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EX-32.2 - CERTIFICATION - IGS Capital Group Ltdsancon_10q-ex3202.htm
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EX-31.2 - CERTIFICATION - IGS Capital Group Ltdsancon_10q-ex3102.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

FORM 10-Q

 

 

 

  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934:

 

For the Quarterly Period ended June 30, 2016

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT

 

For the transition period from __________________ to __________________

 

Commission File Number: 000-50760

 

Sancon Resources Recovery, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Nevada 58-2670972

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

602 Nan Fung Tower, Suite 6/F

88 Connaught Road Central

Central District, Hong Kong

(Address of Principal Executive Offices)

 

+(852) 2868-0668

(Registrant’s Telephone Number, Including Area Code)

 

____________________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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. Yes      No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes      No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No

 

Number of shares outstanding of each of the issuer’s classes of common equity, as of August 19, 2016: 105,091,254 shares of Common Stock, par value US $0.001

 

 

 
 

 

Forward Looking Statements

 

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

The information contained in this 10-Q includes some statements that are not purely historical and that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates”, “believes”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “might”, “plans”, “possible”, “potential”, “predicts”, “projects”, “seeks”, “should”, “will”, “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking.

 

Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of management’s views and assumptions as of the time the statements are made, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof. 

 

 

 2 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)     4  
         
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION     9  
         
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     12  
         
ITEM 4. CONTROLS AND PROCEDURES     12  
         
PART II. OTHER INFORMATION
         
ITEM 1. LEGAL PROCEEDINGS     13  
         
ITEM 1A. RISK FACTORS     13  
         
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS     13  
         
ITEM 3. DEFAULTS UPON SENIOR SECURITIES     13  
         
ITEM 4. MINE SAFETY DISCLOSURES     13  
         
ITEM 5. OTHER INFORMATION     13  
         
ITEM 6. EXHIBITS     13  
         
SIGNATURES     14  
         
INDEX TO EXHIBITS     15  

 

 

 

 3 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED) 

SANCON RESOURCES RECOVERY, INC.

CONDENSED BALANCE SHEETS

 

 

   As at 
  

June 30,

2016

(Unaudited)

  

December 31,
2015

 

 
           
Asset          
Total current asset and total asset  $   $ 
           
Liability          
Due to related parties   76,220    163,674 
Accrued expenses and other payables   1,292    57,244 
Total current liability and total liability   77,512    220,918 
           
           
Stockholders' deficits          
Share capital          
Authorized: 500,000,000 common shares, par value $0.001 per share          
Issued and outstanding: 105,091,254 shares as of June 30, 2016 (December 31, 2015: 32,219,996 shares)   105,091    32,220 
Additional paid-in capital   923,070    792,720 
Share option reserves   89,015    89,015 
Accumulated losses   (1,194,688)   (1,134,873)
Total stockholders’ deficits   (77,512)   (220,918)
           
Total liability& stockholders' deficits  $   $ 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

 

 

 4 

 

 

SANCON RESOURCES RECOVERY, INC.

CONDENSED STATEMENTS OF INCOME

(UNAUDITED)

 

   For the three
months periods ended
June 30,
   For the six
months periods ended
June 30,
 
   2016   2015   2016   2015 
                 
Net Revenue  $   $   $   $ 
                     
Operating Expenses                    
General and Administrative expenses   42,058    18,293    61,045    36,749 
Total operating expenses   42,058    18,293    61,045    36,749 
                     
Operating loss   (42,058)   (18,293)   (61,045)   (36,749)
                     
Other income           1,230     
                     
Loss before tax   (42,058)   (18,293)   (59,815)   (36,749)
                     
Income taxes                
                     
Net loss  $(42,058)  $(18,293)  $(59,815)  $(36,749)
                     
Loss per share                    
Basic loss per share  $   $   $   $ 
Basic weighted average shares outstanding   86,280,798    32,219,996    65,827,320    32,219,996 
Diluted loss per share  $   $   $   $ 
Diluted weighted average shares outstanding   86,619,599    35,153,958    65,827,320    33,615,510 

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

 

 

 5 

 

 

SANCON RESOURCES RECOVERY, INC.

