U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2001
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ______________
Commission File No: 0-23712
ASCONI CORPORATION
(Exact name of Small Business Issuer as Specified in Its Charter)
Nevada 91-1395124
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
160 International Parkway, Suite 280
Heathrow, Florida 32746
(407) 833-8000
(Address of Principal Executive Offices)
1221 West Colonial Drive, Suite 205, Orlando, Florida 32804
June 30 Former Fiscal Year End
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ______
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 20, 2001
----- ---------------------------------
Common Stock, $.001 par value 14,586,689
Transitional Small Business Disclosure Format (check one): [_] Yes [X] No
Asconi Corporation
Index
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2001 (unaudited)
and December 31, 2000................................................ 1
Condensed Consolidated Statements of Income - Three
Months and Six Months Ended June 30, 2001 and 2000 (unaudited)....... 2
Condensed Consolidated Statements of Cash Flows - Six Months
ended June 30, 2001 and 2000 (unaudited)............................. 3
Notes to Condensed Consolidated Financial Statements...................... 5
Item 2. Management's Discussion and Analysis or Plan of Operation.............. 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 8
Item 2. Changes in Securities.................................................. 8
Item 5. Other Information...................................................... 8
Item 6. Exhibits and Reports on Form 8-K....................................... 9
SIGNATURES.......................................................................... 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASCONI CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2001 (Unaudited) AND DECEMBER 31, 2000
(UNITED STATES DOLLARS)
ASSETS
JUNE 30, DECEMBER 31,
2001 2000
---------------- ---------------
CURRENT ASSETS
Cash and bank balances $ 2,271 $ 43,142
Trade receivables 3,054,520 1,211,994
Inventories 2,153,074 2,747,721
Other 423,683 278,858
---------------- ---------------
TOTAL CURRENT ASSETS 5,633,548 4,281,715
FIXED ASSETS 2,191,061 2,228,174
OTHER 6,620 29,503
---------------- ---------------
TOTAL ASSETS $ 7,831,229 $ 6,539,392
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,937,870 $ 2,125,647
Current portion of long-term debt 357,926 262,782
Short-term borrowings 1,609,000 170,000
Taxes payable 271,298 381,891
Accrued liabilities 365,394 216,321
---------------- ---------------
TOTAL CURRENT LIABILITIES 4,541,488 3,156,641
LONG-TERM DEBT 221,868 739,562
DEFERRED TAXES 121,953 126,674
MINORITY INTEREST 119,269 150,000
STOCKHOLDERS' EQUITY
Common stock 14,509 -
Paid-in capital 5,811,532 -
Retained earnings (deficit) (2,878,082) -
Comprehensive loss (121,308) -
Members' equity - 2,366,515
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 2,826,651 2,366,515
---------------- ---------------
TOTAL LIABILITIES AND MEMBERS' EQUITY $ 7,831,229 $ 6,539,392
================ ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNITED STATES DOLLARS)
(Unaudited)
For Quarter Ended For Six Months Ended
---------------------------- ---------------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
------------ ----------- -------------- --------------
SALES $ 2,933,293 $ 918,992 $ 4,713,842 $ 1,189,337
COST OF SALES 1,556,670 444,901 2,721,798 690,344
------------ ----------- -------------- --------------
GROSS PROFIT 1,376,623 474,091 1,992,044 498,993
EXPENSES
Consulting 4,000,000 - 4,000,000 -
Merger costs 504,177 - 504,177 -
Depreciation 95,945 12,160 172,935 20,597
Selling and Administrative expenses 652,904 115,591 892,975 170,757
Interest Expense 55,096 10,463 101,798 10,463
------------ ----------- -------------- -------------
TOTAL EXPENSES 5,308,122 138,214 5,671,885 201,817
INCOME (LOSS) BEFORE TAX PROVISION (3,931,499) 335,877 (3,679,841) 297,176
PROVISION FOR INCOME TAXES 155,564 83,210 226,564 83,210
------------ ----------- -------------- -------------
NET INCOME (LOSS) $ (4,087,063) $ 252,667 $ (3,906,405) $ 213,966
============ =========== ============== =============
WEIGHTED AVERGAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic and Diluted 14,217,459 - 13,605,474 -
============ =========== ============== =============
Basic Net Loss per share (Basic and Diluted) $ (0.29) - $ (0.29) -
============ =========== ============== =============
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNITED STATES DOLLARS)
(Unaudited)
JUNE 30,
------------------------------------
2001 2000
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(3,906,405) $ 213,966
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 172,935 20,597
Deferred income taxes (4,721) (18,236)
Issuance of common stock for services 4,000,000
Issuance of common stock for merger 366,540
(Increase) decrease in assets:
Trade receivables (1,842,526) (172,935)
Inventories 594,647 (342,420)
Other (144,825) (28,117)
Increase (decrease) in liabilities
Accounts payable (187,777) 303,592
Taxes payable (110,593) (146,708)
Accrued liabilities 149,073 109,201
--------------- ---------------
Net cash provided (used) by operating activities (913,652) (61,060)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (135,822) (18,574)
Other (7,847) (414)
--------------- ---------------
Cash used for investing activities (143,669) (18,988)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings (net) 1,439,000 80,594
Repayment of long-term debt (422,550) -
--------------- ---------------
Cash provided by financing activities 1,016,450 80,594
--------------- ---------------
NET INCREASE (DECREASE) IN
CASH AND BANK BALANCES (40,871) 546
Cash and bank balances, at beginning of period 43,142 18
--------------- ---------------
Cash and bank balances, at end of period $ 2,271 $ 564
=============== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (continued)
(UNITED STATES DOLLARS)
(Unaudited)
SUPPLEMENTARY CASH FLOWS DISCLOSURES
June 30,
------------------------
2001 2000
---------- ---------
1. Interest paid $ 128,087 $ 10,463
========== =========
Taxes paid $ 219,890 $ -
========== =========
2. On April 12, 2001 Asconi Corporation
(formerly Grand Slam Treasures, Inc.)
