UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ____________
Commission File Number: 0-14869
KOMODO, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3932052
--------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1111 West Georgia Street, Vancouver, B.C. V6E 4M3
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(Address of principal executive offices) (Zip code)
(604) 689-5377
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(Registrant's telephone number, including area code)
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(Former name, address or 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
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of September 30, 2002 the registrant had 7,541,600 shares of Common Stock
issued and outstanding.
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
KOMODO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2002 and March 31, 2002
2
KOMODO, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
------
September 30, March 31,
2002 2002
------------- ---------------
CURRENT ASSETS (Unaudited)
Cash $ 28 $ -
Prepaid expenses 180 290
------------ ------------
Total Current Assets 208 290
------------ ------------
OTHER ASSETS
E-virus technology 50 50
------------ ------------
Total Other Assets 50 50
------------ ------------
TOTAL ASSETS $ 258 $ 340
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Cash overdraft $ - $ 3
Accounts payable and accrued
liabilities-related party 49,391 34,629
Reserve for discontinued operations 205,676 205,676
------------ ------------
Total Current Liabilities 255,067 240,308
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: 10,000,000 shares
authorized of $0.001 par value,
2,000,000 shares issued and outstanding 2,000 2,000
Common stock: 100,000,000 shares authorized
of $0.001 par value, 7,541,600 shares
issued and outstanding at September 30,
2002 and 7,121,600 at March 31, 2002 7,542 7,122
Additional paid-in capital 12,824,151 12,728,571
Stock subscriptions receivable (246,761) (246,761)
Deferred compensation (109,750) (229,750)
Deficit accumulated during the development
stage (12,731,991) (12,501,150)
------------ ------------
Total Stockholders' Equity (Deficit) (254,809) (239,968)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 258 $ 340
============ ============
The accompanying notes are an integral part of the financial statements.
3
KOMODO, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the Six Months Ended For the Three Months Ended November 10,
September 30, September 30, 1995 Through
--------------------------- --------------------------- September 30,
2002 2001 2002 2001 2002
------------- ------------- ------------- ------------- -------------
REVENUES $ - $ - $ - $ - $ -
------------ ------------ ------------ ------------ ------------
EXPENSES
Depreciation and amortization - - - - 194,021
General and administrative 230,841 8,715 146,127 3,333 1,628,240
------------ ------------ ------------ ------------ ------------
Total Expenses 230,841 8,715 146,127 3,333 1,822,261
------------ ------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (230,841) (8,715) (146,127) (3,333) (1,822,261)
------------ ------------ ------------ ------------ ------------
LOSS FROM DISCONTINUED
OPERATIONS - - - (10,909,730)
------------ ------------ ------------ ------------
NET LOSS $ (230,841) $ (8,715) $ (146,127) $ (3,333) $(12,731,991)
============ ============ ============ ============ ============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.03) $ (0.02) $ (0.02) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,143,458 440,077 7,154,643 440,077
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
4
KOMODO, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Preferred Stock Common Stock Additional Stock Other During the
------------------ -------------------- Paid-In Subscription Deferred Development
Shares Amount Shares Amount Capital Receivable Compensation Stage
--------- -------- --------- --------- ------------ ------------ ------------ -------------
Balance, March 31, 2001 2,000,000 $ 2,000 1,606,991 $ 1,607 $ 11,565,886 $ (24,346) $ - $ (11,780,944)
August 15, 2001 to
January 23,2002, stock
issued for cash at $0.04
to $0.25 per share - - 1,206,668 1,207 236,543 (237,750) - -
May 4, 2001 to February
20, 2002, cash received
on stock subscription - - - - - 11,510 - -
September 30, 2001,
stock subscription
receivable satisfied by
reduction of accounts
payable-related - - - - - 3,575 - -
March 31, 2002,
Write-off subscription
receivable - - - - - 250 - -
August 15, 2001 to October
15, 2001, stock issued for
services at $0.02 to $0.25
per share - - 2,271,671 2,272 150,978 - - -
October 15, 2001,
stock issued for deferred
compensation at $0.25
per share - - 1,359,000 1,359 338,391 - (339,750) -
--------- -------- --------- --------- ------------ ----------- ------------- --------------
Balance forward 2,000,000 $ 2,000 6,444,330 $ 6,445 $ 12,291,798 $ (246,761) $ (339,750) $ (11,780,944)
---------- -------- --------- --------- ------------ ----------- ------------- --------------
The accompanying notes are an integral part of these financial statements.