CONDENSED STATEMENTS OF CASH FLOW

(UNAUDITED)

 

 
   For the six months periods ended June 30, 
   2016   2015 
Cash Flows from Operating Activities          
Net loss  $(59,815)  $(36,749)
           
Change in current assets and liabilities          
(Decrease) / Increase in accrued expenses and other payables   (55,952)   11,036 
Net cash flows used in operating activities   (115,767)   (25,713)
           
Cash Flows from Financing Activities          
Issuance of shares   203,221     
Loans from related parties       25,713 
Settlement of loans from related parties   (87,454)    
Net cash flows provided by financing activities   115,767    25,713 
           
 Effect of exchange rate changes on cash        
           
Net Increase in Cash & Cash Equivalent        
           
Cash & Cash Equivalent at start of period  $   $ 
Cash & Cash Equivalent at end of period  $   $ 

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

 

 6 

 

 

SANCON RESOURCES RECOVERY, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six month periods ended June 30, 2016

(Unaudited)

 

Note 1.  Nature of Operations

 

Sancon Resources Recovery, Inc. ("Sancon", or "the Company", or "we", or "us") is registered in the State of Nevada. Sancon Resources Recovery, Inc. was dormant during the period.

 

Note 2.  Basis of Presentation

 

Unaudited Interim Condensed Financial Statements

 

The accompanying unaudited condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America. However, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted or condensed, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of Sancon’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The results for periods are not necessarily indicative of results for the entire year. These financial statements and accompanying notes should be read in conjunction with our annual financial statements and the notes thereto for the year ended December 31, 2015, included in our Annual Report on Form 10K, filed with the Securities and Exchange Commission.

 

Note 3.  Summary of Significant Accounting Policies

 

Use of Estimates

 

These financial statements are prepared in accordance with accounting principles accepted generally in the USA. These principles require management to use its best judgment in determining estimates and assumptions that: affect the reported amounts of assets and liabilities; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for such items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the relevant accounting rules, typically in the period when new information becomes available to management. Actual results in the future could differ from the estimates made in the prior and current periods.

 

Earnings Per Share

 

Basic earnings per share ("EPS") is calculated using net earnings (the numerator) divided by the weighted-average number of shares outstanding (the denominator) during the reporting period.  Diluted EPS includes the effect from potentially dilutive securities.

 

Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

The Company operates in several countries. As a result, we are subject to numerous domestic and foreign tax jurisdictions and tax agreements and treaties among the various taxing authorities. Our operations in these jurisdictions are taxed on various bases: income before taxes, deemed profits and withholding taxes based on revenue. The calculation of our tax liabilities involves consideration of uncertainties in the application and interpretation of complex tax regulations in a multitude of jurisdictions across our global operations.

 

We regularly assess our position with regard to individual tax exposures and record liabilities for our uncertain tax positions and related interest and penalties. These accruals reflect management's view of the likely outcomes of current and future audits. The future resolution of these uncertain tax positions may be different from the amounts currently accrued and therefore could impact future tax period expense.

 

Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of income taxes that we provide during any given year.

 

 7 

 

SANCON RESOURCES RECOVERY, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six month periods ended June 30, 2016

(Unaudited)

 

Note 3.  Summary of Significant Accounting Policies (Continued)

 

Recent pronouncements

 

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

 

Note 4.  Going Concern

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, after the disposal of its operating subsidiaries in the 4th quarter of 2011 and became dormant afterwards, the Company has the stockholders’ deficits of $77,512 and $220,918 as of June 30, 2016 and December 31, 2015 respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans, additional sales of its common stock or through a possible business combination. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Note 5. Related Party Transactions

 

As of June 30, 2016, the Company owed $48,333 and $27,887 to directors and related companies respectively.

 

As of December 31, 2015, the Company owed $141,931, $1,230 and $20,513 to directors, shareholder and related companies respectively.

 

On May 4, 2016, (i) 42,582,858 shares of our common stock, valued at $138,000 were issued in lieu of cash compensation for director and secretarial services from March 13, 2014 through June 30, 2016; and (ii) 9,288,400 shares of our common stock, valued at $23,221 were issued in lieu of cash compensation for accounting services from December 22, 2013 through June 30, 2016.

 

Note 6.  Stockholders’ equity

 

Common stock

 

Please refer to Note 5 – Related Party Transactions for the details of changes in share capital in this quarter.

 

Stock options

 

On December 5, 2012, the Company entered into a settlement agreement with Dragon Wings for the settlement of the claim by Dragon Wings. In consideration of Sancon's agreement to make the payments in the form of common shares and share options listed in the settlement agreement. The Company would give the option to Dragon Wings to purchase 6,000,000 common shares; the option may be exercised by Dragon Wings in whole or in part, at any time within 5 years from the date of this settlement agreement with the exercise price at US$0.01 per share, with dilution protection and subject to share split adjustment.

