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 March 31, 2002
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: 000-23712
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)
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 May 10, 2002
----- ------------------------------
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 -
As of March 31, 2002 (unaudited) and December 31, 2001 ....... 2
Condensed Consolidated Statements of Income -
For the Three Months Ended March 31, 2002 and 2001 ........... 3
Condensed Consolidated Statements of Cash Flow
For the Three Months Ended March 31, 2002 and 2001 ............ 4
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 .......................................... 7
Item 2. Changes in Securities ...................................... 7
Item 3. Defaults Upon Senior Securities ............................ 7
Item 4. Submission of Matters to Vote of Security Holders .......... 7
Item 5. Other Information ........................................... 8
Item 6. Exhibits and Reports on Form 8-K ............................8-9
SIGNATURES ................................................................. 10
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains both historical and forward-looking
statements. All statements other than statements of historical fact are, or may
be deemed to be, "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995. The forward-looking statements in this quarterly report are not
based on historical facts, but rather reflect the current expectations of our
management concerning future results and events.
The forward-looking statements generally can be identified by the use
of terms such as "believe," "expect," "anticipate," "intend," " plan,"
"foresee," "likely," "will" or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals are or may be
forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be different from any future results, performance and
achievements expressed or implied by these statements. You should review
carefully all information, including the financial statements and the notes to
the financial statements included in this quarterly report. The following
important factors could affect future results, causing the results to differ
materially from those expressed in the forward-looking statements in this
quarterly report.
o the timing, impact and other uncertainties related to pending and
future acquisitions by us;
o the impact of new technologies;
o changes in laws or rules or regulations of governmental agencies; and
o currency exchange rate fluctuations.
These factors are not necessarily all of the important factors that
could cause our actual results to differ materially from those expressed in the
forward-looking statements in this quarterly report. Other unknown or
unpredictable factors also could have material adverse effects on our future
results. The forward-looking statements in this quarterly report are made only
as of the date of this quarterly report, and we do not have any obligation to
publicly update any forward-looking statements to reflect subsequent events or
circumstances. 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. We cannot assure you that projected results will be achieved.
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASCONI CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2002 (Unaudited) AND DECEMBER 31, 2001
(UNITED STATES DOLLARS)
ASSETS
MARCH 31, DECEMBER 31,
2002 2001
------------ -------------
CURRENT ASSETS
Cash and bank balances $ 41,888 $ 15,244
Trade receivables 1,449,983 2,128,975
Inventories 2,677,370 2,762,943
Advance payments 1,135,903 694,843
Other 791,019 602,148
------------ ------------
TOTAL CURRENT ASSETS 6,096,163 6,204,153
FIXED ASSETS 2,464,265 2,547,614
INVESTMENT 1,253,695 689,988
OTHER 77,687 79,196
------------ ------------
TOTAL ASSETS $ 9,891,810 $ 9,520,951
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,349,715 $ 2,509,355
Prepayments 460,558 -
Short-term debt 1,548,310 1,004,716
Taxes payable 374,428 314,565
Accrued and other liabilities 380,347 395,248
------------ ------------
TOTAL CURRENT LIABILITIES 5,113,358 4,223,884
LONG-TERM LIABILITIES
LONG-TERM DEBT 977,711 1,720,579
DEFERRED TAXES 192,679 198,560
MINORITY INTEREST 272,530 184,181
SHAREHOLDERS' EQUITY
Common stock $.001 par value 100,000,000
authorized and 14,586,689 issued 14,587 14,587
Paid in capital 5,508,627 5,508,627
Retained earnings (deficit) (1,827,320) (2,072,651)
Accumulated other comprehensive loss (360,362) (256,816)
------------ ------------
Total Shareholders' Equity 3,335,532 3,193,747
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,891,810 $ 9,520,951
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(UNITED STATES DOLLARS)
(Unaudited)
For three Months Ended
-----------------------------
MARCH 31, MARCH 31,
2002 2001
------------- ------------
SALES $ 2,627,635 $ 1,780,549
COST OF SALES 1,748,311 1,165,128
------------- ------------
GROSS PROFIT 879,324 615,421
EXPENSES
Minority interest expense 95,779 -
Depreciation 69,086 76,990
Selling and Administration expenses 321,247 239,523
Interest expense 66,103 46,702
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TOTAL EXPENSES 552,215 363,215
------------- ------------
INCOME BEFORE TAX PROVISION 327,108 252,206
PROVISION FOR INCOME TAXES 81,777 71,000
------------- ------------
NET INCOME 245,331 181,206
OTHER COMPREHENSIVE LOSS
FOREIGN CURRENCY TRANSLATION 103,546 -
------------- ------------
COMPREHENSIVE LOSS $ 141,785 $ 181,206
============= ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
BASIC AND DILUTED 14,586,689 12,986,689(1)
============= ============
BASIC NET PER SHARE (BASIC AND DILUTED) $ 0.01 $ 0.01
============= ============
(1) Number of shares outstanding the day of merger for comparison only
The accompanying notes are an integral part
of these consolidated financial statements.
