UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) July 12, 2002
Commission File Number 000-13822
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RESCON TECHNOLOGY CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Nevada 83-0210455
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
25 Fairchild Avenue, Suite 500
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Plainview, New York 11803
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(Address of principal executive offices)
(516) 576-0060
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(Registrant's Executive Office Telephone Number)
ITEM 1. CHANGES IN CONTROL
This Current Report on Form 8-K is filed as an amendment to the Form
8-K filed by the Company on or about July 23, 2002, to provide relevant
financial and other disclosure. The Current Report on Form 8-K,
previously filed by the Company on or about July 23, 2002, is incorporated
herein in its entirety.
ITEM 5. OTHER INFORMATION
This Current Report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. When used in
this Current Report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," or "intend" or similar expressions
identify forward-looking statements regarding events, conditions, financial
trends in connection with our future plan of operations, business strategy,
operating results and financial position. Current shareholders and
prospective investors are cautioned that forward-looking statements are not
guarantees of future performance. Such forward-looking statements by their
nature involve substantial risks and uncertainties, certain of which are
beyond our control, and actual results from future periods could differ
materially from those discussed in this Current Report.
DESCRIPTION OF BUSINESS
CORPORATE HISTORY
ResCon Technology Corp., (the "Company") was incorporated under the
laws of the State of Wyoming on December 9, 1968, under the name "Platte
River Construction Company, Inc." The purpose for which the corporation
was organized was to engage in and to do any lawful act concerning any or
all lawful businesses for which corporations may be organized.
The Company had an initial authorized capital of $49,500 consisting of
49,500 shares of $1.00 par value common stock.
The Company amended its Articles of Incorporation on February 1, 1985,
to change its name from "Platte River Construction Company, Inc." to
"ResCon Technology Corporation." Also, the Articles were amended to
increase the total number of shares authorized from 49,500 to 770,000,000
and to change the par value from $1.00 per share to $.0001 per share.
On April 1, 1985, the Company amended its Articles of Incorporation to
change the total number of shares authorized from 770,000,000 to 1,000,000
with the par value remaining $.0001 per share.
On or about May 21, 1985, the Company filed an S-18 Registration
Statement with the Securities and Exchange Commission.
On December 13, 1999, the Company completed a merger with ResCon
Technology Corp., a Nevada Corp., with the Nevada corporation being the
surviving corporation. In connection with said merger, the shareholders of
the Wyoming corporation received one share of the Nevada corporation for
every 7,000 shares of the Wyoming corporation; provided, that no
stockholder, computed on a per stock certificate or record basis, owning 10
or more shares was reduced to less than 10 shares as a result of the
reverse split and that no stockholder owning less than 10 shares, on a per
stock certificate of record basis, was affected by the reverse split.
Public Offering
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The Company made a registered public offering, on Form S-18, of its
$.001 par value common stock. The public offering was completed on August
9, 1985, when the Company sold 221,311,500 units consisting of one share of
common stock and a warrant. Each unit was sold for $.01. Two warrants
entitled a holder to purchase one share of common stock for $.015 per
share.
The Company's common stock is now quoted on the Over-the-Counter
Bulletin Board under the symbol "RCTC."
Material Changes in Control Since Inception
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The Company manufactured and sold chemicals and related products for
the permanent repair and protection on concrete and steel structures. The
Company developed its own formulas, and researched and tested these
formulas for commercial applications. The Company's products have been used
in projects by the Federal Highway Administration in conjunction with
individual states such as Virginia, Oregon, New York, Minnesota and
Nebraska. Private industry projects utilizing the Company's products have
included parking ramps in Minnesota, Ohio, West Virginia and Kansas. It
ceased all such operations over 10 years ago.
Other than the above-referenced matters and investigating potential
assets, property or businesses to acquire, the Company has had no material
business operations for over 10 years.
On July 12, 2002, the Company consummated an Agreement and Plan of
Reorganization (the "Agreement") with Radical Technologies, Inc., a New
York corporation ("Radical") and its then wholly owned subsidiary GIT
Securities Corporation, a Nevada corporation ("GIT"). Pursuant to the
terms and conditions of the Agreement, Radical acquired 10,000,000
restricted Company common shares in exchange for 20% of the issued and
outstanding common shares of GIT.