 

   As at 
  

June 30,

2016

   December 31,
2015
 
           
Loan settled by share option  $149,015   $149,015 
Par value of the common shares   60,000    60,000 
Fair value of share option  $89,015   $89,015 

 

 

Note 7. Income Taxes

 

The Company has U.S. federal net operating loss carry forwards that if unused could expire in varying amounts in the years through 2020 to 2026. However, as a result of the acquisition, the amount of net operating loss carry forward available to be utilized in reduction of future taxable income was reduced pursuant to the change in control provisions of Section 382 of the Internal Revenue Code.

 

A 100% valuation allowance has been established as a reserve against the deferred tax assets arising from the net operating losses and other net temporary differences since it cannot, at this time, be considered more likely than not that their benefit will be realized in the future.

 

 

 8 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Item 2(a). Discussion for the Interim Operations and Financial Condition

 

Introduction

 

Management's discussion and analysis of results of operations and financial condition ("MD&A") is provided as a supplement to the accompanying financial statements and footnotes to help provide an understanding of our financial condition, changes in financial condition and results of operations. The MD&A is organized as follows:

 

Caution concerning forward-looking statements and risk factors. This section discusses how certain forward-looking statements made by us throughout the MD&A and in the financial statements are based on our present expectations about future events and are inherently susceptible to uncertainty and changes in circumstances.
Overview. This section provides a general description of our business, as well as recent developments that we believe are important in understanding the results of operations and to anticipate future trends in those operations.
Results of operations. This section provides an analysis of our results of operations for the three month and six month periods ended June 30, 2016 compared to the same period in 2015. A brief description is provided of transactions and events, including any related party transactions that affect the comparability of the results being analyzed.
Liquidity and capital resources. This section provides an analysis of our financial condition and cash flows for the three month and six month periods ended June 30, 2016 and 2015.
Critical accounting policies. This section provides an analysis of the significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

 

Forward-looking Statements

 

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our Common Stock.

 

The following discussion should be read in conjunction with our financial statements and the notes thereto, and the other financial information appearing elsewhere in this document. In addition to historical information, the following discussion and other parts of this document contain certain forward-looking information. When used in this discussion, the words "believes", "anticipates", "expects", and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from projected results, due to a number of factors beyond our control. We do not undertake to publicly update or revise any of our forward-looking statements, even if experience or future changes show that the indicated results or events will not be realized. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Readers are also urged to carefully review and consider our discussions regarding the various factors, which affect our business, included in this section and elsewhere in this report.

 

Factors that might cause actual results, performance or achievements to differ materially from those projected or implied in such forward-looking statements include, among other things: (i) the impact of competitive products; (ii) changes in law and regulations; (iii) limitations on future financing; (iv) increases in the cost of borrowings and unavailability of debt or equity capital; (v) our inability to gain and/or hold market share; (vi) managing and maintaining growth; (vii) customer demands; (viii) market and industry conditions, (ix) the success of product development and new product introductions into the marketplace; (x) the departure of key members of management; as well as other risks and uncertainties that are described from time to time in our filings with the Securities and Exchange Commission.

 

Limited Market Due To Penny Stock

 

The Company's stock differs from many stocks, in that it is a "penny stock". The Securities and Exchange Commission has adopted a number of rules to regulate "penny stock". These rules include, but are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended. Because our securities probably constitute "penny stock" within the meaning of the rules, the rules would apply to us and our securities. The rules may further affect the ability of owners of our stock to sell their securities in any market that may develop for them. There may be a limited market for penny stocks, due to the regulatory burdens on broker-dealers. The market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. Stockholders should be aware that, according to the Securities and Exchange Commission Release No. 34- 29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These patterns include: - Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; - Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; - "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; - Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and - The wholesale dumping of the same securities by promoters and broker- dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. Furthermore, the "penny stock" designation may adversely affect the development of any public market for the Company's shares of common stock or, if such a market develops, its continuation. Broker-dealers are required to personally determine whether an investment in "penny stock" is suitable for customers. Penny stocks are securities (i) with a price of less than five dollars per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an issuer with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average annual revenues of less than $6,000,000 for the last three years. Section 15(g) of the Exchange Act and Rule 15g-2 of the Commission require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor‘s account. Potential investors in the Company‘s common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock". Rule 15g-9 of the Commission requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for the Company's stockholders to resell their shares to third parties or to otherwise dispose of them.

 

 

 9 

 

 

Overview of the Company and its Operations

 

The Company sold all its business in the 4th quarter of 2011. It has no business operation as of the date of this report.

 

Sancon's Visions and Goals

 

After the disposal of all its business in 2011, the directors are now looking for viable business that it can acquire in Asia.

 

Employees

 

As of June 30, 2016, the Company had one employee, Angel Lai.

