Supplemental schedule of non-cash financing and investing activities:
May 2013, the Company issued 493,414 preferred shares as conversion of debt.
The accompanying notes are an integral part of these financial statements
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
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. On December 1, 2006 Hemis declared a dividend of Tecton shares to all shareholders as of that date and concurrently cancelled its share ownership in the Company. The effect of this dividend declaration and share cancellation was that Tecton was spun off as an independent company.
On November 8, 2013, the Board of Directors approved a change of the Companys fiscal year from January 31, to December 31. Thus, our next full fiscal year will begin on January 1, 2014. These financial statements are being filed as part of a transition report on Form 10-Q covering the transition period that began August 1, 2013 and ended September 30, 2013. As a result, the Company is also presenting financial information for the two and eight month periods ended September 30, 2012 for comparative purposes.
The company discontinued operations on or about June 1, 2008 and has incurred losses of $4,919,914 since inception through September 30, 2013. The company was formerly an exploration stage company but is no longer reporting as such.
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, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto, included in the Companys latest Form 10-K.
In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of the financial position at September 30, 2013 and the results of operations and cash flows for the two and eight months ended September 30, 2013 and 2012 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 September30, 2013, 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 reducing balance method at 30% and 20 % per annum.
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.
Foreign Currency Translation and Transactions
The Company records changes in foreign currency by translating assets and liabilities at current exchange rates in effect at the end the period. Revenues and expenses are translated at the average rate of exchange throughout the year. Resulting translation adjustments are recorded as a separate component in stockholder's equity. Foreign currency transaction gains and losses, if any, are included in the statement of operations.
Comprehensive Income (Loss)
The Company records comprehensive income as the change in equity of a business during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) includes foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. As of September 30, 2013 the Company had no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
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 September 30, 2013, 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 September 30, 2013 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 September 30, 2013 the Company has incurred total losses of $4,919,914. The Company has no significant liquid assets. These factors, among others, indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
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
On April 27, 2011, the company borrowed $25,000 from Island Capital Management, LLC. under a promissory note bearing interest at 6%. Island Capital Management, LLC is related through common shareholders. The original maturity of the note was April 27, 2012. The note is currently in default.
As of September 30, 2013, the Company's significant shareholders have at varying times and in various amounts, advanced funds to the Company for working capital purposes. Total amounts due to related parties through advances and the promissory note were $294,595 and $169,150 as of September 30, 2013 and January 31, 2013, respectively. Except for the terms stipulated in the promissory note, all other amounts advanced are unsecured, non-interest bearing and have no specific terms of repayment.
During the eight months ended September 30, 2013, the related parties assumed $63,932 in the liabilities from discontinued operations.
NOTE D COMMON STOCK TRANSACTIONS AND REVERSE SPLIT
On May 8, 2013, the Company entered into a Debt Conversion Agreement with Endeavour Cooperative Partners LLC in the amount of $272,356. This amount represents the related party debt payable to Endeavour as of that date. The terms of the agreement allow for Endeavour to convert this debt into preferred stock at $.000172 per share. On May 8, 2013 Endeavour filed a notice of conversion for $3,400 of its debt, in exchange for 19,736,560 of pre-reverse split preferred shares. These shares converted to 493,414 shares of preferred stock after the reverse split.
June 6, 2013, the Company affected a 1 share for 40 shares reverse split of its common and preferred stock. As a result, the issued and outstanding shares at that date were decreased from 79,736,560 to 1,993,495. The authorized shares at that date were then decreased from 100,000,000 to 2,500,000; 2,000,000 shares of common stock and 500,000 preferred shares.
On July 22, 2013, the Company amended and restated its Articles of Incorporation to increase the total authorized capital stock of the corporation to 110,000,000 shares, being comprised of 100,000,000 shares of common stock with a par value of $.01 per share, and 10,000,000 shares of preferred stock with a par value of $.001.
NOTE E 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 September 30, 2013 considers this common stock issuable and has recorded it in the equity section. As a result of the 1 for 40 reverse split, the number of shares issuable has been decreased from 533,333 to 13,333 at September 30, 2013 and 2012.
NOTE F SUBSEQUENT EVENTS
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.
The Company discontinued operations on or about June 1, 2008 and has incurred losses of $4,919,914 since inception from January 19, 2006 through September 30, 2013.
Results of Operations
Lack of Revenue
Since our inception on January 19, 2006 to September 30, 2013 we have not earned any revenues. We have no operations or plans in place to earn any revenues at this time.
We incurred general and administrative costs of $6,334 and $37,814 for the two and eight months ended September 30, 2013 as compared to $0 and $6,662 for the two and eight months ended September 30. The expenses for both periods consist primarily of legal and professional fees.
From January 19, 2006 (date of inception) to September 30, 2013, we incurred net losses of $4,919,914.
Liquidity and Capital Resources
As of September 30, 2013, we had $600 in 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, 2013. 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 September 30, 2013 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 September 30, 2013, 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 Procedure
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of quarter covered by this report. Based on the evaluation of these disclosure controls and procedures the chief executive officer and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were effective.
Changes in Internal Controls
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
On May 8, 2013, the Company issued 493,414 preferred shares as conversion of debt.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
On January 14, 2013, Micah 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: November 14, 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: November 14, 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 transitional period ended September 30, 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: November 14, 2013
/s/ Micah Eldred
Chief Executive Officer
/s/ Christine Zitman
Chief Financial Officer