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EX-32.2 - CERTIFICATION - IGS Capital Group Ltdsancon_ex3202.htm
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EX-31.1 - CERTIFICATION - IGS Capital Group Ltdsancon_ex3101.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

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

 

For the Quarterly Period ended September 30, 2014

 

o 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 x No o

 

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 x No o

 

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 o                                                                           Accelerated filer o

Non-accelerated filer o                                                                             Smaller Reporting Company x

 

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

 

Number of shares outstanding of each of the issuer’s classes of common equity, as of September 30, 2014: 32,219,996 shares of Common Stock, par value US $0.001

 

 

 

   

 

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

 

The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer’s actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “the Company believes,” “management believes” and similar language, including those set forth in the discussions under “Notes to Financial Statements” and “Management’s Discussion and Analysis or Plan of Operation” as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the “safe harbor” created by the Private Securities Litigation Reform Act of 1995.

 

 

 

 

 

 

 

 

 

 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   10 
      
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   14 
      
ITEM 4T. CONTROLS AND PROCEDURES   14 
      
PART II. OTHER INFORMATION     
      
ITEM 1. LEGAL PROCEEDINGS   15 
      
ITEM 1A. RISK FACTORS   15 
      
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   15 
      
ITEM 3. DEFAULTS UPON SENIOR SECURITIES   15 
      
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   15 
      
ITEM 5. OTHER INFORMATION   15 
      
ITEM 6. EXHIBITS   15 
      
SIGNATURES   15 
      
INDEX TO EXHIBITS   16 
      

 

 

 

 3 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

 

SANCON RESOURCES RECOVERY, INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

   As at 
  

September 30,

2014

  

December 31,

2013

 
Assets        
Advance and prepayment       4,829 
Total current asset and total asset  $   $4,829 
           
Liability          
Due to related parties   100,674    62,232 
Accrued expenses and other payables   26,902    15,703 
Total current liability and total liability   127,576    77,935 
           
Stockholders' deficits          
Share capital          
Authorized: 500,000,000 common shares, par value $0.001 per share Issued and outstanding: 32,219,996 shares as of September 30, 2014 and December 31, 2013   32,220    32,220 
Additional paid-in capital   792,720    792,720 
Share option reserves   89,015    89,015 
Accumulated losses   (1,041,531)   (987,061)
Total stockholders’ deficits   (127,576)   (73,106)
           
Total liability& stockholders' deficits  $   $4,829 

 

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 September 30,   For the nine months periods ended September 30, 
   2014   2013   2014   2013 
                 
Net Revenue  $   $   $   $ 
                     
Operating Expenses                    
General and Administrative expenses   17,883    18,078    54,470    53,913 
Total operating expenses   17,883    18,078    54,470    53,913 
                     
Operating Loss   (17,883)   (18,078)   (54,470)   (53,913)
                     
Income tax expenses                
                     
Net loss  $(17,883)  $(18,078)  $(54,470)  $(53,913)
                     
Loss per share                    
Basic loss per share  $   $   $   $ 
Basic weighted average shares outstanding   32,219,996    17,286,914    32,219,996    17,286,914 
Diluted loss per share  $   $   $   $ 
Diluted weighted average shares outstanding   35,500,331    17,871,053    35,493,359    20,247,163 

 

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 nine months periods

ended September 30,

 
   2014   2013 
Cash Flows from Operating Activities          
Net loss  $(54,470)  $(53,913)
           
Adjustments to reconcile net income to net cash flows provided by operating activities:          
Share based payment       30,000 
Change in current assets and liabilities          
Decrease in other current assets   4,829    3,348 
Increase in other current liabilities   49,641    20,565 
Net cash flows provided by operating activities        
           
Cash Flows from Investing Activities          
Purchase of property and equipment        
Net cash flows used in Investing activities        
           
Cash Flows from Financing Activities          
Issuance of shares        
Net cash flows used in financing activities        
           
Effect of exchange rate changes on cash        
           
Net decrease in Cash & Cash Equivalent        
           
Cash & Cash Equivalent at start of period  $   $ 
Cash & Cash Equivalent at end of period  $   $ 
           
Noncash Investing and Financing Transactions          
Settlement of other payables by issuing share  $   $60,000 

 

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 nine month periods ended September 30, 2014

(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

 

(a) 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, 2013, 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.

 

 

 

 7 

 

 

SANCON RESOURCES RECOVERY, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the nine month periods ended September 30, 2014

(Unaudited)

 

Note 3.  Summary of Significant Accounting Policies (Continued)

 

Income Taxes (Continued)

 

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.