 

Factors That May Affect Future Results

 

The Company's ability to execute its business strategy and to sustain its operations depends upon its ability to maintain or procure capital. There can be no absolute assurance the necessary amount of capital will continue to be available to the Company on favorable terms, or at all. The Company's inability to obtain sufficient capital would limit the Company's ability to: (i) acquire new business and (ii) fund its working capital needs. The Company's access to capital may have a material adverse effect on the Company's business, financial condition and/or results of operations.

 

There can be no absolute assurance the Company will be able to effectively manage its existing or the possible future expansion of its operations, or the Company's systems, procedures or controls will be adequate to support the Company's operations. Consequently, the Company's business, financial condition and/or results of operations could be possibly and adversely affected.

 

As a public company, Sancon is subject to certain regulatory requirements including, but not limited to, compliance with Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX404"). Such compliance results in significant additional costs to the Company by increased audit and consulting fees, and the time required by management to address the regulations.

 

Results of Operations - Comparison between the three month and six month periods ended June 30, 2016 and the same period in 2015.

 

Revenue

 

The Company had no revenues for the three month and six month periods ended June 30, 2016 and the same period in 2015.

 

General and administrative expenses

 

General and administrative expenses increased to $42,058 and $61,045 for the three month and six month periods ended June 30, 2016 respectively, from $18,293 and $36,749 for the three month and six month periods ended June 30, 2015 respectively, an increase of $23,765 and $24,296 respectively. Of these amounts, $15,000 and $30,000 related to the value of cash compensation to our directors and secretary for the three and six months, respectively, ended June 30, 2016 and June 30, 2015. In addition, a substantial portion of our expenses for the three and six months, respectively, ended June 30, 2016 and June 30, 2015 related to accounting service fees, audit fees, legal service fees, professional service fees and transfer agent fees.

 

 

 10 

 

 

Other Income

 

The other income for the three month and six month periods ended June 30, 2016 was $nil and $1,230 respectively, compared to the other income of $nil for the three month and six month periods ended June 30, 2015, an increase of $nil and $1,230 respectively.

 

Income Tax

 

There were no income taxes for the three month and six month periods ended June 30, 2016 and the same period in 2015.

 

Net loss

 

The net loss for the three month and six month periods ended June 30, 2016 was $42,058 and $59,815 respectively, compared to the net loss of $18,293 and $36,749 respectively for the three month and six month periods ended June 30, 2015 respectively, an increase of $23,765 and $23,066 respectively.

 

Liquidity and Capital Resources

 

Working Capital

  As of   As of 
  June 30,   December 31, 
   2016   2015 
Current Assets  $   $ 
Current Liabilities  $77,512   $220,918 
Working Capital  $(77,512)  $(220,918)

 

As shown in the accompanying financial statements, the Company has accumulated loss of $1,194,688 as of June 30, 2016 compared to $1,134,873 as of December 31, 2015. There was a working capital deficit of $77,512 on June 30, 2016 and it was $220,918 as of December 31, 2015. It decreased $143,406. This is due to the settlement of liability due to related parties by issuance of common shares.

 

Operating Activities

 

The net cash used in operating activities for the six months period ended June 30, 2016 was $115,767 compared to $nil for the six months period ended June 30, 2015. Part of the liabilities due to related parties and accrued expenses and other payables are settled by the issuance of common shares. The change is attributed by net loss of $59,815 and decrease in liability of $143,406.

 

Financing Activities

 

The net cash provided by financing activities for the six months period ended June 30, 2016 was $115,767 compared to $nil for the six months period ended June 30, 2015. The Company financed its growth by utilizing cash reserves, loans from directors and issuance of common shares. Loans from directors were unsecured, and deferred payment term and without interest bearing. The Company’s primary use of funds was for operation expense and working capital.

 

Critical Accounting Policies and Estimates

 

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments: allowance for doubtful accounts; income taxes; stock-based compensation; asset impairment.

 

 

 11 

 

 

Stock-Based Compensation

Effective January 1, 2006, the beginning of Sancon's first fiscal quarter of 2006, the Company adopted the fair value recognition provisions of SFAS 123R (ASC 718), using the modified-prospective transition method. Under this transition method, stock-based compensation expense was recognized in the consolidated financial statements for granted stock options, since the related purchase discounts exceeded the amount allowed under SFAS 123R(ASC 718) for non-compensatory treatment. Compensation expense recognized included: the estimated expense for stock options granted on and subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R(ASC 718); and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123(ASC 718). Results for prior periods have not been restated, as provided for under the modified-prospective method.

