U.S. 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 March 31, 2001
[ ] Transition Report Under Section 13 Or 15(D) Of The Exchange Act
For the transition period from ____________ to ____________
Commission File No. 0-31507
PRECOM TECHNOLOGY, INC.
(Name of Small Business Issuer in Its Charter)
Florida 06-1588136
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2001 West Main Street, Suite 208, Stamford, CT 06902
(Address of Principal Executive Offices)
(203) 961-0306
(Issuer's Telephone Number, Including Area Code)
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.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 13, 2002, the Company had
44,204,131 shares of Common Stock outstanding, $0.001 par value and no shares of
preferred stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
PRECOM TECHNOLOGY, INC.
FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
TABLE OF CONTENTS
Page No.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements 1
INDEPENDENT ACCOUNTANTS' REVIEW REPORT 2
FINANCIAL STATEMENTS
Balance Sheets 7
Statements of Operations 8
Statement of Changes in Stockholders' Equity (Deficit) 9
Statements of Cash Flows 11
Notes to Financial Statements 12
Item 2. Plan of Operations 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 20
Signatures 21
Index to Exhibits 22
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
BASIS OF PRESENTATION
As used herein, the term "Company" refers to Precom Technology, Inc., a Delaware
corporation, unless otherwise indicated. The accompanying unaudited financial
statements are presented in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-QSB
and item 310 under subpart A 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. The accompanying statements should
be read in conjunction with the audited financial statements for the year ended
December 31, 2001 which are included in our Form 10-KSB filed with the
Securities and Exchange Commission ("SEC") on April 15, 2002. In the opinion of
management, all adjustments (consisting only of normal occurring accruals)
considered necessary in order to make the financial statements not misleading,
have been included. Operating results for the three months ended March 31, 2002
are not necessarily indicative of results that may be expected for the year
ending December 31, 2002. The financial statements are presented on the accrual
basis.
I-1
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
I-2
TABLE OF CONTENTS
Page No.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT .... 1
FINANCIAL STATEMENTS
Balance Sheets ..................... 2
Statements of Operations ........... 3
Statement of Stockholders' (Deficit) 4
Statements of Cash Flows ........... 5
Notes to Financial Statements ...... 6 - 10
I-3
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
Precom Technology, Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheet of Precom Technology, Inc. (a
development stage company) as of March 31, 2002 and the related statements of
operations, stockholders' (deficit) and cash flows for the three months ended
March 31, 2002 and 2001 and for the period from September 1, 1996 (date of
inception) to March 31, 2002, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountant. All information included in these financial statements is the
representation of the management of Precom Technology, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be 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 7 to the
financial statements, the Company has incurred net losses of $482,185, has a
deficit stockholders' equity, and needs additional capital to finance its
operations. In addition, the Company does not have any assets. These conditions
raise uncertainty about its ability to continue as a going concern. Management's
plans regarding these matters also are described in Note 7. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
We have audited, in accordance with auditing standards generally accepted in the
United States of America, the balance sheet of Precom Technology, Inc. as of
December 31, 2001, and the related statements of operations, stockholders'
(deficit) and cash flows for the year then ended (not presented herein); and in
our report dated March 8, 2002, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 2001, is fairly stated in all
material respects in relation to the balance sheet from which it has been
derived.
Moffitt & Company, P.C.