 

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.  Legal Proceeding:

 

The company is involved in the following litigation:

 

Dragon Wings Communications Limited, a Hong Kong corporation and Wong Yee Tat, an individual are the first and second plaintiff. They filed a complaint on July 25, 2008 in the District Court of the Hong Kong special Administrative Region, Civil Action No. 3251, against the first defendant, Fintel Group Limited for breach of contract. The Company is the second defendant because plaintiff claimed Fintel Group Limited is a wholly owned subsidiary of the Company. Under the writ, the plaintiff claimed that pursuant to a written stock purchase agreement, the first defendant shall purchase the first plaintiff’s common stock by common shares of Financial Telecom Limited (USA) inc. (replaced by shares of MKA Capital Inc. from June 2006) or pay to the plaintiff cash of $94,172 in lieu of the shares.  Pluses the interest and cost of litigation, the total amount claimed by plaintiff were $104,966.  The court adjudged that the first defendant do pay the plaintiffs damages on September 08, 2008 and also adjudged that the second defendant do pay the plaintiffs damages on December 10, 2008.  The Company has denied all allegations in the complaint because Fintel Group Limited was not a subsidiary at the time.

 

On November 19, 2010, an involuntary bankruptcy petition was filed against the company in the United States Bankruptcy Court for Nevada, Case No. 10-54572-gwz. The petitioner is Dragon Wings Communications Limited and the amount of the claim is $149,015.  The Company has retained a Nevada law firm to oppose the involuntary petition and have the case dismissed. The Company accrued $149,015 of potential liability in the accompanied financial statements based on the amount of the claim. 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, Dragon Wings agreed to completely release and to forever discharge the Company of and from any and all past, present or future claims, demands, obligations, actions, rights, damages, costs, expenses and compensation which Dragon Wings had, or which may hereafter accrue in connection to the Claim. The Company would issue to Dragon Wings 6,000,000 common shares without payment by or costs to Dragon Wings, and give the option to Dragon Wings to purchase 6,000,000 common shares under the terms and conditions mentioned in note 8. On January 11, 2013, the Bankruptcy Court for the District of Nevada entered an order dismissing this bankruptcy case against the Registrant. As a result, all pending hearings in the case, except any pending hearings on fee applications for Chapter 13 cases, were vacated.

 

Note 5.  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 $127,576 and $73,106 for the period ended September 30, 2014 and the year ended December 31, 2013 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.

 

 

 

 8 

 

 

SANCON RESOURCES RECOVERY, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the nine month periods ended September 30, 2014

(Unaudited)

 

Note 6. Due from/ (to) related parties

 

Due from/ (to) related parties are as follows:

 

   As at 
   Sep 30, 2014   December 31, 2013 
         
Due from Related companies in advance and prepayment  $   $4,829 
           
Due to Directors   (78,931)   (40,489)
Due to Shareholder   (1,230)   (1,230)
Due to Related companies   (20,513)   (20,513)
   $(100,674)  $(62,232)

 

Note 7.  Stockholders’ equity

 

Ordinary share

 

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. On January 4, 2013, the Company issued 6,000,000 ordinary shares to Dragon Wing without payment by or costs to Dragon Wings for the settlement of $60,000 in other payable.

 

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.

 

Share based compensation

 

On May 21, 2012, Mr. Stephen Tang was elected to be the director and CEO of the Company and Mr. Francis Bok was elected to be the director and CFO of the Company. Mr. Stephen Tang and Mr. Francis Bok will receive corporate salary of $24,000 per year each that paid in stock. As of September 30, 2014 and December 31, 2013, the Company recorded $24,000 and $29,420 in due to related parties. This is a stock subscription liability. Since July 1, 2014, no further share based compensation was recognized as the Company planned to settle the director fees by cash afterwards.

 

On May 21, 2012, the Company prescribes the issuance of stock in lieu of salary for $12,000 per year with an employee. As of September 30, 2014 and December 31, 2013, the Company recorded $6,000 and $7,355 in other payables. This is a stock subscription liability. Since July 1, 2014, no further share based compensation was recognized as the Company planned to settle the secretary fees by cash afterwards.

 

Note 8. 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.

 

 

 

 9 

 

 

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 nine month periods ended September 30, 2014 compared to the same periods in 2013. 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 nine month periods ended September 30, 2014 and 2013.
  · 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.

 

Caution Concerning Forward-looking Statements and Risk Factors

 

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.

 

We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business and our products. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could adversely affect us.

 

Potential Fluctuations in Periodic Operating Results

 

Our periodic operating results may fluctuate significantly in the future as a result of a variety of factors, most of which are outside our control, including: the demand for our products; seasonal trends in purchasing, the amount and timing of capital expenditures and other costs relating to the development of our products; price competition or pricing changes in the industry; technical difficulties or system downtime; general economic conditions, and economic conditions specific to the industry. Our results may also be significantly impacted by the impact of the accounting treatment of acquisitions, financing transactions or other matters. Particularly at our early stage of development, such accounting treatment can have a material impact on the results for any period. Due to the foregoing factors, among others, it is likely that our operating results will fall below our expectations or those of investors in some future period.

 

 

 

 10 

 

 

Dependence upon Management

 

Our future performance and success is dependent upon the efforts and abilities of our Directors. We do not maintain key man life insurance on any of our Directors.

 

Limitation of Liability and Indemnification of Officers and Directors

 

Our directors are required to exercise good faith and high integrity in our Management affairs. Our Articles of Incorporation provide, however, that our officers and directors shall have no liability to our shareholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they violated their duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or stock repurchase, or derived an improper benefit from the transaction. Our Articles and By-Laws also provide for the indemnification by us of the officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, the best interests of the Company, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations.

