United States
Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
February 28, 2003 000-13822
RESCON TECHNOLOGY CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
83-0210455
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(I.R.S. Employer Identification No.)
Vanderbilt Center, 300 Vanderbilt Motor Parkway Suite 200,
Hauppage, New York 11788
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(Address of principal executive offices)
(631) 630-2240
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
----- -----
State the number of shares outstanding of each of the registrant's classes
of common equity, as of the latest practicable date.
Common stock, par value $.0001; 3,458,091 shares outstanding
as of April 1, 2003
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RESCON TECHNOLOGY CORPORATION
Condensed Balance Sheet
(Unaudited)
<Table>
<Caption>
ASSETS
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February
28, 2003
------------
Current Assets
Cash $ 3,666
Prepaid professional fees 39,167
------------
Total Current Assets 42,833
Investment in GIT Securities Corp 69,438
------------
Total Assets $ 112,271
------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
--------------------------------------
Liabilities
Accounts payable $ 989
Shareholder loan 155,490
------------
Total Current Liabilities 156,479
------------
Total Liabilities 156,479
Stockholders' Deficit
Common stock 1,126
Additional paid in capital 4,648,995
Accumulated deficit prior to development stage (4,467,609)
Accumulated income during the development stage (226,720)
------------
Total Stockholders' Deficit (44,208)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 112,271
------------
</Table>
See accompanying notes
2
RESCON TECHNOLOGY CORPORATION
Condensed Statements of Operations
(Unaudited)
<Table>
<Caption>
For the Three For the Three
Months Ended Months Ended
February 28, February 28,
2003 2002
------------- -------------
Revenues $ 0 $ 0
General & Administrative Expenses 117,957 1,146
------------- -------------
Operating Income (Loss) (117,957) (1,146)
Other Income and Expense
Income from forgiveness of debt 0 0
Income (Loss) on investment in GIT 3,493 0
------------- -------------
Net Income (Loss) Before Taxes (114,464) (1,146)
Current Year Provision for Income Taxes 0 0
------------- -------------
Net Income (Loss) $ (114,464) $ (1,146)
------------- -------------
Income Per Share $ (0.01) $ (0.01)
------------- -------------
Weighted Average Number of Shares Outstanding 11,258,091 3,861,084
------------- -------------
</Table>
See accompanying notes
3
RESCON TECHNOLOGY CORPORATION
Condensed Statements of Operations
(Unaudited)
<Table>
<Caption>
For the
Development
For the Six For the Six Stage
Months Ended Months Ended Through
February 28, February 28, February 28,
2003 2002 2003
------------ ------------ ------------
Revenues $ 0 $ 0 $ 0
General & Administrative Expenses 203,344 1,747 253,440
------------ ------------ ------------
Operating Income (Loss) (203,344) (1,747) (253,440)
Other Income and Expense
Income from forgiveness of debt 0 0 5,345
Income (Loss) on investment in GIT 29,759 0 21,375
------------ ------------ ------------
Net Income (Loss) Before Taxes (173,585) (1,747) (226,720)
Current Year Provision for Income Taxes 0 0 0
------------ ------------ ------------
Net Income (Loss) $ (173,585) $ (1,747) $ (226,720)
------------ ------------ ------------
Income Per Share $ (0.02) $ (0.01) $ (0.04)
------------ ------------ ------------
Weighted Average Number of
Shares Outstanding 11,258,091 3,861,084 5,233,908
------------ ------------ ------------
</Table>
See accompanying notes
4
RESCON TECHNOLOGY CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
<Table>
<Caption>
For the
Development
For the Six For the Six Stage
Months Ended Months Ended Through
February 28, February 28, February 28,
2003 2002 2003
------------ ------------ ------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (173,585) $ (1,747) $ (226,720)
Adjustments to reconcile net loss to
net cash used for operating activities:
Income from investment in GIT (29,759) 0 (21,375)
Income from forgiveness of debt 0 0 (5,345)
Issued common stock for service or expenses 0 0 44,682
Increase in accounts payable 920 0 989
Decrease in prepaid expenses 50,600 0 50,600
Expenses paid by shareholders 0 1,747 5,345
------------ ------------ ------------
Net Cash from operating Activities (151,824) 0 (151,824)
Cash Flows from Financing Activities:
Increase in loans 155,490 0 155,490
------------ ------------ ------------
Net Cash from Financing Activities 155,490 0 155,490
Net Increase/(Decrease) in Cash 3,666 0 3,666
Beginning Cash Balance 0 0 0
------------ ------------ ------------
Ending Cash Balance $ 3,666 $ 0 $ 3,666
------------ ------------ ------------
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year for interest $ 0 $ 0 $ 0
Cash paid during the year for income
taxes $ 0 $ 0 $ 0
Issued stock for investment in GIT $ 0 $ 0 $ 48,063
Issued stock for professional fees
contracts $ 0 $ 0 $ 98,500
</Table>
See accompanying notes
5
RESCON TECHNOLOGY CORPORATION
Notes to Condensed Financial Statements
February 28, 2003
PRELIMINARY NOTE
----------------
The accompanying condensed financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year
ended August 31, 2002.