acquired "ASCONI" S.R.L. pursuant to
an exchange agreement.
The following amounts represent the non-cash portion of this transaction:
Merger costs 504,177
Accrued liabilities (137,637)
------------
$ 366,540
============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ASCONI CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by Asconi
Corporation (formerly Grand Slam Treasures, Inc.) (the "Company") without audit
and include: the Company; its wholly owned subsidiary Asconi Holdings Limited;
and "ASCONI" S.R.L. its wholly owned subsidiary. "ASCONI" S.R.L. acquired
controlling interest (70%) of SA Fabria devin Puhoi and (72%) of SA Orhei-vin
during October and December, 2000, which were recorded as a purchase. The
condensed consolidated financial statements also include the accounts of these
two majority owned subsidiaries. The condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles of the United States of America
The condensed consolidated financial statements do not include any operations of
Grand slam Treasures, Inc. The Condensed Consolidated Balance Sheets, the
Condensed Consolidated Statements of Income, and the Condensed Consolidated
Statements of Cash Flow include, in the opinion of management, all the
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of these periods and the financial condition as
of that date. Historical interim results are not necessarily indicative of
results that may be expected for any future period.
NOTE 2 - TAXES
Income taxes are provided on "ASCONI", S.R.L. in accordance with taxation
principles currently effective in the Republic of Moldova.
NOTE 3 - OTHER
The Company entered into written agreements with four consultants for specified
services around April 16, 2001. Pursuant to the terms of the agreements, the
Company issued 1,600,000 shares of common stock and registered those shares
under the Securities Act of 1933 on Form S-8, which the Company filed on April
24, 2001. The 1,600,000 shares of common stock were valued at $2.50 per share
($4,000,000) at the time the Form S-8 was filed. This resulted in a non-cash
charge to the Income Statement in the amount of $4,000,000. The Company has
filed a lawsuit against these consultants alleging breach of contract for
failing to perform the services specified in the agreements, providing little or
no consideration in return for the compensation received under the agreements,
and receiving grossly inadequate compensation in relation to the services
purportedly rendered; rescission of the contracts; civil conspiracy; violation
of the Florida securities laws; and breach of fiduciary duty as to one of the
consultants who is an attorney.
The Company incurred $504,177 in costs associated with the merger with "ASCONI",
S.R.L. on April 12, 2001. The entire $504,177 was expensed during the current
quarter. This resulted in a non-cash charge to the Condensed Consolidated
Income Statement.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Cautionary Factors Regarding Forward-Looking Statements
Statements made in this report other than statements of historical or
current fact, including, without limitation, statements relating to our plans,
strategies, objectives, expectations, intentions and adequacy of resources, are
considered "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements.
We undertake no obligation to update any forward-looking statements, but
investors are advised to consult any further disclosures by us on the subject in
our filings with the Securities and Exchange Commission, especially on Forms 10-
KSB, 10-QSB and 8-K (if any), in which we discuss in more detail various
important factors that could cause actual results to differ from expected or
historic results. It is not possible to foresee or identify all such factors.
As such, investors should not consider any list of such factors to be an
exhaustive statement of all risk, and certainties or potentially inaccurate
assumptions.
Results Of Operation
Three Months Ended June 30, 2001 As Compared To Three Months Ended June 30,
2000
Revenues increased by $2,014,301 or 219% to $2,933,293 from $918,992 for
the three months ended June 30, 2001 as compared to the corresponding period of
the prior year. This increase is attributed primarily to increased production
and sales resulting from acquisitions in 2000. Our primary activity was the
acquisition, consolidation, and development of product for sale.
