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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For Quarterly period Ended: June 30, 2003; or
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period _________ to __________
Commission File Number: 0-14869
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KOMODO, INC.
---------------------------------------------------------------
(Exact name of small business issuer 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 ST, VANCOUVER BC V6E 4M3 CANADA
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(604) 689-5377
-------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that a registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of the issuer's common equity: $0.001 par
value, as of June 30, 2003, was 7,538,460.
Transitional Small Business Disclosure Format. Yes No X
--- ---
1
Report on Form 10-QSB
For the Quarter Ended June 30, 2003
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements (unaudited)........................3
Balance Sheets .........................................4
Statements of Operations ...............................5
Statements of Stockholders' Equity (Deficit)............6
Statements of Cash Flows..............................7-8
Notes to the Financial Statements ...................9-12
Item 2. Management's Discussion and Analysis .................13
or Plan of Operation
Item 3. Controls and Procedures ...............................14
Part II. Other Information
Item 1. Legal Proceedings .....................................14
Item 2. Changes in Securities .................................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 and Reports on Form 8-K ......................15
Signatures.............................................16
Certifications......................................17-22
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying balance sheets of Komodo, Inc.com at June 30, 2003 and
March 31, 2003, related statements of operations, stockholders' equity (deficit)
and cash flows for the three months ended June 30, 2003 and 2002, have been
prepared by our management in conformity with accounting principles generally
accepted in the United States of America. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature. Operating results for the quarter ended June
30, 2003, are not necessarily indicative of the results that can be expected for
the fiscal year ending March 31, 2004.
KOMODO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
June 30, 2003 and March 31, 2003
3
KOMODO, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
- ------
June 30, March 31,
2003 2003
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash $ -- $ --
Prepaid expenses 150 210
------------ ------------
Total Current Assets 150 210
------------ ------------
OTHER ASSETS
E-virus technology 50 50
------------ ------------
Total Other Assets 50 50
------------ ------------
TOTAL ASSETS $ 200 $ 260
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Cash overdraft $ 1,574 $ 176
Accounts payable and accrued liabilities 43,547 40,534
Accounts payable - related parties 28,011 20,482
Liabilities of discontinued operations 205,676 205,676
------------ ------------
Total Current Liabilities 278,808 266,868
------------ ------------
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, 7,538,460 shares issued and
outstanding at June 30, 2003 and March 31, 2003 7,539 7,539
Additional paid-in capital 12,824,154 12,824,154
Stock subscriptions receivable (182,165) (236,511)
Deficit accumulated during the development stage (12,930,136) (12,863,790)
------------ ------------
Total Stockholders' Equity (Deficit) (278,608) (266,608)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 200 $ 260
============ ============
The accompanying notes are an integral part of these financial statements.
4
KOMODO, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
From the Three Months Ended November 10,
June 30, 1995 Through
---------------------------- June 30,
2003 2002 2003
------------ ------------ ------------
REVENUES $ -- $ -- $ --
------------ ------------ ------------
EXPENSES
Depreciation and amortization -- -- 170,538
General and administrative 65,470 84,714 1,845,962
------------ ------------ ------------
Total Expenses 65,470 84,714 2,016,500
------------ ------------ ------------
LOSS FROM OPERATIONS (65,470) (84,714) (2,016,500)
------------ ------------ ------------
OTHER EXPENSES
Interest expense (876) -- (3,906)
------------ ------------ ------------
Total Other Expense (876) -- (3,906)
------------ ------------ ------------
LOSS BEFORE DISCONTINUED OPERATIONS (66,346) (84,714) (2,020,406)
------------ ------------ ------------
LOSS FROM DISCONTINUED OPERATIONS NET OF
ZERO TAX EFFECT -- -- (10,909,730)
------------ ------------ ------------
NET LOSS $ (66,346) $ (84,714) $(12,930,136)
============ ============ ============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.01) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,538,460 7,132,150
============ ============
The accompanying notes are an integral part of these financial statements.