Scottsdale, Arizona
April 22, 2002
F-1
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MARCH 31, 2002 AND DECEMBER 31, 2001
ASSETS
March 31, December 31,
2002 2001
(Unaudited) (Audited)
----------- ---------
TOTAL ASSETS $ 0 $ 0
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable
Stock Transfer Agent $ 17,839 $ 17,814
Greenwich Financial Group 61,187 59,188
Legal and accounting fees 37,796 28,215
------------------ ------------------
TOTAL CURRENT LIABILITIES 116,822 105,217
------------------ ------------------
STOCKHOLDERS' (DEFICIT)
Preferred stock, par value $ 0.001 per share
Authorized 10,000,000 shares
Issued and outstanding - 0 - shares 0 0
Common stock, par value $ 0.001 per share
Authorized 50,000,000 shares
Issued and outstanding - 2,120,820 shares 2,121 2,121
Paid in capital in excess of par value of stock 363,242 363,242
Deficit accumulated during the development stage ( 482,185) ( 470,580)
------------------ ------------------
TOTAL STOCKHOLDERS' (DEFICIT) ( 116,822) ( 105,217)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) $ 0 $ 0
================== ==================
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-2
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
For the Period
From
Three Months September 1, 1996
Ended March 31, (Date of Inception)
----------------------
2002 2001 to March 31, 2002
---- ---- ------------------
REVENUE $ 0 $ 0 $ 6,768
----------- ----------- -----------
EXPENSES
General and administrative
expenses 11,605 26,588 115,560
Development costs 0 0 373,393
----------- ----------- -----------
TOTAL EXPENSES 11,605 26,588 488,953
----------- ----------- -----------
NET (LOSS) $ (11,605) $ (26,588) $ (482,185)
=========== =========== ===========
NET (LOSS) PER COMMON SHARE
Basic and diluted $ (.01) $ (.01)
=========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING
Basic and diluted 2,120,820 2,120,820
========= =========
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-3
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE PERIOD FROM SEPTEMBER 1, 1996
(DATE OF INCEPTION) TO MARCH 31, 2002
(UNAUDITED)
Preferred Stock Common Stock
--------------- ------------
Shares Amount Shares Amounts
------ ------ ------ -------
September 1, 1996
(Date of inception) 0 $ 0 0 $ 0
September, 1996 - Shares issued for services 0 0 100,000 100
October, 1996 - Shares issued for cash 0 0 100,000 100
Net (loss) for the period from
September 1, 1996 to December 31, 1996 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, DECEMBER 31, 1996 0 0 200,000 200
March 1997 - Shares issued for cash 0 0 400,000 400
March 1997 - Shares issued for settlement of
failed mergers 0 0 720,820 721
Net (loss) for the year ended
December 31, 1997 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, DECEMBER 31, 1997 0 0 1,320,820 1,321
August 1998 - Shares issued for services 0 0 600,000 600
Net (loss) for the year ended
December 31, 1998 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, DECEMBER 31, 1998 0 0 1,920,820 1,921
Net (loss) for the year ended
December 31, 1999 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, DECEMBER 31, 1999 0 0 1,920,820 1,921
August 2000 - issuance of common stock for
Provence Capital Corporation, Inc. 0 0 200,000 200
Net (loss) for the year ended
December 31, 2000 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, DECEMBER 31, 2000 0 0 2,120,820 2,121
Net (loss) for the year ended
December 31, 2001 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, DECEMBER 31, 2001 0 0 2,120,820 2,121
Net (loss) for the three months ended
March 31, 2002 0 0 0 0
--------------- --------------- ---------------- ----------------
BALANCE, MARCH 31, 2002 0 $ 0 2,120,820 $ 2,121
=============== =============== ===================================
Paid in Deficit
Capital in Accumulated
Excess of During the
Par Value Development
of Stock Stage Total
-------- ----- -----
$ 0 $ 0 $ 0
900 0 1,000
50,084 0 50,184
0 ( 16,703) ( 16,703)
- ---------------------------------------------- ---------------------- ----------------------
50,984 ( 16,703) 34,481
199,600 0 200,000
6,488 0 7,209
0 ( 178,200) ( 178,200)
- ---------------------------------------------- ---------------------- ----------------------
257,072 ( 194,903) 63,490
99,400 0 100,000
0 ( 171,241) ( 171,241)
- ---------------------------------------------- ---------------------- ----------------------
356,472 ( 366,144) ( 7,751)
0 ( 7,249) ( 7,249)
- ---------------------------------------------- ---------------------- ----------------------
356,472 ( 373,393) ( 15,000)
6,770 0 6,970
0 ( 58,741) ( 58,741)
- ---------------------------------------------- ---------------------- ----------------------
363,242 ( 432,134) ( 66,771)
0 ( 38,446) ( 38,446)
- ---------------------------------------------- ---------------------- ----------------------
363,242 ( 470,580) ( 105,217)
0 ( 11,605) ( 11,605)
- ---------------------------------------------- ---------------------- ----------------------
$ 363,242 $ ( 482,185) $ ( 116,822)
====================== ====================== ======================
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-4
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND FOR THE PERIOD FROM SEPTEMBER 1, 1996 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
For the period
From September
Three Months 1, 1996 (Date of
Ended March 31, Inception) to
--------------------------------
2002 2001 March 31,2002
---------------- --------------- -------------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net (loss) $ (11,605) $ (38,446) $ (482,185)