Item 2. Plan of Operations
This Form 10-QSB contains certain forward-looking statements. For
this purpose any statements contained in this Form 10-QSB that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "estimate" or "continue" or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties.
Actual results may differ materially depending on a variety of factors.
For a complete understanding, this Plan of Operations should be read in
conjunction with Part I- Item 1. Financial Statements to this Form 10-QSB.
On July 12, 2002, the Company consummated an Agreement and Plan of
Reorganization whereby it acquired 20% of the issued and outstanding common
shares of GIT Securities Corporation, an NASD registered broker-dealer for
10,000,000 restricted common shares. Pursuant to the terms and conditions
of the Agreement and Plan of Reorganization the Company was to the
remaining 80% interest in GIT upon approval of the transaction by the NASD
in exchange for an additional 1,000,000 restricted common shares. As an
NASD broker-dealer, any change in beneficial ownership of greater than a
25% interest in a registered broker-dealer must be approved by the NASD.
In February 2003, because of delays in the approval process by the
NASD, the parties to the Agreement and Plan of Reorganization agreed that
the 10,000,000 shares would be canceled and 2,200,000 shares would be
issued to represent the 20% interest in GIT acquired, with an additional
8,800,000 shares to be issued upon NASD approval.
Subsequent to quarter end, GIT voluntarily relinquished its NASD
license. Without an NASD license, GIT can no longer conduct the business
of an NASD broker-dealer. As GIT is no longer an NASD broker-dealer,
approval of a change in beneficial ownership of GIT by the NASD is no
longer required. The Company is currently determining whether it still
wishes to acquire the remaining 80% interest in GIT or acquire the assets
of GIT, and the number of shares to be issued for such an acquisition. The
Company believes GIT has net assets of approximately $150,000 to $175,000
comprised of cash, marketable securities and tangible personal property.
6
The Company is also in the process of closing an Agreement and Plan of
Reorganization with Campuslive Incorporated, a Delaware corporation,
("Campus") and the shareholders of Campus to acquire a majority of and up
to all of the issued and outstanding common shares of Campus. The Company
will acquire up to 2,680,000 shares of Campus in exchange for up to
2,680,000 restricted shares of Company common stock on a one share for one
share basis.
Campus is a development stage company that has not yet generated
revenues. Campus has created and continues to develop educational computer
software systems. In 1998, Campus completed a study of the New Jersey
Assessment tests and the New Jersey Core Curriculum Content Standards.
Based on the findings of this study and extensive in-house testing in web-
based technology, Campus has developed a software program it calls "Reading
& Writing Plus." This program is dedicated to teaching students language
arts, basic skills, reading and writing comprehension and computer skills.
Campus believes that use of the Reading & Writing Plus system over a
recommended time frame will result in increased scholastic performance as
measured by standardized testing.
Reading & Writing Plus teaches students through the use of web-based
interactive multimedia presentations. Reading & Writing Plus is based on
the premise that the student's level of concentration, intrigue, discipline
to the project and learning are increased significantly by the
interactivity of software's multimedia presentations and testing. Another
advantage of the Campus system is that the student can access the system
anywhere the student can access the internet. The student is not limited
to access at only one location, such as a school computer or a home
computer.
At this point, it is unclear when the Agreement and Plan of
Reorganization will close, although closing is expected to occur during the
third quarter of 2003. Thereafter, the Company will seek to finalize
development of the Reading & Writing Plus system and to begin selling the
system as quickly as possible. The Company hopes Campus can begin to
generate revenue by the end of the Company's fiscal year.
