The accompanying notes are an integral part of these financial statements
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2012
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation
Tecton Corporation (the Company) was incorporated under the laws of the State of Nevada on January 19, 2006, as a wholly-owned subsidiary of Hemis Corporation which spun off the Company on December 1, 2006. Since the company has not commenced significant operations it was considered an exploration stage company. The Company had been registered as an extraprovincial company in British Columbia, Canada with an assumed name of Tecton Mineral Corporation in order to register claims in the Companys name. The company discontinued mining and exploration operations on or about June, 2008 and has incurred losses of $4,878,395 since inception through July 31, 2012. The company was formerly an exploration stage company but is no longer reporting as such.
On February 7, 2011, Norman Meier, sole officer and director, resigned from all offices he held and appointed Micah Eldred as Director and President, Chief Executive Officer, Secretary, Chief Financial Officer, and Treasurer. Immediately thereafter, Mr. Meier resigned from the Board of Directors, leaving the board with Mr. Eldred as the sole officer and director of Tecton.
The corporations registration with the State of Nevada was reinstated effective February 14, 2011.
Interim Period Financial Statements
The interim period financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations.
In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of the financial position at July 31, 2012 and the results of operations and cash flows for the six months ended July 31, 2012 and 2011 have been made.
For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.
The Company uses the liability method to record income tax activity. Deferred taxes are determined based upon the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws.
The accounting for uncertainty in income taxes recognized in an enterprises financial statements uses the threshold of more-likely-than-not to be sustained upon examination for inclusion or exclusion. Measurement of the tax uncertainty occurs if the recognition threshold has been met.
Net Earnings (Losses) Per Common Share
Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the year. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Company's stock options and warrants (calculated using the treasury stock method). Through July 31, 2012, the Company has no potentially dilutive common stock equivalents to consider in the calculation of the weighted average number of common shares outstanding. Common stock issuable is considered outstanding as of the original approval date for purposes of earnings per share computations.
Capital assets are recorded at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, capital assets are recorded at cost and are depreciated using the straight-line method over the estimate lives of the assets
Fair Value of Financial Instruments
The fair value of financial instruments, which include cash, loans receivable, accounts payable and accrued expenses and advances from related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from financial instruments.
Stock Based Compensation
Stock based compensation cost is measured at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The Company determines the fair value of awards using the Black - Scholes valuation model. As of July 31, 2012, the Company has not issued any awards that qualify as stock based compensation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to July 31, 2012 through the date these financial statements were issued.
NOTE B GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements for the period ended July 31, 2012 the Company has incurred total losses of $4,878,395.
The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE C ADVANCES FROM RELATED PARTIES AND RELATED PARTY TRANSACTIONS
Prior to the period ended July 31, 2012, the Company's significant shareholders had advanced funds to the Company for working capital purposes. On April 27, 2011, the company borrowed $25,000 from Island Capital Management, the companys transfer agent, creditor and a wholly owned subsidiary of a current shareholder, Endeavour Cooperative Partners, LLC. Total amount due to related parties was $135,650 and $128,988 as of July 31, 2012 and January 31, 2012, respectively. The amounts advanced are unsecured, non-interest bearing and have no specific terms of repayment.
NOTE D COMMON STOCK ISSUABLE
In April 2008, the Company entered into a subscription agreement with a non-U.S. investor for the purchase of 533,333 at a price of $0.42 per share, resulting in cash proceeds of $224,000. This issuance was exempt from registration pursuant to Regulation S of the Securities Act. The Company was unable to issue these shares and at July 31, 2012 considers this common stock issuable and has recorded it in the equity section.
NOTE E SUBSEQUENT EVENTS
On January 14, 2013, Mr. Eldred, believing it to be in the best interest of the Company to bring on additional board members and officers, pursuant to Sections 78.335(5) of the Bylaws, appointed Carl Dilley and Christine Zitman as Directors, to hold said director position until the next shareholder meeting, and Christine Zitman as Secretary/Treasurer, to hold said officer positions until removed by the Board, resignation, or death. Micah Eldred remains as Director, Chairman of the Board, President and Chief Executive Officer.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We were incorporated as a Nevada company on January 19, 2006, as a wholly owned subsidiary of Hemis Corporation. On December 1, 2006 Hemis declared a dividend in the amount of one common share of Tecton for every $0.0001 of dividend declared, which equated to one common share of Tecton for every 100 shares of the Hemis owned as at December 1, 2006. At the same time the dividend was declared, Hemis cancelled its share ownership in Tecton. The effect of this dividend declaration and share cancellation was that Tecton was spun off as an independent company. We are quoted on the OTC Bulletin Board under the symbol TTNC.OB. We do not currently have any subsidiaries.
