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
May 31, 2004 000-13822
RESCON TECHNOLOGY CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
NEVADA
---------
(State or other jurisdiction of incorporation or organization
83-0210455
---------------
(I.R.S. Employer Identification No.)
1500 Market Street, 12th Floor, East Tower,
Philadelphia, Pennsylvania 19102
------------------------------------------------
(Address of principal executive offices)
(215) 246-3456
------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
-----
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; 24,591,091 shares outstanding as of August
11, 2004
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
RESCON TECHNOLOGY CORPORATION
Condensed Financial Statements
May 31, 2004
RESCON TECHNOLOGY CORPORATION
Condensed Balance Sheet
(Unaudited)
<Table>
<Caption>
ASSETS
-------
May 31, 2004
------------
Current Assets
Cash $ 6,447
Prepaid professional fees 42,335
------------
Total Current Assets 48,782
Fixed Assets (Net) 60,303
Prepaid Equipment Lease 26,667
Software & Technology License Agreement 403,280
Investment Speed of Thought 286,720
Note receivable - Roman Sand & Stone, LLC. 153,586
Other receivable 6,000
------------
Total Non-Current Assets 936,556
------------
Total Assets $ 985,338
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
--------------------------------------
Accounts payable $ 35,403
Payable to shareholders 765,839
------------
Total Current Liabilities 801,242
Total Liabilities 801,242
Minority Interest (750)
Stockholders' Equity
Common stock 2,459
Additional paid in capital 6,340,802
Accumulated deficit prior to development stage (4,467,609)
Accumulated deficit during the development stage (1,690,806)
------------
Total Stockholders' Equity 184,846
------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 985,338
============
</Table>
See accompanying notes
3
RESCON TECHNOLOGY CORPORATION
Condensed Statements of Operations
(Unaudited)
<Table>
<Caption>
For the Three For the Three
Months Ended Months Ended
May 31, 2004 May 31, 2003
------------- -------------
Revenues $ 0 $ 0
General & Administrative Expenses 422,624 488,902
------------- -------------
Operating Income (Loss) (422,624) (488,902)
Other Income and Expense
Income (Loss) on investment in GIT 0 (69,438)
------------- -------------
Net Income (Loss) Before Taxes (422,624) (558,340)
------------- -------------
Current Year Provision for Income Taxes 0 0
------------- -------------
Net Income (Loss) $ (422,624) $ (558,340)
============= =============
Income Per Share $ (0.02) $ (0.05)
============= =============
Weighted Average Number of Shares Outstanding 24,591,091 11,258,091
============= =============
</Table>
See accompanying notes
4
RESCON TECHNOLOGY CORPORATION
Condensed Statements of Operations
(Unaudited)
<Table>
<Caption>
For the
For the Nine For the Nine Development
Months Ended Months Ended Stage Through
May 31, 2004 May 31, 2003 May 31, 2004
------------ ------------ ------------
Revenues $ 0 $ 0 $ 0
General & Administrative
Expenses 982,767 692,246 1,975,264
------------ ------------ ------------
Operating Income (Loss) (982,767) (692,246) (1,975,264)
Other Income and Expense
Income from forgiveness of debt 0 0 755,145
Income (Loss) on investment in GIT 0 (39,679) (48,063)
------------ ------------ ------------
Net Income (Loss) Before Taxes (982,767) (731,925) (1,268,182)
------------ ------------ ------------
Current Year Provision for
Income Taxes 0 0 0
------------ ------------ ------------
Net Income (Loss) $ (982,767) $ (731,925) $(1,268,182)
============ ============ ============
Income Per Share $ (0.03) $ (0.07) $ (0.22)
============ ============ ============
Weighted Average Number of
Shares Outstanding 22,260,069 11,258,091 6,192,207
============ ============ ============
</Table>
See accompanying notes
5
RESCON TECHNOLOGY CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
<Table>
<Caption>
For the
For the Nine For the Nine Development
Months Ended Months Ended Stage Through
May 31, 2004 May 31, 2003 May 31, 2004
------------ ------------ ------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (982,767) $ (731,925) $(1,690,806)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 45,718 0 67,526
Income from investment in GIT 0 39,679 48,063
Decrease in bank overdraft (504) 0 (504)
Increase in investments (159,586) 0 (159,586)
Income from forgiveness of debt 0 0 (755,145)
Issued common stock for service
or expenses 0 0 535,881
Decrease in accounts payable (2,038) 920 35,907
Decrease in prepaid expenses 20,331 74,100 20,331
Change in minority interest (194) 0 (750)
Expenses paid by shareholders 0 0 5,345
------------ ------------ ------------
Net Cash from operating Activities (1,079,040) (617,226) (1,893,738)
Cash Flows from Investing Activity
Increase in advances - (218,000) -
------------ ------------ ------------
Net (Increase)/Decrease in
Investing Activities - (218,000) -
Cash Flows from Financing Activites:
Purchase of equipment (25,527) 0 (25,527)
Issued stock for cash 442,500 0 442,500
Loan proceeds 668,513 835,226 1,483,211
------------ ------------ ------------
Net Increase/(Decrease) in Cash 6,446 0 6,446
Beginning Cash Balance 0 0 0
------------ ------------ ------------
Ending Cash Balance 6,446 0 6,446
============ ============ ============
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 $ 0 $ 0 $ 548,223
Issued stock for professional fees
contracts $ 0 $ 0 $ 788,500
</Table>
See accompanying notes
6
RESCON TECHNOLOGY CORPORATION
Notes to Condensed Financial Statements
May 31, 2004
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, 2003.
