1
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNITED STATES DOLLARS)
(Unaudited)
For Quarter Ended For Nine Months Ended
---------------------------------- --------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
SALES $ 1,875,065 $1,230,862 $ 6,588,907 $2,420,199
COST OF SALES 1,221,542 691,591 3,943,340 1,381,935
----------- ---------- ----------- ----------
GROSS PROFIT 653,523 539,271 2,645,567 1,038,264
EXPENSES
Consulting - - 4,000,000 -
Merger costs - - 504,177 -
Depreciation 9,909 12,160 182,844 32,757
Selling and Administration expenses 331,216 90,628 1,224,191 261,385
Interest Expense 68,561 18,045 170,359 28,508
----------- ---------- ----------- ----------
TOTAL EXPENSES 409,686 120,833 6,081,571 322,650
INCOME (LOSS) BEFORE TAX PROVISION 243,837 418,438 (3,436,004) 715,614
PROVISION FOR INCOME TAXES 68,808 117,163 295,372 200,373
----------- ---------- ----------- ----------
NET INCOME (LOSS) $ 175,029 $ 301,275 $(3,731,376) $ 515,241
=========== ========== =========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
BASIC AND DILUTED 14,586,689 - 13,936,140 -
=========== ========== =========== ==========
BASIC NET LOSS PER SHARE (BASIC AND
DILUTED) $ 0.01 - $ (0.27) -
=========== ========== =========== ==========
2
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(UNITED STATES DOLLARS)
(Unaudited)
SEPTEMBER 30,
-------------------------------
2001 2000
------------ ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(3,731,376) $ 515,241
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 182,844 32,757
Deferred income taxes (4,721) (18,236)
Issuance of common stock for services 4,000,000 -
Issuance of common stock for merger 366,540 -
(Increase) decrease in assets:
Trade receivables (722,147) (392,497)
Inventories 508,496 (554,003)
Other (663,763) (124,375)
Increase (decrease) in liabilities:
Accounts payable (535,417) 296,027
Taxes payable 4,628 (162,686)
Accrued liabilities 147,145 109,183
----------- ---------
Net cash provided (used) by operating activities (447,771) (298,589)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (512,663) (302,307)
Other (8,524) (2,129)
----------- ---------
Cash used for investing activities (521,187) (304,436)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings (net) 1,216,088 (58,915)
Increase in long-term debt (net) 285,530 664,162
----------- ---------
Cash provided by financing activities 1,501,618 605,247
----------- ---------
NET INCREASE (DECREASE) IN
CASH AND BANK BALANCES 532,660 2,222
Cash and bank balances, at beginning of period 43,142 18
----------- ---------
Cash and bank balances, at end of period $ 575,802 $ 2,240
=========== =========
The accompanying notes are an integral part of these consolidated
financial statements.
3
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; its wholly owned subsidiary Asconi Holdings Limited;
and "ASCONI" S.R.L. its wholly owned subsidiary. "ASCONI" S.R.L. acquired
controlling interest (70%) of SA Fabria devin Puhoi and (72%) of SA Orhei-vin
during October and December, 2000, which were recorded as a purchase. The
consolidated financial statements also include the accounts of these two
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 financial statements do not include any operations of Grand Slam Treasures,
Inc. The consolidated balance sheets, the consolidated statements of income, and
the 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 "ASCONI", S.R.L. in accordance with taxation
principles currently effective in the Republic of Moldova.
NOTE 3 - OTHER
The Company entered into written agreements with four consultants for specified
services around April 16, 2001. Pursuant to the terms of the agreements, the
Company issued 1,600,000 shares of common stock and registered those shares
under the Securities Act of 1933 on Form S-8, which the Company filed on April
24, 2001. The 1,600,000 shares of common stock were valued at $2.50 per share
($4,000,000) at the time the Form S-8 was filed. This resulted in a non-cash
charge to the Income Statement in the amount of $4,000,000. The Company has
filed a lawsuit against these consultants for breach of contract for failing to
perform the services specified in the agreements, providing little or no
consideration in return for the compensation received under the agreements, and
receiving grossly inadequate compensation in relation to the services
purportedly rendered; rescission of the contracts; civil conspiracy; violation
of the Florida securities laws; and breach of fiduciary duty as to one of the
consultants who is an attorney.
The Company incurred $504,177 in costs associated with the merger with "ASCONI",
S.R.L. on April 12, 2001. The entire $504,177 was expensed during the second
quarter. This resulted in a non-cash charge to the income statement.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Factors Regarding Forward-Looking Statements
Statements made in this report other than statements of historical or
current fact, including, without limitation, statements relating to our plans,
strategies, objectives, expectations, intentions and adequacy of resources, are
considered "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements.
We undertake no obligation to update any forward-looking statements,
but 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.