 

Management of Potential Growth

 

Growth of the Company will place a significant strain on our managerial, operational, and financial systems resources. To accommodate our current size and manage growth, we must continue to implement and improve our financial strength and our operational systems, and expand, train and manage our sales and distribution base. There is no guarantee that we will be able to effectively manage the expansion of our operations, or that our facilities, systems, procedures or controls will be adequate to support our expanded operations. Our inability to effectively manage our future growth would have a material adverse effect on the Company.

 

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.

 

 

 11 

 

 

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 September 30, 2014, 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.

 

The Company does not foresee changes in tax laws for the jurisdictions in which the Company operates. There can be no absolute assurance that changes will not occur, and therefore no absolute assurance such changes will not materially and adversely affect the Company's business, financial condition and results of operations.

 

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 nine month periods ended September 30, 2014 and the same periods in 2013.

 

Revenue

 

The Company had no revenues for the three month and nine month periods ended September 30, 2014 and the same periods in 2013.

 

General and administrative expenses

 

General and administrative expenses decreased to $17,883 and increased to $54,470 for the three month and nine month periods ended September 30, 2014 respectively, from $18,078 and $53,913 for the three month and nine month periods ended September 30, 2013 respectively, a decrease of $195 and an increase of $557 respectively. Of these amounts, $15,000 and $45,000 related to the value of cash compensation to our directors and secretary for the three and nine months, respectively, ended September 30, 2014, $15,000 and $45,000 related to the value of cash and share based compensation to our directors and secretary for the three and nine months, respectively, ended September 30, 2013. In addition, a substantial portion of our expenses for the three and nine months, respectively, ended September 30, 2014 and September 30, 2013 related to accounting service fees, audit fees, professional service fees and transfer agent fees.

 

Income Tax

 

There were no income taxes for the three month and nine month periods ended September 30, 2014 and the same periods in 2013.

 

Net loss

 

The net loss for the three month and nine month periods ended September 30, 2014 was $17,883 and $54,470 respectively, compared to the net loss of $18,078 and $53,913 respectively for the three month and nine month periods ended September 30, 2013 respectively, a decrease of $195 and an increase of $557 respectively.

 

 

 

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Liquidity and Capital Resources

 

As shown in the accompanying financial statements, the Company has accumulated loss of $1,041,531 as of September 30, 2014 compared to $987,061 as of December 31, 2013. There was a working capital deficit of $127,576 on September 30, 2014 and it was $73,106 as of December 31, 2013. It increased $54,470.

 

Operating Activities

 

No net cash was provided by operating activities for the nine month period ended September 30, 2014 and the same period in 2013.

 

Investing Activities

 

No net cash was used in investing activities for the nine month period ended September 30, 2014 and the same period in 2013.

 

Financing Activities

 

No net cash was used in financing activities for the nine month period ended September 30, 2014 and the same period in 2013.

 

The Company financed its growth by utilizing cash reserves and loans from directors. 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.

 

Inflation

 

In the opinion of management, inflation has not had a material effect on the Company's financial condition or results of its operations.

 

Trends and uncertainties

 

Management believes there are no known trends, events, or uncertainties that could, or reasonably be expected to, adversely affect the Company's liquidity in the short and long terms, or its net sales, revenues, or income from continuing operations.

 

The Company's operations are not affected by seasonal factors.

 

Critical Accounting Policies and Estimates

 

The preparation of our consolidated 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 consolidated 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.

 

Income taxes

 

We account for income taxes in accordance with SFAS No. 109 (ASC 740), Accounting for Income Taxes. SFAS 109 (ASC 740) prescribes the use of the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance, or increase or decrease this allowance in a period, we increase or decrease our income tax provision in our statement of operations. If any of our estimates of our prior period taxable income or loss prove to be incorrect, material differences could impact the amount and timing of income tax benefits or payments for any period. In addition, as a result of the significant change in the Company's ownership, the Company's future use of its existing net operating losses may be limited.

 

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.

 

 

 

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We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. The tax liabilities are reflected net of realized tax loss carry forwards. We adjust these reserves upon specific events; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the contingency has been resolved and the liabilities are no longer necessary.

 

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.

 

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.

 

Asset Impairment

 

We periodically evaluate the carrying value of other long-lived assets, including, but not limited to, property and equipment and intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Significant estimates are utilized to calculate expected future cash flows utilized in impairment analyses. We also utilize judgment to determine other factors within fair value analyses, including the applicable discount rate.

 

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 4T. 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 nine months ended September 30, 2014, 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

 

None.

 

Item 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

Item 5. OTHER INFORMATION

 

None.

 

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.

 

 

 

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: June 2, 2016

/s/ Stephen Tang

  Stephen Tang
  President and Director
  (Chief Executive Officer)
   
   
Dated: June 2, 2016

/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 September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language); (i) Balance Sheets at September 30, 2014 and December 31, 2013, (ii) Statement of Operations for the nine months period ended September 30, 2014 and 2013, (iii) Statement of Cash Flows for the nine months period ended September 30, 2014 and 2013, and (iv) Notes to Financial Statements.

 

 

 

 

 

 

 

 

 

 

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