3
ASCONI CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(UNITED STATES DOLLARS)
(Unaudited)
MARCH 31,
-----------------------
2002 2001
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Comprehensive income $ 141,785 $ 181,206
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 69,086 76,990
Deferred income taxes (5,881) (4,721)
Minority interest expense 88,349 -
Effect of exchange rate changes on cash 72,021 -
(Increase) decrease in assets:
Trade receivables 678,992 (457,140)
Advance payments (441,060) -
Inventories 85,573 660,656
Other (188,871) (171,631)
Increase (decrease) in liabilities
Accounts payable (159,640) (215,385)
Taxes payable (14,901) 46,505
Accrued liabilities 460,558 (323)
---------- ---------
Net cash provided (used) by operating activities 786,011 116,157
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (57,758) (28,765)
Investment (563,707) -
Other 1,509 (13,639)
---------- ---------
Cash used for investing activities (619,956) (42,404)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings (net) 543,594 33,300
Decrease in long-term debt (net) (742,868) (149,694)
---------- ---------
Cash provided by financing activities (199,274) (116,394)
---------- ---------
NET INCREASE (DECREASE) IN
CASH AND BANK BALANCES 26,644 (42,641)
Cash and bank balances, at beginning of period 15,244 43,142
---------- ---------
Cash and bank balances, at end of period $ 41,888 $ 501
========== =========
The accompanying notes are an integral part
of these 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; Asconi Holding Company Limited, its wholly-owned
subsidiary; and Asconi S.R.L., its wholly-owned subsidiary. Asconi S.R.L.
acquired controlling interest (70%) of SA Fabria de vin uri din Puhoi and (74%)
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.
Asconi S.R.L. has acquired 46% of SA Vitis-Hincesti as of March 31, 2002.
Operations from January 1, thru March 31, 2002 of SA Vitis-Hincesti were
immaterial and are not included in the condensed consolidated financial
statements.
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 foreign operations in accordance with taxation
principles currently effective in the Republic of Moldova.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results Of Operation
The following is derived from, and should be read in conjunction with,
our unaudited condensed consolidated financial statements, and related notes, as
of and for the three months ended March 31, 2002 and 2001.
Three Months Ended March 31, 2002 As Compared To Three Months Ended
March 31, 2001
Revenues. Revenues increased by $847,086 or 48% to $2,627,635 for the
three months ended March 31, 2002 from $1,780,549 for the three months ended
March 31, 2001. This increase was primarily due to increased production and
sales resulting from acquisitions in 2000.
Cost of sales. Cost of sales increased by $583,183 or 50% to $1,748,311
for the three months ended March 31, 2002 from $1,165,128 for the three months
ended March 31, 2001. This increase was primarily due to increased production
volume costs.
Selling and Administrative. Selling and administrative expenses
increased by $81,724 or 34% to $321,247 for the three months ended March 31,
2002 from $239,523 for the three months ended March 31, 2001. This increase was
primarily due to increased professional fees.
Income from Operations. As a result of the foregoing, our income
excluding interest expense other than minority interest expense and before
income taxes increased by $94,303 or 32% to $393,211 for the three months ended
March 31, 2002 from $298,908 for the three months ended March 31, 2001.
Interest Expense. Interest expenses increased by $19,401 or 42% to
$66,103 for the three months ended March 31, 2002 from $46,702 for the three
months ended March 31, 2001. This increase was primarily due to increased
borrowings.
Income Taxes. Income taxes increased by $10,777 or 15% to $81,777 for
the three months ended March 31, 2002 from $71,000 for the three months ended
March 31, 2001. This increase was primarily due to increased income before
taxes.
Net Income. Our net income increased by $64,125 or 35% to $245,331 for
the three months ended March 31, 2002 from $181,206 for the three months ended
March 31, 2001. This increase was primarily due to increased sales.
Liquidity and Capital Resources.
For the past few months, we have funded capital requirements through
short loans. As of March 31, 2002 we had a cash balance of $41,888 and a working
capital surplus of $982,804. This compares with a cash balance of $501 and a
working capital surplus of $1,858,228 for the corresponding period of the prior
year.
Net cash provided in operating activities increased by $729,719 or 628%
to $845,874 for the three months ended March 31, 2001 from $116,157 for the
three months ended March 31, 2001. This increase in cash provided by operations
resulted primarily from a decrease in trade receivables of $678,992, an increase
in prepayments from customers of $460,558 and an increase in advance payments to
vendors of $441,060.
Cash flows used in investing activities for the three months ended
March 31, 2002 increased by $577,552 or 1,362% as the current period used
$619,956 in investing activities as opposed to $42,404 used in investing
activities for the three months ended March 31, 2001. This change was due
primarily to the purchase of additional shares of SA Vitis-Hincesti for
approximately $563,707.
6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than as set forth below, we are not a party to any pending legal
proceedings or are aware of any pending legal proceedings against us that,
individually or in the aggregate, would have a material adverse affect on our
business, results of operations or financial condition.