Adjustments to reconcile net (loss) to net
cash (used) by operating activities:
Stock issued for merger expenses 0 0 14,179
Stock issued for services 0 0 101,000
Changes in operating assets and liabilities:
Accounts payable 11,605 38,446 116,822
---------------- --------------- -------------------
NET CASH (USED) BY
OPERATING ACTIVITIES 0 0 (250,184)
---------------- --------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES 0 0 0
---------------- --------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 250,184
---------------- --------------- -------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 0 0 250,184
---------------- --------------- -------------------
NET INCREASE IN CASH 0 0 0
CASH AT BEGINNING OF PERIOD 0 0 0
---------------- --------------- -------------------
CASH AT END OF PERIOD $ 0 $ 0 $ 0
================ =============== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the period for:
Interest $ 0 $ 0 $ 0
================ =============== ===================
Taxes $ 0 $ 0 $ 150
================ =============== ===================
SCHEDULE OF NON-CASH FINANCING
ACTIVITIES:
Issuance of common stock for merger expenses $ 0 $ 0 $ 14,179
================ =============== ===================
Issuance of common stock for services $ 0 $ 0 $ 101,000
================ =============== ===================
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-5
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Precom Technology, Inc. (hereinafter referred to as the Company) was
organized on September 1, 1996, under the laws of the State of
Florida. In August 2000, the Company completed a merger with Provence
Capital Corporation, Inc. by exchanging 200,000 shares of common stock
for 100% of the outstanding shares of Provence Capital Corporation,
Inc.
Name Changes
The Company has changed its name as follows: At date of incorporation
- Fairbanks, Inc. April 1997 - Jet Vacations, Inc. May 1998 - Precom
Technology, Inc.
Accounting Estimates
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax basis of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
Net (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No.
128 that requires the reporting of both basic and diluted earnings
(loss) per share. Basic earnings (loss) per
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-6
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net (Loss) Per Share (Continued)
share is computed by dividing net income (loss) available to common
stockholders' by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share reflects
the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock. In accordance with FASB 128, any anti-dilutive effects
on net (loss) per share are excluded.
Recent Accounting Pronouncements
In June 2001, the FASB issued the following statements:
FASB 141 - Business Combinations FASB 142 - Goodwill and other
Intangible Assets FASB 143 - Accounting for Asset Retirement
Obligations
FASB 144 - Accounting for the Impairment or Disposal of Long-Lived
Assets
These FASB statements did not have a material impact on the Company's
financial position or results of operations.
NOTE 2 RESTATEMENT OF COMMON STOCK AND PAID IN CAPITAL IN EXCESS OF PAR
VALUE OF STOCK
On February 5, 2001, the Company effected a 1 for 100 reverse stock
split on 19,208,522 shares of stock. On March 19, 2001, the Company
then had a 10-1 forward stock split on 192,008 shares.
The stock splits have been retroactively recorded in the financial
statements as if they occurred at the date of inception.
NOTE 3 DEVELOPMENT STAGE OPERATIONS
As of March 31, 2002, the Company was in the development stage of
operations. A development stage company is defined as a company that
devotes most of its activities to establishing a new business
activity. In addition, planned principal activities have not
commenced, or have commenced and have not yet produced significant
revenue.
The Company expensed $373,393 of development costs for the period from
September 1, 1996 (date of inception) to March 31, 2002.
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-7
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 4 INCOME TAXES
Significant components of the Company's deferred tax assets and
liabilities are as follows as of March 31, 2002 and 2001:
2001 2000
------------------ ------------------
Deferred tax assets
Net operating losses carryforward $ 66,000 $ 62,000
Less valuation allowance 66,000 62,000
------------------ ------------------
Net deferred tax assets $ 0 $ 0
================== ==================
Deferred tax liabilities $ 0 $ 0
================== ==================
A reconciliation of the valuation allowance is as
follows:
2001 2000
Balance at beginning of period $ 64,000 $ 57,959
Addition for the period 2,000 4,041
------------------ ------------------
Balance at end of period $ 66,000 $ 62,000
================== ==================
NOTE 5 NET OPERATING LOSS CARRYFORWARDS
The Company has the following net operating loss carryforwards at
March 31, 2002:
Tax Year Amount Expiration date
----------------- --------------------- ---------------
December 31, 1996 $ 16,703 2016
December 31, 1997 178,200 2017
December 31, 1998 171,241 2018
December 31, 1999 7,248 2019
December 31, 2000 15,226 2020
December 31, 2001 38,446 2021
March 31, 2002 11,605 2022
---------------------
$ 438,669
=====================
Future changes in ownership may limit the ability of the Company to
utilize its net operating loss carryforwards.