Cost of sales increased by $1,115,769 or 251% to $1,566,670 from $444,901
for the three months ended June 30, 2001, as compared to the corresponding
period of the prior year. This increase resulted from increased production
volume costs.
General and administrative expenses increased by $537,313 or 465% to
$652,904 from $115,591 for the three months ended June 30, 2001 as compared to
the corresponding period of the prior year. This increase is attributed
primarily to increased overhead resulting from acquisitions in 2000.
Our net income decreased by $4,339,730 to a net loss of $4,087,063 from a
net income of $252,667 for the three months ended June 30, 2001 as compared to
the corresponding period of the prior year. Our net income would have been
$453,114 for the three months ended June 30, 2001, but for the $4,504,177 non-
cash charges to the income statement as are discussed in Note 2 to the condensed
consolidated financial statements
Six Months Ended June 30, 2001 As Compared To Six Months Ended June 30,
2000
Revenues increased by $1,743,956 or 147% to $2,933,293 from $1,189,337 for
the six months ended June 30, 2001 as compared to the corresponding period of
the prior year. This increase is attributed primarily to increased production
and sales resulting from acquisitions in 2000. Our primary activity was the
acquisition, consolidation, and development of product for sale.
Cost of sales increased by $ 2,031,454 or 294% to $2,721,798 from $690,344
for the six months ended June 30, 2001, as compared to the corresponding period
of the prior year. This increase resulted from increased production volume
costs.
General and administrative expenses increased by $722,218 or 423% to
$842,975 from $170,757 for the six months ended June 30, 2001 as compared to the
corresponding period of the prior year. This increase is attributed primarily
to increased overhead resulting from acquisitions in 2000.
6
Our net income decreased by $4,120,371 to a net loss of $3,906,405 from a
net income of $213,966 for the six months ended June 30, 2001 as compared to the
corresponding period of the prior year. Our net income would have been $597,772
for the six months ended June 30, 2001, but for the $4,504,177 non-cash charges
to the income statement as are discussed in Note 2 to the condensed consolidated
financial statements
Liquidity and Capital Resources
For the past few months, we have funded capital requirements through short
loans. As of June 30, 2001, we had a cash balance of $2,271 and a working
capital surplus of $1,092,060. This compares with a cash balance of $564 and a
working capital surplus of $190,928 for the corresponding period of the prior
year.
Net cash used in operating activities increased by $852,592 to $913,652
from $61,060 for the six months ended June 30, 2001 as compared to the
corresponding period of the prior year. This increase in cash used in
operations resulted primarily from an increase in trade receivables of
$1,842,526, an increase in accounts payable of $187,777 and a decease in
inventory of $594,647.
Cash flows used in investing activities for the six months ended June 30,
2001 increased by $124,681 as the current period provided $143,669 in investing
activities as opposed to $18,988 used in investing activities for the
corresponding period of the prior year. This change was due primarily to the
purchase of equipment.
7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 17, 2001, we filed a complaint in the Circuit Court of the Ninth
Judicial Circuit in and for Orange County, Florida against La-Sal Capital, Inc.,
a Florida corporation; ICARA, Inc., a Florida corporation; Stoneside Development
Limited, a personal services corporation; Goldberg Law Group, P.A., a Florida
corporation (collectively, the "Consultants"); Glenn E. Goldberg; Alan S.
Lipstein; George Carapella; Thomas L. Tedrow; Vadim Enikeev; and Serguei Melnik.
We entered into written agreements with the Consultants for specified
services. Pursuant to the agreements, we issued 1,600,000 shares of our common
stock and registered those shares under the Securities Act of 1933 on Form S-8,
which we filed on April 24, 2001. We have asserted claims against the
Consultants for breach of contract for failing to perform the services specified
in the agreements, providing little or no consideration in return for the
compensation received under the agreements, and receiving grossly inadequate
compensation in relation to the services purportedly rendered; rescission of the
contracts and violation of the Florida securities laws. We have also asserted
claims against all the defendants for civil conspiracy, claims against Vadim
Enikeev for breach of contract, and claims against Goldberg Law Group, Glenn E.
Goldberg, Vadim Enikeev and Serguei Melnik for breach of fiduciary duty. We are
seeking to reclaim the stock issued to the Consultants or the value thereof and
damages from Vadim and Serguei for causing the corporation to issue the stock
for little or no consideration.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 12,2001, we issued 12,600,000 shares our common stock to Asconi
Ltd., a Republic of Moldova corporation in exchange for all of its issued and
outstanding securities. None of the securities issued were registered under the
Securities Act, and in our opinion the sale or issuance of the securities was
deemed to be exempt from registration under the Securities Act in reliance upon
Section 4(2) of the Securities Act, as a transaction by an issuer not involving
any public offering. The recipients of the securities represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof. An appropriate ledger
was fixed to the share certificates issued. The sale of the securities did not
involve the use of an underwriter and no commissions were paid in connection
with the sale or issuance of the securities.