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.
RESULTS OF OPERATIONS
During the three months and nine months ended May 31, 2004, the
Company generated operating loss of $422,624 and $982,767 respectively.
This represents a decrease in operating loss of $66,278 over the
corresponding three month period ending May 31, 2003 and an increase in
operating loss of $290,521 over the corresponding three month and nine
month periods ending May 31, 2003. During the three months ended May 31,
2004, general and administrative expenses decreased by $66,278 and
increased by $290,521 over the corresponding nine month period ended May
31, 2003. Total assets of the Company at May 31, 2004, were $985,338,
compared to $233,667 at May 31, 2003. These significant increases in net
loss, general and administrative expenses and total assets are the result
of a number of factors, including a significant increase in operating
expenses incurred by the Company in investigating and identifying
businesses and technologies to acquire, and the development of those
technologies. At June 30, 2004, the Company had an accumulated deficit
since reactivation of $1,690,806, and cash on hand of $6,447.
LIQUIDITY AND CAPITAL RESOURCES
As the Company has limited working capital and limited cash on hand,
and as it is not currently realizing revenue from operations, the Company
needs to seek additional funding from third parties. This funding may be
sought by means of private equity or debt financing. The Company currently
has no commitments from any party to provide funding and there is no way to
predict when, or if, any such funding could materialize. There is no
assurance that the Company will be successful in obtaining additional
funding on attractive terms, or at all. If the Company is unsuccessful in
obtaining additional debt or equity financing during the third quarter of
2004, the Company may be unable to continue operations. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
7
Cash Flows
----------
During the quarter ended May 31, 2004, cash was primarily used to fund
Company expenses and to make loans to a third party. Cash in hand
increased approximately $6,446 for the nine month period ending May 31,
2004, compared to May 31, 2003. See below for additional discussion and
analysis of cash flow.
<Table>
<Caption>
Nine months ended Nine months ended
May 31, 2004 May 31, 2003
----------------- -----------------
Net cash used in operating activities $ (1,079,040) $ (835,226)
Net cash provided by financing activities $ 1,085,486 $ 835,226
NET INCREASE/(DECREASE) IN CASH $ 6,446 $ 0
</Table>
During the nine months ended May 31, 2004, net cash used in operations
was $1,079,040, as net loss, increase in investments, decrease in bank
overdraft and accounts payable and change in minority interest were only
partially offset by depreciation and amortization expenses. Net cash
provided from financing activities was $1,085,486, as stock issued for cash
and loan proceeds were only partially offset by equipment purchases.
During the quarter, no cash was provided from financing activities. At May
31, 2004, the Company had cash on hand of $6,446.
During the quarter ended May 31, 2004, the Company made loans to a
third party, Roman Sand & Stone, LLC., in the amount of $153,586. Roman
Sand & Stone, LLC., ("Roman") is a New Jersey limited liability company
that contracts to remove and deliver building materials to and from
construction sites. The funds were primarily used to acquire two trucks
and other operating equipment for Roman. The Company is currently
negotiating the conversion of its loan to Roman into an equity interest in
Roman. Roman has not yet earned revenue, but expects to realize some
revenues within the next 90 days. There is no guarantee that the Company
will be able to successfully negotiate the conversion of the funds loaned
to Roman to an equity interest in Roman. And Roman is under no obligation
to allow the Company to convert its loan to an equity interest.
The Company continues to seek funding to allow it to pursue business
opportunities, including final development and marketing of the Reading &
Writing Plus educational product, the digital yearbook and its trading
software platform, it acquired in 2003, as well as investigating potential
new opportunities.
Campus is seeking funds to complete the development of its educational
product called Reading & Writing Plus. This product will require some
additional development before it is ready for market. The Company
anticipates that it can finish final development of the Reading & Writing
Plus educational product for approximately $100,000 to $150,000. If
funding is obtained, the Company believes final development can be
completed within 30-60 days. The Company believes it will also need
approximately $150,000 to $200,000 to purchase equipment for installation
at the first school district. These funds are advanced to the school
district and are collected out of initial deposit paid by the school
district once the system is installed and operational.
8
In addition to the Reading & Writing Plus product, Campus has
developed a digital yearbook product. As this product is ready for market,
Campus will begin marketing its digital yearbook product as soon as it can
raise sufficient funds to hire a sales staff and undertake a direct
marketing campaign. The Company believes that with $20,000 Campus should
be able to undertake its initial marketing campaign of the digital
yearbook.