GIT is a broker-dealer registered with the National Association of
Securities Dealers ("NASD"). As such, it is subject to NASD rules and
regulations. As an NASD broker-dealer, GIT must obtain NASD approval of
any change in its beneficial ownership that exceeds 25%. GIT is currently
seeking NASD approval of a change in its beneficial ownership to allow the
Company to acquire the remaining 80% of its issued and outstanding common
shares from Radical. Upon approval of the change in beneficial ownership
of the remaining 80% by the NASD, GIT shall become a wholly owned
subsidiary of the Company and the Company shall issue an additional
1,000,000 shares to Radical.
At the time the Agreement was executed, certain Company shareholders
agreed to return their shares to the Company for cancellation. Radical now
owns approximately 97% of the 10,273,091 issued and outstanding common
shares of the Company.
Upon approval by the NASD of the transfer of the remaining 80%
interest in GIT to the Company, the Company's primary business operations
will be the operations of its subsidiary GIT.
BUSINESS OF GIT
GIT is a $5,000 introducing broker-dealer under "fully disclosed"
Clearing Agreements with two self-clearing broker-dealers. GIT began its
brokerage operations in the second half of 2001. GIT relies on its
registered representatives (i.e., stockbrokers) to open client accounts and
to take buy and sell orders from clients for which the clients pay a
commission to GIT. During 2002, average monthly net trading commissions
from sales have ranged between $100,000 and $300,000 with net commissions
averaging approximately $170,000 per month. Assuming market conditions do
not vary greatly, GIT does not anticipate significant change in its average
monthly net trading commissions during the next twelve months. Currently,
the main sources of revenue for GIT are trading commissions from the sale
of stock and options.
GIT is a relatively small, simply structured brokerage offering both
discount and full-service brokerage services to specific ethnic groups in
the United States, with a primary focus on Russian, Bulgarian, and Armenian
ethnic groups. The principals of GIT are multi-lingual and have sought to
hire and train personnel capable of providing personalized services to the
firm's clients in their native languages. GIT believes in this way it can
provide higher quality service to certain ethnically diverse communities in
the United States who may be more comfortable engaging in securities
transaction in their native language. GIT has primarily focused its
marketing activities in the metropolitan areas of the East Coast. As funds
and demand justify, GIT will expand its services to the rest of the
country.
GIT is also seeking to establish an international presence. GIT
believes that many residents of European and Eastern Block countries desire
greater access to trading in the United States financial markets. The
current regulatory environment is such that residents of those countries
are allowed to trade securities listed on United States financial markets
only through United States based broker-dealers who have overseas offices
in those countries. GIT is currently negotiating with several consulting
groups to advise and assist GIT in establishing offices in certain European
and Eastern Block countries. GIT believes that given the multi-lingual
skills of its principals, its focus on providing services to ethnic groups
and the proliferation and acceptance of the internet as a tool of commerce
that GIT may be uniquely situated to provide services to this sector of the
market.
While GIT believes there is sufficient demand to justify international
expansion, it has conducted no market studies and has no independent
verification that such demand exists. Moreover, GIT does not have
significant financial resources available to it. Given its limited
financial resources, if it opens an unsuccessful foreign branch, or if
growth of the operations in that foreign branch does not occur as quickly
as anticipated, GIT may sustain losses from which it cannot financially
recover. Similarly, by opening foreign branches, GIT will be significantly
more susceptible to the risks and uncertainties of doing business in
foreign countries, including but not limited to, foreign regulation and
governmental intervention, currency and exchange rate risks, fluctuations
of foreign economies and terrorism.
Products
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GIT is licensed as a broker-dealer in 40 states and offers financial
services to clients across the country. GIT is a member of the NASD and
the Securities Investor Protection Corporation ("SIPC"). GIT does not make
markets in any securities and will conduct a retail operation limited to
agency trade and riskless principal transactions with customers.
Similarly, GIT does not maintain any inventory or engage in other
positional trades.
To properly service balanced portfolios, GIT offers corporate debt,
corporate equity (including both exchange listed and over-the-counter
securities), mutual funds (via subscription basis or clearing agent only)
and option contracts. GIT generally stays away from speculative thinly
traded issues. Penny stock transactions are conducted only on an
unsolicited basis, and only in accordance with applicable NASD rules.
GIT's options business line is primarily used for income and hedging
purposes. For income strategies, GIT writes covered calls for its clients.