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-8
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 6 PREFERRED STOCK
No rights or preferences have been assigned to the preferred stock.
NOTE 7 GOING CONCERN
These financial statements are presented on the basis that the Company
is a going concern. Going concern contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business over a reasonable length of time. The Company has incurred
net losses of $482,185, has deficit stockholders' equity and needs
additional capital to finance its operations. These factors raise
uncertainty as to the Company's ability to continue as a going
concern.
Management's plans to eliminate the going concern situation include,
but are not limited to, seeking a merger candidate. (See Note 10)
NOTE 8 BUSINESS COMBINATION
In August 2000, the Company merged with Provence Capital Corporation,
Inc. and accounted for the transaction as a pooling of interest. The
Company recorded the merger as follows:
Increase in common stock $ 200
Increase in paid in capital in excess of
par value of stock 6,770
The following unaudited information presents certain income statement
data of the separate companies for the periods preceding the merger:
2000
Net sales -----------------
Precom Technology, Inc. $ 0
Provence Capital Corporation, Inc. 0
Net (loss)
Precom Technology, Inc. ( 42,170)
Provence Capital Corporation, Inc. ( 6,970)
There were no material transactions between Precom Technology, Inc.
and Provence Capital Corporation, Inc. prior to the merger. The
effects of conforming Provence Capital Corporation, Inc.'s accounting
policies to those of Precom Technology, Inc. were not material.
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-9
PRECOM TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 9 UNAUDITED FINANCIAL INFORMATION
The accompanying financial information as of March 31, 2002 and 2001
is unaudited. In management's opinion, such information includes all
normal recurring entries necessary to make the financial information
not misleading.
NOTE 10 SUBSEQUENT EVENT - SALE OF COMMON STOCK
On April 9, 2002, the Company sold 40,000,000 shares of common stock
to CGI International Holdings, Inc. under the following terms and
conditions:
A. CGI International Holdings, Inc. issued to the Company a six
month note for $2,000,000.
B. The note does not bear interest.
C. The note is secured by the 40,000,000 shares of stock.
D. The Company shall release a portion of the security if partial
payments are made on the note.
E. The Company will change its name to Concilium Group, Inc.
On April 12, 2002, the new chief executive officer purchased 2,030,511
shares of common stock for a cash payment of $101,541.
On April 16, 2002, the Company issued 1,000,000 warrants to Greenwich
Financial Group (Greenwich). The warrants entitle Greenwich to acquire
1,000,000 shares of common stock at $1.00 per share for a period of
three years.
The Company agreed to issue Greenwich Financial Group and its
shareholders 3,850,000 of restricted common stock as follows:
100,000 shares to stockholders of Greenwich for consulting services.
1,350,000 shares to Greenwich subject to a lock-up agreement which
restricts sales of the stock to 210,000 shares per month. The Company
agreed to register these shares with the Securities and Exchange
Commission by June 15, 2002. The Company is subject to penalty clauses
if it does not register and receive SEC approval by June 15, 2002. The
penalties are that the Company would have to issue Greenwich addition
shares depending on the length of time the SB-2 filing is delayed.
2,400,000 will be restricted shares.
On April 17, 2002, the Company issued 2,500,000 shares to Randal
Letcavage and Rosemary Nguyen in payment for a consulting agreement.
On April 9, 2002, the Company established the 2002 employee stock
option plan and reserved 4,642,820 shares of common stock for future
issuance under the plan.
See Accompanying Notes and Indeptendent Accountants' Review Report.