5
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, 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 -- -- 20,000 20 11,980 -- -- --
September 27, 2002, stock issued
for services at $0.21 per share -- -- 400,000 400 83,600 -- -- --
April 1, 2002 to December 31,
2002, services rendered for
deferred compensation -- -- -- -- -- -- 229,750 --
Fractional share correction -- -- (3,140) (3) 3 -- -- --
Reduction in stock subscription
receivable for services
performed by related parties -- -- -- -- -- 10,250 -- --
Net loss for the year ended
March 31, 2003 -- -- -- -- -- -- -- (362,640)
-------- ------- ------- ------- ------------ ------------ ------------ -----------
Balance, March 31, 2003 2,000,000 2,000 7,538,460 7,539 12,824,154 (236,511) -- (12,863,790)
April 1, 2003 to June 30, 2003,
services rendered for stock
subscription receivable
(unaudited) -- -- -- -- -- 54,346 -- --
Net loss for the three months
ended June 30, 2003
(unaudited) -- -- -- -- -- -- -- (66,346)
-------- ------- ------- ------- ------------ ------------ ------------ -----------
Balance, June 30, 2003
(unaudited) 2,000,000 $ 2,000 7,538,460 $ 7,539 $ 12,824,154 $ (182,165) $ -- $(12,930,136)
======== ======= ======= ======= ============ ============ ============ ===========
The accompanying notes are an integral part of these financial statements.
6
KOMODO, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the Three Months Ended November 10,
June 30, 1995 Through
---------------------------- June 30,
2003 2002 2003
------------ ------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (66,346) $ (84,714) $(12,930,136)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization expense -- -- 194,021
Stock issued for services -- 12,000 3,775,523
Stock issued for payment of accounts 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 -- 60,000 339,750
Services performed to reduce stock subscription
receivable 54,346 -- 64,596
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 60 54 (85,515)
Increase (decrease) in accounts payable and
accounts payable-related parties 9,666 9,358 198,437
Increase in accrued liabilities 876 554 6,969
Increase in liabilities of discontinued
operations -- -- 258,161
------------ ------------ --------------
Net Cash Used by Operating Activities (1,398) (2,748) (3,914,126)
------------ ------------ --------------
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
Increase in cash overdraft 1,398 5 1,574
Proceeds from common stock -- -- 5,340,175
Proceeds on notes payable - related party -- 2,743 1,472,420
------------ ------------ ------------
Net Cash Provided by Financing Activities 1,398 2,748 6,825,679
------------ ------------ ------------
NET INCREASE IN CASH -- -- --
CASH AT BEGINNING OF PERIOD -- -- --
------------ ------------ ------------
CASH AT END OF PERIOD $ -- $ -- $ --
============ ============ ============
The accompanying notes are an integral part of these financial statements.
7
KOMODO, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the Three Months Ended November 10,
June 30, 1995 Through
--------------------------- June 30,
2003 2002 2003
------------ ----------- -------------
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 $ -- $ 12,000 $ 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
Services performed by related parties for the
reduction in stock subscription receivable $ 54,346 $ -- $ 64,596
The accompanying notes are an integral part of these financial statements.
8
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2003 and March 31, 2003
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, 2003 Annual
Report on Form 10-KSB. Operating results for the three months ended
June 30, 2003 are not necessarily indicative of the results that may
be expected for the year ending March 31, 2004.
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.
NOTE 3 - RELATED PARTY PAYABLE
As of June 30, 2003, the Company owed related parties $28,011 for
amounts advanced to the Company to cover operating expenses, as well
as accrued salaries.
9
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2003 and March 31, 2003
NOTE 4 - LOSS FROM DISCONTINUED OPERATIONS
On March 31, 1999, the Board of Directors of the Company decided to
discontinue the mining operations due to a lack of funding and low
precious metal prices. The following is a summary of the loss from
discontinued operations.