Results Of Operation
Three Months Ended September 30, 2001 Compared To Three Months Ended
September 30, 2000
Revenues increased by $644,203 or 52%, to $1,875,065 from $1,230,862
for the three months ended September 30, 2001 as compared to the corresponding
period of the prior year. This increase was attributed to increased production
and sales resulting from acquisitions in 2000. Our primary activity was the
acquisition, consolidation, and development of product for sale.
Cost of sales increased by $529,951 or 77%, to $1,221,542 from $691,591
for the three months ended September 30, 2001 as compared to the corresponding
period of the prior year. This increase resulted from increased production
volume costs.
General and administrative expenses increased by $240,588 or 265%, to
$331,216 from $90,628 for the three months ended September 30, 2001 as compared
to the corresponding period of the prior year. This increase is attributed
primarily to increased overhead resulting from acquisitions in 2000.
Nine Months Ended September 30, 2001 Compared To Nine Months Ended
September 30, 2000
Revenues increased $4,168,708 or 172%, to $6,588,907 from $2,420,199
for the nine months ended September 30, 2001 as compared to the corresponding
period of the prior year. This increase was attributed primarily to increased
production and sales resulting from acquisitions in 2000. Our primary activity
was the acquisition, consolidation, and development of product for sale.
Cost of sales increased by $2,561,405 or 185%, to $3,943,340 from
$1,381,935 for the nine months ended September 30, 2001 as compared to the
corresponding period of the prior year. This increase resulted from increased
production volume costs.
General and administrative expenses increased by $962,806 or 368%, to
$1,244,191 from $261,385 for the nine months ended September 30, 2001 as
compared to the corresponding period of the prior year. The increase is
attributed to increased overhead resulting from acquisitions in 2000.
Our net income decreased by $4,246,617 to a net loss of $3,731,376 from
a net income of $515,241 for the nine months ended September 30, 2000 as
compared to the corresponding period of the prior year. Our net income would
have been $772,801 for the nine months ended September 30, 2001, but for the
$4,504,177 non-cash charges to the income statement as are discussed in Note 2
to our condensed consolidated financial statements.
5
Liquidity and Capital Resources
For the past few months we have funded capital requirements with short
term loans. As of September 30, 2001, we had a cash balance of $575,802 and a
working capital surplus of $1,702,705. This compares with a cash balance of
$2,240 and a working capital surplus of $883,078 for the corresponding period of
the prior year.
Net cash used in operating activities increased by $149,182 to $447,771
from $298,589 for the nine months ended September 30, 2001 as compared to the
corresponding period of the prior year.
Cash flows used in investing activities for the nine months ended
September 30, 2001 increased by $216,751 as the current period provided $521,187
in investing activities as opposed to $304,436 used in investing activities for
the corresponding period of the prior year. This change was due primarily to the
purchase of equipment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No information has been presented pursuant to Item 3 as we do not have
any financial instruments outstanding as of September 30, 2001 requiring market
risk disclosure or material foreign currency exposure requiring marker risk
disclosure.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Number Description of Exhibit
------ ----------------------
2.1 Exchange Agreement between Asconi Corporation (formally
Grand Slam Treasures, Inc., Asconi Holdings Limited and
Asconi Ltd., dated April 12, 2001 (1)
3.1 Restated Articles of Incorporation (2)
3.2 Amended and Restated Bylaws (2)
6
Number Description of Exhibit
------ ----------------------
10.1 Consulting Agreement with Stoneside Development Limited,
dated April 16, 2001 (3)
10.2 Consulting Agreement with La-Sal Capital, Inc., dated
April 16, 2001 (3)
10.3 Consulting Agreement with ICARA, Inc., dated April 16,
2001 (3)
10.4 Consulting Agreement with The Goldberg Law Group, P.A.,
dated April 13, 2001 (3)
- -------------
(1) Incorporated by reference to our Current Report on Form 8-K, filed on
April 19, 2001, file no. 000-23712.
(2) Incorporated by reference to our Quarterly Report on Form 10-QSB, filed
on August 20, 2001, file no. 000-23712.
(3) Incorporated by reference to our Registration Statement on Form S-8,
filed on April 24, 2001, file no. 000-23712.
(b) Reports on Form 8-K.
During the fiscal quarter ended September 30, 2001, we filed (i) a
Current Report on Form 8-K on July 16, 2001 to report a change in our fiscal
year end from June 30 to December 31, effective June 29, 2001, and (ii) an
Amended Current Report on Form 8-K/A filed July 31, 2001, which report amended
our Current Report on Form 8-K filed April 19, 2001 to include the financial
information required by Item 7(a) and (b) of Form 8-K.
7
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 14, 2001 /s/ Constantin Jitaru
--------------------------------------------------
Constantin Jitaru, President and Chief
Executive Officer
Date: November 14, 2001 /s/ Anatol Sirbu
--------------------------------------------------
Anatol Sirbu, Chief Financial Officer
8