ITEM 5. OTHER INFORMATION
Changes in Our Certifying Accountant
Previous Independent Accountant. On August 17, 2001, we contacted
representatives of Aronson, Fetridge & Weigle ("AFW") to inform them that their
firm would no longer be engaged as the principal accountant to audit our
financial statements, including any audits for the forthcoming annual reports
for the interim period between June 30, 2000 and December 31, 2000 and for the
fiscal year ended December 31, 2001, and terminated the relationship effective
August 17, 2001. The decision to change independent auditors was approved by
our Board of Directors.
The reports of AFW on our financial statements for the fiscal year ended
June 30, 2000 did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with the audit of our financial statements for the fiscal
year ended June 30, 2000, and in the subsequent interim periods, there were no
disagreements ("Disagreements") as defined in Item 304 (a)(1)(iv) and the
instructions to Item 304 of Regulation S-B, as amended, with AFW on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope and procedure which, if not resolved to the satisfaction of AFW,
would have caused AFW to make reference to the matter in its reports. We have
furnished AFW with a copy of the foregoing disclosure and AFW has furnished us
with a letter addressed to the Securities and Exchange Commission, indicating
that AFW agrees with the above statements.
8
New Independent Accountant. On August 14, 2001, we engaged Thomas Leger &
Co. L.L.P. as our independent auditors for our financial statements, including
the annual reports for the interim period between June 30, 2000 and December 31,
2000 and for the fiscal year ending December 31, 2001. At no time preceding
August 14, 2001, have we (or anyone on behalf of us) consulted with Thomas Leger
& Co. on matters regarding (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our financial statements, or (ii) any matter
that was the subject of Disagreement with AFW.
Reverse Split of Common Stock
On March 31, 2001, we had 30,907,929 shares of common stock issued and
outstanding. On April 16, 2001, we effectuated a reverse split on a one for one
hundred basis. We made adjustments to the number of shares of common stock
outstanding due to the terms of the reverse split, which provided that holders
of 1-100 shares of common stock retained their same number of shares; holders of
101-10,000 shares of common stock had their holdings divided by 100 then rounded
up to 100 shares; and holders of over 10,000 shares of common stock had their
holdings divided by 100. These reverse split adjustments, along with our
issuance to third parties of 14,200,000 shares of common stock (1,600,000 of
which were registered under the Securities Act on Form S-8) in April 2001, gave
us 14,586,689 shares of common stock issued and outstanding as of June 30, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Number Description of Exhibit
------ ----------------------
2.1 Exchange Agreement between Asconi Corporation (formally Grand
Slam Treasures, Inc., Asconi Holdings Limited and Asconi Ltd.,
dated April 12, 2001 (1)
3.1 Restated Articles of Incorporation (2)
3.2 Amended and Restated Bylaws (2)
10.1 Consulting Agreement with Stoneside Development Limited, dated
April 16, 2001 (3)
10.2 Consulting Agreement with La-Sal Capital, Inc., dated April 16,
2001 (3)
10.3 Consulting Agreement with ICARA, Inc., dated April 16, 2001 (3)
10.4 Consulting Agreement with The Goldberg Law Group, P.A., dated
April 13, 2001 (3)
16.1 Letter of Aronson, Fetridge & Weigle to the Securities and
Exchange Commission, dated August 17, 2001 (2)
_________________
(1) Incorporated by reference to our Current Report on Form 8-K, filed on April
19, 2001, file no. 000-23712.
(2) Filed herewith
(3) Incorporated by reference to our Registration Statement on Form S-8, filed
on April 24, 2001, file no. 000-23712.
(b) Reports on Form 8-K.
During the quarterly period ended June 30, 2001, we filed one report
on Form 8-K on April 19, 2001. The report included information
regarding our acquisition of all the issued and outstanding shares of
Asconi Ltd., a Republic of Moldova Corporation. The financial
statements relating to the acquisition were not included in the Form
8-K filed on April 19, 2001, but were included in an amendment thereto
on Form 8-K/A filed on July 31, 2001.
9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.
ASCONI CORPORATION
August 20, 2001 /s/ Constantin Jitaru
--------------------------------------
Constantin Jitaru, President/Chief
Executive Officer
August 20, 2001 /s/ Anatol Sirbu
--------------------------------------
Anatol Sirbu, Chief Financial Officer
10