For hedging, wherein a sector investment may be concentrated, the
corresponding equity put or index put shall be utilized for customer
protection purposes. In suitable cases, clients are allowed to enter into
long options positions for quantifiable risk positions. GIT does not take
short opening positions in options as the firm does not condone this
trading strategy. In suitable cases, GIT considers long position spreads,
straddles or combinations to satisfy investor needs. GIT relies on the
advanced technology tools provided by the CBOE website and NYSE for these
sophisticated trading derivatives.
GIT will not conduct a wire order business for mutual funds. Mutual
funds are sold either on a subscription basis wherein all money due is paid
to the fund family, or the clearing firm warehouses said fund families to
the clearing firm.
GIT does not engage in any proprietary trading or market making
activities at this time.
The current mix of GIT clients is approximately 75% retail investors
and 25% institutional investors. This may change with market conditions.
In the future, GIT may seek to enter into a strategic alliance with a
licensed banking institution or insurance provider to allow GIT to offer a
full range of high quality financial products and services.
Marketing
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GIT primarily attracts clients through different marketing techniques
including the distribution of brochures and advertisements, seminars, via
the internet and in person. All advertising is subject to prior approval
of the NASD. GIT does not rely on cold-calling as a primary or secondary
marketing strategy. From time to time, a GIT broker may "cold call" an
individual who has been referred to the broker from a center of influence
such as an attorney, accountant, etc.
GIT has a future vision and unconditional belief that rapid innovative
advances in computer technology along with dramatic expansion of internet
applications will change the face of securities market-related businesses.
Therefore, GIT will seek to employ selected technology to provide a
platform that is competitive with those offered by considerably larger
brand name brokerage operations. GIT will use technological advances
derived from both internal and external sources. Presently, GIT is
developing a unique multilingual software application, which will be
employed to facilitate securities-related activities. Basic features of
this application would provide the potential customer with comprehensive
"lay language" overview of different securities products, flexible research
tools, real-time quotes, and other various services. Additionally, GIT's
clearing firms offer excellent technological platforms, which GIT believes
will help the Firm to obtain a competitive edge and offer exceptional
service.
Back Office Operations
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Through its Clearing Agreements, GIT has effectively outsourced its
back office operations and is able to leverage the technology provided by
its clearing firms so it can better focus its efforts on marketing its
services. The clearing firms provide satisfactory customer service and
technology service support for GIT's customers who wish to provide order
entry at a low reasonable cost structure. GIT has established a small, but
continuously growing number of retail customer accounts. The GIT
principals have significant experience in the brokerage industry, and rely
on their contacts within the industry to develop clients.
As a non-clearing broker, GIT does not handle any customer funds or
securities, that responsibility rests with the above named clearing firms.
All funds or securities sent directly to GIT are immediately forwarded to
our clearing agents. GIT holds no customer accounts. All checks are made
payable directly to the clearing agent. Commissions payable to our
registered representatives are paid monthly using ADP and taxes are
collected for the New York Department of Taxation and Finance, The Treasury
Department and OADISA. GIT's back office personnel in ministerial,
secretarial, clerical and operations and compliance are paid bi-weekly
using the same ADP system.
Competition
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The market for discount brokerage services is rapidly evolving and
intensely competitive and has few barriers to entry. We expect competition
to continue and intensify in the future. GIT encounters competition from
numerous brokerage firms, including discount brokerage firms and
full-commission brokerage firms, financial institutions, mutual fund
sponsors, insurance companies and other organizations. Businesses in the
securities industry primarily compete in the following areas:
- Quality and ability of professional personnel;
- Experience and reputation of the firm;
- Relative prices of services and products offered;
- The scope of products and services; and
- Back office operations efficiency.
GIT has focused its efforts on positioning itself competitively by
targeting services to specific ethnic groups in the United States, with a
primary focus on Russian, Bulgarian, and Armenian ethnic groups, and
providing them the ability to make securities transactions in their primary
language. This is a market GIT believes is not adequately served by, and
not the primary focus of larger firms.
Many competitors of GIT have significantly greater financial,
technical, marketing and other resources. Many of its competitors offer a
wider range of service and financial products and have greater name
recognition and more extensive client bases. These competitors may be able
to respond more quickly to new and changing opportunities, technologies and
client requirements and may be able to undertake more extensive promotional
activities, offer more attractive terms to clients and adopt more
aggressive pricing policies. Moreover, current and potential competitors
have established or may establish cooperative relationships among
themselves or with third parties or may consolidate to enhance their
services and products. We expect that new competitors or alliances among
competitors will emerge and may acquire significant market share. There
can be no assurance that we will be able to compete effectively with
current or future competitors or that the competitive pressures GIT faces
will not harm our business.