F-10
Item 2. Plan of Operation
OVERVIEW
- ---------
On February 25, 2002, we entered into a Share Exchange Agreement with CGI
International Holdings, Inc., a Delaware corporation, ("CGI"), and its
shareholders. We reported this transaction in an 8-K filed with the SEC on March
26, 2002 and attached a copy of the Share Exchange Agreement as Exhibit 1 to the
8-K. On April 9, 2002, we decided to rescind that Share Exchange Agreement and
to proceed with a simpler transaction that could be accomplished immediately,
and with a better result for our shareholders. Under the new transaction, CGI
agreed to purchase 40 million shares of our common stock for a capital
investment in the Company equal to $2,000,000. Please refer to our Form 10-KSB
filed with the SEC April 15, 2002 for further discussion of the share
acquisition. A copy of the Subscription Agreement dated April 9, 2002 is
attached as Exhibit 10.1 to our Form 10-KSB filed with the SEC on April 15,
2002. The Company intends to integrate the operations of CGI into the Company
during 2002.
CGI is an international financial services company engaged in financial, tax and
business planning, asset protection, insurance management, and merchant banking
with offices in the United States and Hong Kong. CGI is organized as a holding
corporation with five distinct divisions or subsidiaries currently, and several
planned in 2002, which collectively provide all of the necessary elements to
manage and execute each comprehensive, specifically tailored service plan
developed and maintained to meet the financial needs of CGI's clients. The
individuals managing each division or subsidiary are recognized as being among
the best in their respective industries. CGI acts as a "financial concierge" by
maintaining and coordinating the actions of division each subsidiary into a
cohesive set of services.
RESULTS OF OPERATIONS
- ---------------------
The Company had no operations in the first quarter of 2002 and its sole business
model since early 2000 has been to identify, acquire or merge with a viable
business operation. Management made numerous efforts to pursue the Company's
original business plan and to raise capital to operate the business.
Unfortunately the equity markets underwent significant turmoil and uncertainty
over the past two years. As a result, our ambitious plans for a capital
intensive business were unsuccessful and our capital needs could not be
realized. Accordingly we abandoned our original business plan and began to look
for potential acquisition candidates. In addition, as of the most recent quarter
ending March 31, 2002, we have incurred cumulative net losses of $482,185 from
inception. We abandoned all further development activities and had no assets as
of March 31, 2002. These factors raised doubt as to our ability to continue as a
going concern and our auditors included a going concern warning in their audit
report for the year ended December 31, 2001, as reported on our 10-K filed with
the SEC on April 15, 2002. Management's plans to eliminate the going concern
situation included but were not limited to seeking a merger or acquisition
candidate. A mature and businesslike evaluation of our affairs required the
consideration of the foreseeable possibility of business failure. Accordingly, a
reverse acquisition transaction or other merger transaction became a possible
and foreseeable solution.
I-3
In early January 2001, we had received an offer from GroupNow, Inc. dated
November 1, 2000 to acquire a controlling interest in our company. On or about
March 5, 2001, we contacted GroupNow, Inc., to follow up on their progress and
to consider an opportunity to be acquired by our Company. After the discussions
with Information Technology, Inc., we re-opened discussions with GroupNow. We
entered into a Stock Exchange Agreement with GroupNow Inc. on June 4, 2001 and
commenced the necessary due diligence and SEC disclosure process. In our Form
10Q for the Third Quarter of 2001, filed with the SEC on November 14, 2001, we
announced that the proposed transaction with GroupNow Inc. had been called off
due to extenuating circumstances. We then began to search for a more suitable
acquisition partner. Negotiations between CGI and the Company began in early
February, 2002 and resulted in the execution of a Share Exchange Agreement
between CGI and its shareholders and the Company dated February 25, 2002. A copy
of the Share Exchange Agreement was included in the Form 8-K reporting the
agreement filed with the SEC on March 26, 2002. Subsequently, we decided to
rescind that Agreement and entered into a Subscription Agreement with CGI on
April 9, 2002, under which CGI agreed to subscribe for 40,000,000 shares of our
common stock in return for a promissory note, secured by the stock, for
$2,000,000. This transaction, and a copy of the Subscription Agreement and
Promissory Note, were reported on Form 10-KSB, filed with the SEC on April 15,
2002.
The Company incurred general and administrative expenses of $11, 605 during the
first quarter of 2002, resulting in a loss for the quarter of $11, 605 and a
cumulative loss of $482,185.