We filed a complaint on July 17, 2001, in the Circuit Court of the
Ninth Judicial circuit in and for Orange County, Florida, against Vadim Enikeev,
an individual; Serguei Melnick, an individual; La-Sal Capital, Inc., a Florida
corporation; Icara, Inc. a Florida corporation, Stoneside Development Limited, a
personal services corporation, Goldberg Law Group, PA., a Florida corporation;
Glenn E. Goldberg, an individual; Alan S. Lipstein, an individual; George
Carapella, an individual; Thomas L. Tedrow, an individual; Larry Eastland, an
individual; Robert Klosterman, an individual; and John Does and Jane Does,
fictitious parties, the true parties intended to be those individuals or
entities liable to plaintiff.
The amended complaint seeks damages for breach of contract (defendants
Enikeev, La-Sal, Icara, Goldberg Law Group, Stoneside); rescission (defendants
La-Sal, Icara, Goldberg Law Group, Stoneside); breach of fiduciary duty
(defendants Enikeev, Melnick, Goldberg Law Group, Goldberg, Eastland and
Klosterman); aiding and abetting breach of fiduciary duty (defendants Stoneside,
La-Sal, Icara, Goldberg Law Group, Goldberg, Carapella, Lipstein and Tedrow);
declaratory relief (defendants Klosterman and Eastland); civil conspiracy
(defendants Enikeev, Melnick, Goldberg, Goldberg Law Group, La-Sal, Icara,
Stoneside, Lipstein, Carapella, Tedrow, Eastland and Klosterman); violation of
Florida Securities Investors Protection Act (defendants La-Sal, Goldberg Law
Group, Stoneside and Icara); fraudulent inducement (defendants Stoneside,
La-Sal, Icara, Goldberg Law Group, Goldberg, Carapella, Lipstein and Tedrow).
We allege that defendants Melnick and Enikeev abused limited authority
given to them to act as corporate promoters and entered into a civil conspiracy
with the remaining defendants to issue corporate stock without our approval for
their individual and collective profit. We further allege that many of the
defendants entered into, or facilitated entry into, unapproved "consulting
agreements" as a vehicle to justify issuance of the stock, and that the
"consultants" provided little or no services to Asconi but received stock valued
at as much as $11,200,000. The complaint seeks monetary damages, rescission and
return of the stock still possessed by any of the defendants, and other relief.
Defendant Enikeev has been defaulted and we are seeking entry of final
judgment against him at this time. The remaining defendants have in some
instances answered the amended complaint while also filing motions to dismiss,
or have moved to dismiss only. Defendants Klosterman and Eastland have filed
"General Denials" but have raised no defenses. No counterclaims have been filed
against us at this time.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
(d) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
7
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 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)
10.5 Office Lease in Heathrow, Florida.(4)
10.6 General Contract for Delivery No. 1 Agreement with Josef Smilek dated December 3,
2001.(4)
10.7 Contract No. 498/B-43142800/011 with Sovagroimport, Ltd., dated September 9,
2000.(4)
10.8 Contract No. 498/41286111/001 with Sovagroimport, Ltd., dated April 12, 2001.(4)
10.9 Contract of Sale No. X-075 with I.E. Hordex, dated January 10, 2002.(4)
10.10 Contract No. 05-04/01-A with Winnice Moldowy, dated March 1, 2001.(4)
10.11 Contract with Estate-Design S.R.L., dated 1999.(4)
10.12 Contract No. S2001/018 with Glass Container Company, S.A., dated January 22,
2001.(4)
10.13 Contract of Buying-Selling with Ilitax-Pac, Ltd., dated January 1, 2000.(4)
10.14 Contract No. M3-001 with Pomul, Ltd., dated January 4, 2001.(4)
10.15 Contract No. 1/2002 with Agro-Inedit, Ltd., dated November 29, 2001.(4)
10.16 Contract No. 689 with KPMG Moldova S.R.L., dated January 28, 2002.(5)
16.1 Letter of Aronson, Fetridge & Weigle to the SEC, dated August 17, 2001.(2)
21.0 Subsidiaries.(4)
--------------------
(1) Incorporated by reference to our Current Report on Form 8-K, filed on
April 19, 2001, file no. 0-23712.
(2) Incorporated by reference to our Quarterly Report on Form 10-QSB, filed on
August 20, 2001, file no. 0-23712.
(3) Incorporated by reference to our Registration Statement on Form S-8, filed
on April 24, 2001, file no. 0-23712.
(4) Incorporated by reference to our Annual Report on Form 10-KSB, filed on
April 15, 2002, file no. 0-23712.
(5) Filed Herewith.
8
(b) Reports on Form 8-K.
During the fiscal quarter ended March 31, 2002 we did not file any
Current Reports on Form 8-K.
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
Date: May 10, 2002 /s/ Constantin Jitaru
--------------------------------------------
Constantin Jitaru, President and Chief
Executive Officer
Date: May 10, 2002 /s/ Anatolie Sirbu
--------------------------------------------
Anatolie Sirbu, Chief Financial Officer
10