5
KOMODO, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Preferred Stock Common Stock Additional Stock Other During the
------------------ -------------------- Paid-In Subscription Deferred Development
Shares Amount Shares Amount Capital Receivable Compensation Stage
--------- -------- --------- --------- ------------ ------------ ------------ -------------
Balance forward 2,000,000 $ 2,000 6,444,330 $ 6,445 $ 12,291,798 $ (246,761) $ (339,750) $ (11,780,944)
April 1, 2001 to March
31, 2002, services
rendered for deferred
compensation - - - - - - 110,000 -
September 27, 2001,
stock issued for payment
of accounts payable at
$0.02 per share - - 469,333 469 8,331 - - -
October 28, 2001,
stock issued for purchase
of technology at $0.0003
per share - - 200,000 200 (150) - - -
October 15, 2001,
Additional expense through
issuance of warrants - - - - 428,600 - - -
Fractional shares issued - - 7,937 8 (8) - - -
Net loss for the year
ended March 31, 2002 - - - - - - - (720,206)
--------- -------- --------- --------- ------------ ----------- ----------- -------------
Balance, March 31, 2002 2,000,000 2,000 7,121,600 7,122 12,728,571 (246,761) (229,750) (12,501,150)
May 13, 2002,
stock issued for services
at $0.60 per share
(unaudited) - - 20,000 20 11,980 - - -
September 27, 2002,
stock issued for services
at $0.21 per share
(unaudited) - - 400,000 400 83,600 - - -
--------- -------- --------- --------- ------------ ----------- ----------- -------------
Balance forward 2,000,000 $ 2,000 7,541,600 $ 7,542 $ 12,824,151 $ (246,761) $ (229,750) $ (12,501,150)
--------- -------- --------- --------- ------------ ----------- ----------- -------------
The accompanying notes are an integral part of these financial statements.
6
KOMODO, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Preferred Stock Common Stock Additional Stock Other During the
------------------ -------------------- Paid-In Subscription Deferred Development
Shares Amount Shares Amount Capital Receivable Compensation Stage
--------- -------- --------- --------- ------------ ------------ ------------ -------------
Balance forward 2,000,000 $ 2,000 7,541,600 $ 7,542 $ 12,824,151 $ (246,761) $ (229,750) $ (12,501,150)
April 1, 2002 to September
30, 2002, services
rendered for deferred
compensation (unaudited) - - - - - - 120,000 -
Net loss for the six months
ended September 30, 2002
(unaudited) - - - - - - - (230,841)
--------- -------- --------- --------- ------------ ----------- ------------ -------------
Balance, September 30, 2002
(unaudited) 2,000,000 $ 2,000 7,541,600 $ 7,542 $ 12,824,151 $ (246,761) $ (109,750) $ (12,731,991)
========= ======== ========= ========= ============ =========== ============ =============
The accompanying notes are an integral part of these financial statements.
7
KOMODO, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the Six Months Ended FromInception on
September 30, November 10,
---------------------------- 1995 Through
2002 2001 September 30, 2002
------------- ------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (230,841) $ (8,715) $(12,731,991)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization expense - - 194,021
Stock issued for services 96,000 - 3,775,523
Stock issued for payment of account payable - - 8,800
Bad debt expense - - 224,941
Write-off mineral property - - 3,914,434
Write-off of stock subscription receivable - - 250
Services rendered for deferred compensation 120,000 - 230,000
Warrants granted below market value - - 497,581
Currency translation adjustment - - (168,626)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - - (213,312)
(Increase) decrease in deposits and
prepaid expenses 110 1,333 (85,545)
Increase (decrease) in accounts payable and
accounts payable-related party 6,389 599 172,982
Increase (decrease) in accrued liabilities 1,180 - 3,064
Increase in reserve for discontinued operations - - 258,161
------------ ------------ ------------
Net Cash Used by Operating Activities (7,162) (6,783) (3,919,717)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - - (149,014)
Purchase of mineral property and deferred exploration costs - - (2,762,539)
------------ ------------ ------------
Net Cash Used by Investing Activities - - (2,911,553)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received on stock subscription - - 11,510
Proceeds from (repayment of) cash overdraft (3) (2) -
Proceeds from common stock - 9,725 5,340,175
Proceeds on notes payable - related party 7,193 (2,940) 1,479,613
------------ ------------ ------------
Net Cash Provided by Financing Activities 7,190 6,783 6,831,298
------------ ------------ ------------
NET INCREASE IN CASH 28 - 28
CASH AT BEGINNING OF PERIOD - - -
------------ ------------ ------------
CASH AT END OF PERIOD $ 28 $ - $ 28
============ ============ ============
The accompanying notes are an integral part of these financial statements.