 

On December 5, 2012, the Company entered into a settlement agreement with Dragon Wings for the settlement of the claim by Dragon Wings. In consideration of Sancon's agreement to make the payments in the form of common shares and share options listed in the settlement agreement. The Company would give the option to Dragon Wings to purchase 6,000,000 common shares; the option may be exercised by Dragon Wings in whole or in part, at any time within 5 years from the date of this settlement agreement with the exercise price at US$0.01 per share, with dilution protection and subject to share split adjustment.

 

For other items paid for by common stock, the value of the transaction is determined by the value of the goods or services received, measured at the time of the transaction. The corresponding stock value, used to determine the number of share to be issued, is the value of the average price for the 20 to 30 days prior to the transaction date.

 

Item 2(b). Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The information is not required of smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report (the "Evaluation Date"). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date, that our disclosure controls and procedures were not effective.

 

During the six months ended June 30, 2016, there were no changes in our internal accounting controls or in other factors that materially affected our internal controls over financial reporting.

 

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

Item 1A. RISK FACTORS

 

The information is not required for smaller reporting companies.

 

Item 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

 

We have sold the following equity securities within the period covered by this report in transactions which were not registered under the Securities Act of 1933, as amended: Except where otherwise noted, all shares were issued in offshore transactions in reliance upon the exemption from the registration requirements of the Securities Act in accordance with Regulation S promulgated thereunder.

 

On February 4, 2016, we issued 21,000,000 shares of our common stock to Wai Hung TAM (3,500,000 shares), Chi Pan LAM (3,500,000 shares), Wai Leong TANG (3,000,000 shares), Yee Tat WONG (4,000,000 shares), Hoi Yi TO (3,500,000 shares) and Wai Fan WU (3,500,000 shares) for a consideration of US$42,000.

 

On May 4, 2016, (i) 42,582,858 shares of our common stock, valued at $138,000 were issued in lieu of cash compensation for director and secretarial services from March 13, 2014 through June 30, 2016; and (ii) 9,288,400 shares of our common stock, valued at $23,221 were issued in lieu of cash compensation for accounting services from December 22, 2013 through June 30, 2016.

 

Item 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

Item 4. MINE SAFETY DISCLOSURES

 

None.

 

Item 5. OTHER INFORMATION

 

Effective June 28, 2016, the Board of Directors (the “Board”) of Sancon Resources Recovery, Inc. (the “Company”) increased the size of the Board from two to four directors and elected Ms. HE, Qianying and Mr. KOK, Seng Yeap as directors to fill the newly created vacancy on the Board.

 

On July 4, 2016, Pontoon Boat Inc. (“Pontoon”) purchased a total of 53,596,540 common shares of Sancon Resources Recovery, Inc. (the “Company”) at US$0.0017 per share, representing 51% of the Company’s outstanding common shares. The shares were purchased for cash from the following persons:

 

Name Number of shares
   
Wai Hung TAM   3,500,000
Chi Pan LAM   3,500,000
Wai Leong TANG   3,000,000
Yee Tat WONG   4,000,000
Hoi Yi TO   3,500,000
Wai Fan WU   3,500,000
Francis BOK 13,144,867
Stephen TANG 13,144,867
Shuk Har LAI   6,306,806

 

Pontoon is a limited liability company registered in the Republic of Vanuatu. Pontoon is wholly owned by its director, Mr. KOK Seng Yeap. Mr. KOK is also a director of the Company and he provided the financing to Pontoon to purchase the Company’s shares. The financing is interest free and has no definite repayment schedule.

 

There is no agreement between Pontoon and its owners and the former Company stockholders regarding election of directors or any other matters.

 

Item 6. EXHIBITS

   
(1)   Exhibits: Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits following the signature page of this Form 10-Q, which is incorporated herein by reference.

 

 

 

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SIGNATURES

 

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.

 

  SANCON RESOURCES RECOVERY, INC.  
       
Dated: August 19, 2016 By: /s/ Stephen Tang  
  Stephen Tang  
    President and Director  
    (Chief Executive Officer)  
     
       
Dated: August 19, 2016 By: /s/ Francis Bok  
    Francis Bok  
    Director  
    (Chief Financial Officer)  
       

 

 

 

 

 

 

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INDEX TO EXHIBITS

 

Exhibit No.   Description
     
31.1   Certification of President  
       
31.2   Certification of Director  
       
32.1   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002  
       
32.2   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002  
       
101   The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language); (i) Balance Sheets at June 30, 2016 and December 31, 2015, (ii) Statement of Operations for the six months period ended June 30, 2016 and 2015, (iii) Statement of Cash Flows for the six months period ended June 30, 2016 and 2015, and (iv) Notes to Financial Statements

 

 

 

 

 

 

 

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