Cyclical Factors
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The revenues of GIT may be adversely affected by cyclical factors,
such as financial market downturns, problems or recessions in the United
States or global economies. These downturns may cause investor concerns,
which has historically resulted in fewer transactions and less investing
through broker-dealers, thereby reducing revenue and potentials profits.
Such conditions would present risk in that GIT would need to raise
additional capital to offset related significant reductions in revenues.
Government Regulation
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BROKER-DEALER REGULATION
The securities industry in the United States is subject to extensive
regulation under various federal and state laws and regulations. While the
Securities and Exchange Commission ("SEC") administers most of the federal
securities laws, much of the regulation of the securities industry is
subject to state regulation and various self-regulatory organization such
as the NASD. The self-regulatory organizations, among other things,
promulgate regulation and provide oversight in the following areas:
- Sales practices;
- Trade practices among broker-dealers;
- Capital requirements;
- Records keeping; and
- Conduct of employees and affiliates of member organizations.
The SEC, the states and the self-regulatory organizations also have
the authority to conduct administrative proceedings that can result in the
censure, fine, suspension or expulsion of a broker-dealer, its employees or
officers. Also, new legislation, changes in rules and regulations
promulgated by the SEC, the states or self-regulatory organizations, or
changes in the interpretation or enforcement of existing laws and rules
often directly affect the operation and profitability of broker-dealers.
The stated purpose of much of the regulation of broker-dealers is the
protection of customers and the securities markets, rather than the
protection of creditors and shareholder of broker-dealers.
NET CAPITAL REQUIREMENTS; LIQUIDITY
As a registered broker-dealer and member of the NASD, GIT is subject
to the Net Capital Rule. The Net Capital Rule, which specifies minimum net
capital requirements for registered broker-dealers, is designed to measure
the general financial integrity and liquidity of a broker-dealer and
requires that at least a minimum part of its assets be kept in relatively
liquid form. In general, net capital is defined as net worth (assets minus
liabilities), plus qualifying subordinated borrowings and certain
discretionary liabilities, and less certain mandatory deductions that
result from excluding assets that are not readily convertible into cash and
from valuing conservatively certain other assets. Among these deductions
are adjustments (called "haircuts"), which reflect the possibility of a
decline in the market value of an asset prior to disposition.
Failure to maintain the required net capital may subject a firm to
suspension or revocation of registration by the SEC and suspension or
expulsion by the NASD and other regulatory bodies and ultimately could
require the firm's liquidation. The Net Capital Rule prohibits payments of
dividends, redemption of stock, the prepayment of subordinated indebtedness
and the making of any unsecured advance or loan to a shareholder, employee
of affiliate, if the payment would reduce the firm's net capital below a
certain level.
The Net Capital Rule also provides that the SEC may restrict for up to
20 business days any withdrawal of equity capital, or unsecured loans or
advances to shareholders, employees or affiliates ("capital withdrawal") if
the excess net capital and the SEC concludes that the capital withdrawals
during a 30-day period, exceeds 30% of the excess net capital and the SEC
concludes that the capital withdrawal may be detrimental to the financial
integrity of the broker-dealer. In addition, the Net Capital Rule provides
that the total outstanding principal amount of the broker of a broker-
dealer's indebtedness under certain subordination agreements, the proceeds
of which are included in its net capital, may not exceed 70% of the sum of
the outstanding principal amount of all subordinated indebtedness included
in net capital, par or stated value of capital stock, paid in capital in
excess of par, retained earnings and other capital accounts for a period in
excess of 90 days.
A change in the Net Capital Rule, the imposition of new rules or any
unusually large change against net capital could limit those of our
operations that require the intensive use of capital, such as the financing
of client account balances, and also could restrict our ability to pay
dividends, repay debt and repurchase shares of our outstanding stock. A
significant operating loss or any unusually large charge against net
capital could adversely affect our ability to expand or even maintain our
present levels of business, which could harm our business.
GIT is a member of SIPC which provides, in the event of the
liquidation of a broker-dealer, protection for clients' accounts up to
$500,000, subject to a limitation of $100,000 for claims for cash balances.
GIT's clients are carried on the books and records of our clearing firms.