8
KOMODO, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the Six Months Ended November 10,
September 30, 1995 Through
-------------------------- September 30,
2002 2001 2002
------------ ------------ ------------
CASH PAID FOR:
Interest $ - $ - $ 114
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for acquisition of asset $ - $ - $ 394,062
Common stock issued for debt conversion $ - $ - $ 1,210,719
Common stock issued for mineral properties $ - $ - $ 550,000
Common stock issued for services $ 96,000 $ - $ 3,775,523
Common stock issued for license $ - $ - $ 125,000
Common stock issued for subscription $ - $ - $ 237,750
Common stock issued for payment of
accounts payable $ - $ - $ 8,800
The accompanying notes are an integral part of these financial statements.
9
11KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and March 31, 2002
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted in accordance with
such rules and regulations. The information furnished in the interim
condensed financial statements include normal recurring adjustments
and reflects all adjustments, which, in the opinion of management, are
necessary for a fair presentation of such financial statements.
Although management believes the disclosures and information presented
are adequate to make the information not misleading, it is suggested
that these interim condensed financial statements be read in
conjunction with the Company's most recent audited financial
statements and notes thereto included in its March 31, 2002 Annual
Report on Form 10-KSB. Operating results for the six months ended
September 30, 2002 are not necessarily indicative of the results that
may be expected for the year ending March 31, 2003.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has not yet established
an ongoing source of revenues sufficient to cover its operating costs
and allow it to continue as a going concern. The ability of the
Company to continue as a going concern is dependent on the Company
obtaining adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital, it
could be forced to cease operations.
In order to continue as a going concern, develop a reliable source of
revenues, and achieve a profitable level of operations the Company
will need, among other things, additional capital resources.
Management's plans to continue as a going concern include raising
additional capital through sales of common stock. However, management
cannot provide any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually secure other sources of financing
and attain profitable operations. The accompanying financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
10
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and March 31, 2002
NOTE 3 - STOCK OPTIONS
During September 2002, the Company's board of directors adopted the
"2002 Stock Incentive Plan" to issue options to purchase 1,000,000
shares of stock to employees and consultants at $0.21 per share. The
options vest immediately.
During September 2002, the Company granted options to employees to
purchase 1,000,000 shares of common stock. The options have an
exercise price of $0.21 per share, vest immediately and have a
five-year term.