The Company is also investigating the acquisition of other business
opportunities.
Results of Operations
---------------------
As of February 28, 2003, the Company had total assets of $112,271,
with total liabilities of $156,479 and total stockholders'deficit of
$44,208, compared to total assets of $129,512, total liabilities of $59,255
and total stockholder's deficit of $70,257 at November 30, 2002.
During the quarter ended February 28, 2003, the Company had General
and Administrative Expenses of $ 117,957 compared to $1,146 for the same
three-month period ended February 28, 2002. During the six months ended
February 28, 2003, the Company incurred General and Administrative Expenses
of $203,344 compared to $1,747 during the six months ended February 28,
2003. These increases are due to the fact that the Company had no
operations during its first two fiscal quarters of 2002.
During the three months ended and the six months ended February 28,
2003, the Company suffered net losses of $114,464 and $173,585 respectively
compared to net losses of $1,146 and $1,747 for the corresponding three
month and six month periods ended February 28, 2002. Again, these
significant increases in losses are due to the Company undertaking business
operations in the first two fiscal quarters of 2003. The Company conducted
no business in the corresponding fiscal periods of 2002.
7
The Company has accumulated losses of $226,720 from development stage
through February 28, 2003.
Liquidity and Capital Resources
-------------------------------
The Company has not generated any revenue from sales of products and
has incurred losses since inception. As of February 28, 2003, the Company
had cash on hand of $3,666. The Company has negative working capital
through its first two fiscal quarters of 2003 and has relied on $155,490 in
shareholder loans to fund operations through February 28, 2003. The
Company does not believe it will realize sufficient income from operations
to meet its working capital needs during the remainder of its current
fiscal year. Therefore, the Company will be reliant on additional
contributions from stockholders, none of whom have made any commitments to
provide additional funding to the Company, or the Company may need to seek
additional funding through the sale of equity or debt instruments. The
Company does not know if there is any interest by any parties to provide
additional funding to the Company either in the form of equity or debt.
The Company has limited assets, a working capital deficiency and no
commitment by any party to provide the Company with additional capital.
Moreover, with the delays in receiving NASD approval of the transfer of
ownership of GIT to the Company and with GIT discontinuing its operations
as an NASD broker-dealer license the Company has no way to generate revenue
in the upcoming quarter. Similarly, even if the Company is able to
consummate the Agreement and Plan of Reorganization with Campus, the
Company does not anticipate that Campus will generate revenues during the
upcoming quarter. These issues raise substantial doubt about the Company's
ability to continue as a going concern.
Item 3. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and Chief Financial Officer has conducted an
evaluation of the Company's disclosure controls and procedures as of a date
(the "Evaluation Date") within 90 days before the filing of this quarterly
report. Based on his evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the applicable Securities and
Exchange Commission rules and forms.
(b) Changes in Internal Controls and Procedures. Subsequent to the
Evaluation Date, there were no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls, nor were any corrective actions required with regard to
significant deficiencies and material weaknesses.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Reports on Form 8-K
On January 24, 2003, the Company filed a Current Report on Form 8-K.
This Current Report disclosed the resignation of Perry Louros as a director
of the Company. That resignation was not the result of any disagreement
with the Company on any matter relating to company operations, policies or
practices.
(B) Exhibits. The following exhibits are included as part of this
report:
Exhibit 99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the
undersigned thereunto duly authorized.
ResCon Technology Corporation,
a Nevada corporation
Dated: April 29, 2003 By: /S/ Christian Nigohossian
------------------------------------
Christian Nigohossian, CEO
9
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Christian Nigohossian, certify that:
(1) I have reviewed this quarterly report on Form 10-QSB of ResCon
Technology Corporation, (the "Company");
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the Company as of, and for, the periods presented in this
quarterly report;
(4) I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Company and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Company is made known
to me by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
my evaluation as of the Evaluation Date;
(5) I have disclosed, based on my most recent evaluation, to the
Company's auditors and the audit committee of the Company's board of
directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls; and
(6) I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of the
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 29, 2003 By: /S/ Christian Nigohossian
-------------------------------------
Christian Nigohossian
Chief Executive Officer and
Chief Financial Officer
10