EMPLOYEES
GIT currently have 14 full-time employees, 12 of which are registered
representatives, including four of whom are in management. None of its
employees are covered by a collective bargaining agreement or are
represented by a labor union. GIT's relations with its employees are good.
DESCRIPTION OF PROPERTY
The corporate headquarters of GIT is located at 271 North Ave., Suite
1103 in New Rochelle, New York 10801, where its leases approximately 1,200
square feet of office space for $1,250 per month, pursuant to a lease that
expires in July, 2003. GIT also has a branch office located at 25
Fairchild Avenue, Suite 500 Plainview, New York 11803, where it leases
approximately 4,000 square feet of office space for $5,000 per month,
pursuant to a lease that expires in July, 2003. GIT will open additional
branch offices in the future based upon need and the progress of its
business activities. GIT does not anticipate opening an additional branch
office prior to the end 2002.
DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the terms of the Agreement and Plan of Reorganization,
following consummation of the Agreement, the directors and executive
officers of the Company resigned in seriatim and appointed Christian
Nigohossian, Michael Barrett and Perry Louros as directors of the Company.
Christian Nigohossian was also appointed to serve as president and
secretary of the Company.
CHRISTIAN NIGOHOSSIANN, DIRECTOR, PRESIDENT AND SECRETARY. Mr.
Nigohossian has served as president of GIT since March 2001. As such, he
is particularly responsible for developing and overseeing the retail
operations of GIT. He is also involved in the general management of the
firm. Mr. Nigohossian is a licensed General Securities Principal (Series
24), an Equity Trader (Series 55), a Registered Option Principal (Series 4)
and a Registered Representative (Series 7 and 63). From 1997 to 2001, Mr.
Nigohossian was a registered representative at the Minneapolis Company
where, in addition to developing retail clients, he also gained experience
in structuring and developing back office and trading operations. His
operations experience includes compliance assistance, monitoring and
enforcement of industry rules and regulations. His trading experience
includes ECN oerder flow, market making , working with trading
correspondents , manning multiple Nasdaq workstations and trading for the
proprietary account. Mr. Nigohossian is 31 years old.
MICHAEL BARRETT, DIRECTOR. Mr. Barrett has been with GIT since March
2000. He currently serves as the Branch Manager of the firm's Plainview
office. Mr. Barrett is a licensed General Securities Principal (Series
24), a Registered Option Principal (Series 4) and a Registered
Representative (Series 7 and 63). From 1994 to 1999, Mr. Barrett worked
for Murray Hill Chemists, a pharmaceutical company. During his tenure with
Murray Hill, Mr. Barrett primarily responsible for employee supervision in
the various positions he held, including software trainer, operational
trainer and manager and customer service manager in a retail environment.
Mr. Barrett received a Bachelors of Science degree in Psychology from
Rutgers University. Mr. Barrett is 41 years old.
PERRY LOUROS, DIRECTOR. Mr. Louros has served as operations manager
for GIT since March 2001. As operations manager, Mr. Louros is primarily
responsible to oversee the day-to-day operations of the firm. Prior to
joining GIT, Mr. Louros was employed by Frostpond Realty. In addition to
being a real estate agent and participating in property lease negotiations
and property management operations, Mr. Louros held various supervisory
positions with Frostpond. He oversaw the day-to-day operations of the
company. He was also responsible for training, motivating and directing
the sales force. Mr. Louros received a Bachelors of Science degree in
Psychology from the C.W. Post Campus of Long Island University. Mr. Louros
is 33 years old.
ITEM 7. FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
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Included herein as Exhibit 99.1 to this Current Report on Form 8-K/A,
which is incorporated into this document by reference, are the statement of
financial condition of GIT Securities Corporation as of December 31, 2001,
and the statement of operations, statement of stockholders' equity and
statement of cash flows, with the accompanying notes to the financial
statements.
(b) Pro Forma Financial Information
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The following documents appear as Exhibit 99.2 to this Current Report
on Form 8-K/A and are incorporated into this document by reference:
Unaudited Pro Forma Balance Sheet as of June 30, 2002;
Unaudited Pro Forma Statement of Operations for the year ended
December 31, 2001;
Unaudited Pro Forma Statement of Operations for the six months ended
June 30, 2002;
Notes to the Unaudited Pro Forma Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K/A-1 to be
signed on its behalf by the undersigned hereunto duly authorized.
RESCON TECHNOLOGY CORPORATION
Date: September 23, 2002 By: /s/ Christian Nigohossian
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Christian Nigohossian, President