A summary of the status of the Company's outstanding stock options as
of September 30, 2002 and 2001 and changes during the periods then
ended is presented below:
2002 2001
--------------------- ---------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ---------- ---------- ----------
Outstanding, beginning of
year - $ - - $ -
Granted 1,000,000 0.21 - -
Expired/Cancelled - - - -
Exercised - - - -
---------- --------- ---------- ----------
Outstanding end of year 1,000,000 $ 0.21 - $ -
========== ========= ========== ==========
Exercisable 1,000,000 $ 0.21 - $ -
========== ========= ========== ==========
Outstanding Exercisable
--------------------------------- ----------------------
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
at Sept. 30, Contractual Exercise at Sept. 30, Exercise
2002 Life Price 2002 Price
------------ ----------- -------- ------------ ---------
1,000,000 5.00 $ 0.21 1,000,000 $ 0.21
11
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2002 and March 31, 2002
NOTE 3 - STOCK OPTIONS (Continued)
The Company estimates the fair value of each stock option at the grant
date by using the Black-Scholes option pricing model based on the
following assumptions:
For the Period
Ended
September 30, 2002
------------------------------
Risk free interest rate 2.79%
Expected life 5 years
Expected volatility 212%
Dividend yield 0.00%
Of the 1,000,000 options issued, 1,000,000 were issued to employees or
employee directors and were accounted for under APB 25, "Accounting
for Stock Issued to Employees." All of these shares were issued either
at or above the market price of the Company's common stock on the date
of issue and no compensation expense was recognized. Had compensation
cost for the issuance of the options been determined based on the fair
value at the grant dates consistent with the method of FASB Statement
123, "Accounting for Stock Based Compensation," the Company's net loss
and loss per share would have been increased to the pro forma amounts
indicated below:
For the Six Months Ended
September 30,
----------------------------------
2002 2001
--------------- -----------------
Net (loss) as reported $ (230,841) $ (8,715)
Pro forma (437,368) (8,715)
Basic (loss) per share as reported $ (0.03) $ (0.02)
Pro forma (0.06) (0.02)
NOTE 4- MATERIAL EVENTS
All of the former subsidiaries of the Company have been abandoned and
have been dissolved, accordingly the Company is no longer a
consolidated entity.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Plan of Operation
Komodo is a software company in the process of developing a web based product
for the email industry. Email is plagued with viruses, unwanted spam and
insecure mail which is increasingly causing businesses to incur extra expenses
in unnecessary man hours trying to control the content either received or sent
by their employees. Current solutions only provide for partial fixes and require
special software or expensive equipment to be installed on the client side.
Komodo's email detective product is incorporating a fundamentally different and
proprietary technique for the delivery of email via the Internet. This unique
approach will allow all subscribers to the product to keep their current email
address and never again worry about unwanted viruses, spam, adult content or the
size of the files transferred.
The current activities conducted by the Company are to continue the development
of the E-mail detective product with a view to launching a beta product in the
first quarter of 2003.
The Company has decided not to proceed with the Letter of Intent signed with The
Magnetizer Group, Inc. on June 6th, 2002.
This Form 10-Q contains forward-looking statements that involve risks and
uncertainties. We may use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends," "may," "will," "should," "estimates,"
"predicts," "potential," "continue" and similar expressions to identify such
forward-looking statements". Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance, achievements and prospects to be
materially different from those expressed or implied by such forward-looking
statements. These forward-looking statements apply only as of the date of this
Form 10-Q. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties, and assumptions,
the forward-looking events discussed in this Form 10-Q might not occur. Our
actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described above and elsewhere in this Form 10-Q and readers are cautioned not to
place undue reliance on these forward looking statements, which reflect
management's analysis only as of the date hereof.
13
Results of Operations
The Company has incurred a net loss for the six months ended September 30, 2002
of $230,841.
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will satisfy our projected working capital
requirements through the last quarter of fiscal 2002. Our ability to maintain
sufficient liquidity through fiscal 2002 is dependent on the company raising
additional capital and such capital may not be available on acceptable terms, if
at all. Additional financing may result in substantial and immediate dilution to
existing stockholders. If adequate funds are not available to satisfy either
short or long-term capital requirements, the company may be required to curtail
operations significantly or to seek funds through arrangements with strategic
partners, existing investors or other parties.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
During the quarter the company issued 400,000 common shares for services at
$0.21 per share.
Item 3. Defaults Upon Senior Securities
None; not applicable
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Report on Form 8-K
None
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KOMODO, INC.
Date: November 4, 2002 -----------------------------
By / s / Gordon Muir
President / Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
KOMODO, INC.
Date: November 4, 2002 -----------------------------
By / s / Gordon Muir
President / Director
Date: November 4, 2002 -----------------------------
By / s / Victor Cardenas
Secretary/Director
15
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Komodo, Inc. (the "Company") on Form
10-Q(SB) for the period ending September 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, GORDON MUIR, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ GORDON MUIR
---------------
Chief Executive Officer
Date: November 4, 2002
16