We were engaged in the acquisition, exploration and development of mineral properties since our inception. As of the date of this report we have discontinued all exploration and development operations.
The company is considering alternatives to increase shareholder value but have not entered into any definitive agreements.
Results of Operations
Lack of Revenue
Since our inception on January 19, 2006 to July 31, 2012 we have not earned any revenues. The company is beginning to spend money on professional fees and administrative costs to bring the SEC filings current. We have no operations or plans in place to earn any revenues at this time.
We incurred general and administrative costs of $324 for the three months ended July 31, 2012 as compared to $319 for the three months ended July 31, 2011. We incurred general and administrative costs of $6,662 for the six months ended July 31, 2012 as compared to $26,809 for the six months ended July 31, 2011. The expenses for both periods consist primarily of legal fees for the Company efforts to file bankruptcy.
From January 19, 2006 (date of inception) to July 31, 2012, we incurred net losses of $4,878,395.
Liquidity and Capital Resources
As of July 31, 2012, we had no cash and the Companys general and administrative costs were financed by money borrowed and expenses advanced.
This raises substantial doubt about our ability to continue as a going concern. Our auditors have issued a going concern opinion on our audited financial statements as of January 31, 2012. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. Since we were unable to obtain additional financing from outside sources and produce enough revenues, we ceased our operations.
Research and Development
From January 19, 2006 (inception) to July 31, 2012 we did not have any research and development expenses.
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Off-Balance Sheet Arrangements
As of July 31, 2012, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Companys Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Companys disclosure controls and procedures were not effective.
No significant changes have been made to our internal control over financial reporting during our last fiscal quarter in connection with the results of Managements report included in the Form 10-K filed with the Securities and Exchange Commission on February 27, 2013.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us. None of our directors, officers or affiliates is (i) a party adverse to us in any legal proceedings, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings that have been threatened against us.
Tecton commenced negotiations with the holders of the unsecured claims in order to establish a consensus on the framework for a Chapter 11 plan of reorganization that would satisfy the requirements of section 524(g) of the Bankruptcy Code and treat all creditors and stakeholders fairly and equitably. In May 2011, counsel for Tecton began discussions with Tectons creditors to explore the feasibility of and the potential for a pre-negotiated Chapter 11 plan of reorganization that would afford all the stakeholders an opportunity for some recovery of their claim, if not all.
Upon receiving consensus among the Tectons creditors, the Company filed a pre-negotiated Plan of Reorganization with its Chapter 11 bankruptcy petition on February 2, 2012 in the United States Bankruptcy Court, Middle District of Florida (Case no. 8:12-bk-01564-KRM). Unfortunately, the US Trustee filed a Motion to Dismiss Case or Alternatively a Motion to Convert Case to Chapter 7. After discussions with the Trustee, and with the intent to preserve any existing shareholder value, the Company consented to the dismissal and the bankruptcy case was subsequently dismissed on order of the Court on April 2, 2012.
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCCEDS
We have not made any previously unreported sales for the six months ended July 31, 2012.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
On January 14, 2013, Mr. Eldred, believing it to be in the best interest of the Company to bring on additional board members and officers, pursuant to Sections 78.335(5) and the Bylaws, appointed Carl Dilley and Christine Zitman as Directors, to hold said director position until the next shareholder meeting, and Christine Zitman as Secretary/Treasurer, to hold said officer positions until removed by the Board, resignation, or death. Micah Eldred remains as Director, Chairman of the Board, President and Chief Executive Officer.
ITEM 6. EXHIBITS
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 4, 2013
/s/ Christine Zitman
Director, Principal Accounting Officer, Secretary, Treasurer
(Authorized Officer and Chief Financial Officer)
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Micah Eldred, as Chief Executive officer, and Christine Zitman, as Chief Financial Officer, of Tecton Corporation, certifies that:
I have reviewed this quarterly report on Form 10-Q of Tecton Corporation;
Based on my knowledge, this 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 report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors:
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 4, 2013
/s/ Micah Eldred
Chief Executive Officer
/s/ Christine Zitman
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
In connection with the Tecton Corporation (the registrant) on Form 10-Q for the period ended July 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the report), I, Micah Eldred, Chief Executive Officer of the registrant, and Christine Zitman, Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
Date: April 4, 2013
/s/ Micah Eldred
Chief Executive Officer
/s/ Christine Zitman
Chief Financial Officer