Currently the Company does not have sufficient resources to meet the Company's
cash requirements. The Company is current seeking to raise additional capital
through various vehicles including but not limited to acquisitions of other
business concerns, private stock placements, or public offerings.
FORWARD-LOOKING STATEMENTS
- --------------------------
Forward-looking statements, based on management's current views and assumptions,
are made throughout this Form 10-QSB. These statements, including consolidated
pro forma financial statements, are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical results and
those presently anticipated or projected. Among the factors that may affect
operating results are the following: success of the Company's change in focus,
competitive environment, limited capital resources and general economic
conditions.
I-4
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Robert Hipple, CEO of the Company, Rodney Read, COO, Drew Roberts, CFO and Aaron
Nilsen, Corporate Counsel, as officers of CGI, the 94 percent majority
shareholder of the Company, were named as defendants in an action entitled David
K. Broadbent, as Receiver, et al. vs. CGI International Holdings, Inc. et al
filed March 21, 2002 in the United States District Court for the District of
Utah, Central Division, Civil Action No. 2:02-C-230. In that action, the
Receiver is seeking to ascertain whether any assets of Merrill Scott &
Associates, Inc., a Utah corporation, by which all of the individuals had been
employed prior to October 15, 2001 (Mr. Roberts until December 31, 2001) are
held by CGI. Merrill Scott & Associates, Inc., which ceased active business
prior to the end of 2001, is the subject of an SEC civil enforcement action,
along with its principal and several related entities, commenced on January 15,
2002. The Receiver was appointed on January 23, 2002 at the request of the SEC
to identify and gather the assets of Merrill Scott & Associates, Inc. for the
benefit of its creditors. Based on a review of the pleadings and other documents
filed in the Receiver action, no liability is expected to result from this
action on the part of CGI, or any of the named individuals, because no assets or
other property of Merrill Scott & Associates, Inc. are held by CGI, or any of
the named individuals. On April 5, 2002, a Stipulated Order was entered by the
Court in the pending civil litigation whereby, in part, CGI agreed to set aside
temporarily 40% of any fees or commissions earned by CGI from certain clients
for whom CGI might provide services in the future, until it has been determined
whether the Receiver has any claim to the specific clients. CGI does not expect
the any reserved funds will be subject to a claim by the Receiver since the
Receiver has already indicated that he will not be providing any services to any
of the potential clients. The Stipulated Order any relates to potential clients
first identified between October 15, 2001 and January 15, 2002, prior to CGI's
incorporation. Motions to Dismiss the claims against CGI and the named
individuals for failure to state a cause of action, or for judgment on the
pleadings, have been filed in the Receiver's action and are currently pending
with the Court.
Item 2. Changes in Securities.
On February 25, 2002, we entered into a Share Exchange Agreement with CGI, and
its shareholders. We reported this transaction in an 8-K filed with the SEC on
March 26, 2002 and attached a copy of the Share Exchange Agreement as Exhibit 1
to the 8-K. On April 9, 2002, we decided to rescind that Share Exchange
Agreement and to proceed with a simpler transaction that could be accomplished
immediately, and with a better result for our shareholders. Under the new
transaction, CGI agreed to purchase 40 million shares of our common stock for a
capital investment in the Company equal to $2,000,000 (the "Subscription
Agreement). Please refer to the Company's Form 10-KSB filed with the SEC on
April 15, 2002 for further discussion of the Subscription Agreement.
Effective April 16, 2002, the Company issued 1,000,000 warrants to Greenwich
Financial Group. Please refer to Item 5 for further discussion of the Warrant
Agreement.
On April 12, 2002, the Company entered into a subscription agreement with Robert
J. Hipple, President, CEO and Chairman of the Company, whereby the Company
issued 2,030,811 shares of the Company's common stock to in exchange for
$101,540.55. The proceeds from this subscription were used by the Company for
payroll and other operating expenses.
Item 3. Defaults Upon Senior Securities.
None
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Item 4. Submission of Matters to a Vote of Security Holders.
Prior to the issuance of the new shares to CGI, a majority of our shareholders
consented in writing on April 9, 2002 to certain actions, in lieu of an Annual
Meeting of the shareholders. Those actions consented to in writing by a majority
of our shareholders were:
Election of Directors
To elect as directors of the Company the following individuals, to
serve until the next Annual Meeting or until their successors are
elected: Nicholas M. Calapa, Robert Hipple and Rodney Read.