The Company will also seek to raise sufficient funds to market and
sell the trading platform it acquired from Speed. This product is also
ready to market pending the Company raising sufficient funds to hire a
marketing staff and negotiating a hosting agreement, which the Company is
currently negotiating with a third party. Once a hosting agreement is in
place, the Company expects it will need approximately $20,000 to begin
marketing its trading product.
If the Company is successful in converting its loan to Roman into an
equity position in Roman, the Company intends to allocate the first funds
it raises to Roman, as the Company believes that is its quickest
opportunity to begin realizing revenues. If the Company is unsuccessful in
its negotiations with Roman, and unless the Company discovers a new
business opportunity that will allow it to begin realizing revenue in the
immediate future, the first funds raised by the Company will be allocated
to Campus for the marketing of its digital yearbook product. Thereafter,
the Company will allocate funds to the marketing and sale of its trading
platform. Once sufficient funding for those projects has been raised, the
Company will allocate remaining funds to the final development and
marketing of the Reading & Writing Plus educational product and to the
investigation of other business opportunities.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
-------------------------------------------------
The Company's Principal Executive Officer and Principal Financial
Officer have conducted an evaluation of the Company's disclosure controls
and procedures as of a date (the "EVALUATION DATE") within 90 days prior to
the filing of this quarterly report. Based on his evaluation, the
Company's Principal Executive Officer and Principal 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.
9
PART II - OTHER INFORMATION
Item 2. Changes in Securities
No instruments defining the rights of the holders of any class of
registered securities were materially modified, limited or qualified during
the quarter ended May 31, 2004. Similarly, the Company issued no
securities that were not registered under the Securities Act of 1933 during
the quarter ended May 31, 2004.
Item 5. Other Information
In accordance with Section 78.335 of the Nevada Revised Statutes and
the bylaws of the Company, during the quarter Henrik H. E. Klausgaard and
Ilona V. Klausgaard were appointed by the board of directors to fill
existing vacancies on the board of directors. Subsequent to quarter end,
Christian Nigohossian resigned as a director, Chief Executive Officer and
Chief Financial Officer of the Company. Mr. Nigohossian's resignation was
not the result of any disagreement with the Company on any matter relating
to the Company's operations, policies or practices. The resignation was
also not the result of any change in control of the Company. Tristan V.
Voth-Stonger, M.D., was appointed to the board of directors to fill the
vacancy created by the resignation of Mr. Nigohossian. In accordance with
Section 78.130 of the Nevada Revised Statutes and the bylaws of the
Company, the board has appointed Henrik Klausgaard to serve as Chief
Executive Officer, Ilona Klausgaard to serve as Chief Financial Officer,
Secretary and Treasurer and Christian Nigohossian to serve as Chief
Operating Officer of the Company.
Following is a brief description of the background and business
experience of Henrik Klausgaard, Ilona Klausgaard and Tristan Voth-Stonger:
HENRIK H.E. KLAUSGAARD. Since 1995, Mr. Klausgaard has served as an
executive of a corporate services enterprise providing consulting and
support in corporate structuring and trustee services to private
individuals and foundations. Since 2003 he has also took he has served on
the board of directors of a UK based corporate service provider. From 1989
to 1995, Mr. Klausgaard was an independent financial consultant, primarily
in Germany. Mr. Klausgaard is not currently serving as a director of any
other reporting compan. Mr. Klausgaard is 44 years old.
ILONA V. KLAUSGAARD. Since 1995, Mrs. Klausgaard has served as the
managing director of a corporate service provider based in Europe
specializing in set up and management of international corporate entities.
During this time, she has also served as a director for various
corporations. From 1985 to 1985, Mrs. Klausgaard was self employed and
provider client acquisition services to independent financial services
consultants in Europe. Mrs. Klausgaard is not currently serving as a
director of any other reporting company. Mrs. Klausgaard is 44 years old.
TRISTAN V. VOTH-STONGER, M.D. Dr. Stonger currently works as a
plastic surgeon specializing in cosemtic, reconstructive and hand and nerve
surgery. He has practiced in Peru, Indiana since 1991 and has served as a
director of the Indiana Pain Center since 1998. Dr. Stonger also served as
a Flight Surgeon for the United States Air Force Reserves from 1986 to
1994. Dr. Stonger graduated with an A.B. degree in Zoology, Anthropology
from Indiana University in 1969. He received an M.D. degree from the
Indiana University School of Medicine in 1973. Dr. Stonger does not
currently as a director of any other reporting company. Dr. Stonger is 56
years old.
Henrik Klausgaard and Ilona Klausgaard are married.
10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K
None.
(B) Exhibits. The following exhibits are included as part of this
report:
Exhibit 31.1 Certification of Principal Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Principal Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Principal Executive Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Principal Financial Officer Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
11
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
Dated: August 16, 2004 By: /S/ Kenrik Klausgaard
-------------------------------------
Henrik Klausgaard, CEO
Dated: August 16, 2004 By: /S/ Ilona Klausgaard
-------------------------------------
Ilona Klausgaard, CFO
12