Appointment of Auditors for 2002
To appoint Moffitt & Company, PC, of Scottsdale, Arizona, as our
auditors again for 2002.
Adoption of the 2002 Stock Option Plan for Employees
To approve the adoption of the 2002 Employee Stock Option Plan.
Please refer to the Company's Form 10-KSB filed with the SEC on April 15, 2002
for further discussion of these shareholder actions. A copy of the 2002 Employee
Stock Option Plan is attached to that Form 10-KSB.
Item 5. Other information.
The Company has agreed to honor and complete certain agreements and conditions
that were contemplated under the rescinded Share Exchange Agreement. The
following are the related transactions the Company has entered into:
The Company has issued warrants to Greenwich Financial Group ("GFG") to purchase
1,000,000 shares of the Company's common stock at $2.00 per share for a period
of three (3) years. A copy of the Warrant Agreement with GFG is attached hereto
as Exhibit 10.1.
The Company will also issue a total of 3,850,000 restricted shares of the
Company's common stock to GFG (the GFG Shares"). Issuance of the GFG Shares will
be as follows:
100,000 of the GFG Shares have been included in the Company's
registration statement on Form S-8 filed with the SEC May 8, 2002 (the
"S-8"). 50,000 of these shares were issued each to Nicholas M. Calapa,
director of the Company and Bruce Keller, former director of the
Company, pursuant to separate consulting agreements with Messers.
Calapa and Keller. Copies of the consulting agreements are attached as
Exhibits 4.2 and 4.3 to the S-8.
1,350,000 of the GFG Shares are subject to a Lock-up Agreement
effective May 8, 2002 (the "Lock-up Agreement") between GFG and the
Company. The Lock-up Agreement provides for the release of the subject
shares for sale at the rate of 15% per month (210,000 shares) once the
subject shares become free trading as a result of an effective
registration of the subject shares and elimination of any transfer
restrictions. A copy of the Lock-up Agreement is attached hereto as
Exhibit 10.2.
2,400,000 of the GFG Shares will remain restricted shares.
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The Company has agreed to use its reasonable best efforts to register 1,350,000
of the GFG Shares on Form SB-2 to be filed with the SEC by June 15, 2002. If the
SB-2 is not filed by June 30, 2002, then the Company agreed to issue an
additional two hundred thousand (200,000) shares to GFG with such shares to be
registered in the SB-2 Registration Statement. For each additional 30 days that
the SB-2 is not filed with the SEC, GFG will receive an additional two hundred
thousand (200,000) shares that will be registered in the SB-2 Registration
Statement. If the SB-2 is not approved by the SEC and deemed effective within
365 days of filing, through any fault or neglect of the Company, then GFG will
receive an additional two hundred thousand (200,000) shares. For each additional
sixty (60) days that the SB-2 is not thereafter deemed effective for the same
reasons, GFG will receive an additional two hundred thousand (200,000) shares.
The Company issued 1,250,000 shares each to Randal Letcavage and Rosemary
Nguyen, principals of iCapital Corporation, pursuant to a Financial Consulting
Services Agreement dated April 17, 2002, between the Company and Randal
Letcavage and Rosemary Nguyen (the "Consulting Agreement"). These 2,500,000
shares are included in the S-8 registration statement filed May 8, 2002. A copy
of the Consulting Agreement attached as Exhibit 4.1 to the S-8.
Item 6. Exhibits and reports on Form 8-K
Exhibits. Exhibits required to be attached by Item 601 of Regulation S-B are
listed in the Index to Exhibits on page 22 of this Form 10-QSB, and are
incorporated herein by this reference.
Reports on Form 8-K. The Company filed one report on Form 8-K during the quarter
for which this report is filed:
On March 22, 2002, the Company filed a Form 8-K disclosing the
subscription of 40,000,000 shares of the Company's common stock by CGI
International Holdings, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this 10-QSB report to be signed on
its behalf by the undersigned thereunto duly authorized.
Precom Technology, Inc.,
a Florida corporation
By: /s/ Robert J. Hipple
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Robert J. Hipple
President and CEO
DATED: May 20, 2002
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