From
Inception on
November 10,
1995 Through
June 30,
1999
------------
REVENUES $ --
------------
EXPENSES
General and administrative 6,923,450
Depreciation 23,483
------------
Total Expenses 6,946,933
------------
LOSS FROM OPERATIONS (6,946,933)
------------
OTHER INCOME (EXPENSE)
Currency translation income 168,626
Write-off of mineral property (3,914,434)
Bad debt expense (224,941)
Interest income 7,952
------------
Total Other Income (Expense) (3,962,797)
------------
NET LOSS $(10,909,730)
============
The Company had liabilities of $205,676 which are associated with the
discontinued operations. No income tax benefit has been attributed to the loss
from discontinued operations.
10
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2003 and March 31, 2003
NOTE 5 - OPTIONS AND WARRANTS
On September 27, 2002, the Company established the 2002 stock option
plan (the plan) to promote the interests of the Company. The Board of
Directors of the Company has sole and complete authority to determine
the employees to whom options shall be granted, the number of each
grant and any additional conditions and limitations. The total number
of shares of common stock subject to outstanding options shall be
1,000,000 shares. The exercise price shall not be less than the fair
market value of the underlying shares.
A summary of the status of the Company's outstanding stock options as
of June 30, 2003 and 2002 and changes during the years ended June 30,
2003 and 2002 is presented below:
2003 2002
-------------------- --------------------
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
Range of at June 30, Contractual Exercise at June 30, Exercise
Exercise Prices 2003 Life Price 2003 Price
- ---------------------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.21 1,000,000 10.00 $ 0.21 1,000,000 $ 0.21
- ---------------------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.21 1,000,000 10.00 $ 0.21 1,000,000 $ 0.21
================================== ============= ============= ============= ============= ===============
11
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2003 and March 31, 2003
NOTE 5 - OPTIONS AND WARRANTS (Continued)
The Company has the following outstanding warrants:
2003 2002
------------------------------- ------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------- ---------------- ------------- ---------------
Outstanding, beginning of
year 1,600,000 $ 0.30 100,000 $ 1.00
Granted - - 1,500,000 0.25
Expired/Cancelled - - - -
Exercised - - - -
------------- ---------------- ------------- ---------------
Outstanding end of year 1,600,000 $ 0.30 1,600,000 $ 0.30
============= ================ ============= ===============
Exercisable 1,600,000 $ 0.30 1,600,000 $ 0.30
============= ================ ============= ===============
Outstanding Exercisable
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
Range of at June 30, Contractual Exercise at June 30, Exercise
Exercise Prices 2003 Life Price 2003 Price
--------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.25-1.00 1,600,000 9.75 $ 0.25-1.00 1,600,000 $ 0.30
--------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.25-1.00 1,600,000 9.75 $ 0.25-1.00 1,600,000 $ 0.30
===================== ============= ============= ============= ============= ===============
The warrants were repriced on March 19, 2001. The exercise price
was less than the trading price of the stock. Accordingly, a
compensation expense $51,761 was recorded as per the Black
Scholes calculation.
12
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operations
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Form 10-QSB.
Forward-looking and Cautionary Statements
This report contains certain forward-looking statements. These statements relate
to future events or our future financial performance and involve known and
unknown risks and uncertainties. These factors may cause our company's, or our
industry's actual results, levels of activity, performance or achievements to be
materially different from those expressed or implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will" "should," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "continue," or
the negative of these terms or other comparable terminology.
These statements are only predictions. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
Business Overview
-----------------
Komodo is a development stage software company developing a web based product
designed to eradicate viruses, spam and any unwanted emails. Currently e-mail
traffic is rampant with viruses, unwanted spam, unsolicited adult content and
insecure e-mail. This annoying and costly phenomenon is increasingly causing
businesses a loss in productive man-hours and extra expenses in terms of
downtime lost when computers are virus infected. Current solutions are only
partially effective as they only provide minimal protection and usually require
special software or expensive equipment to be installed on the client side.
We believe our e-mail system, once developed, will be 100% effective in
eliminating spam, viruses, unwanted email solicitations and will dramatically
speed up the delivery of all mail, especially larger files. All subscribers will
be able to keep their current e-mail address or have another secure mailbox
within Komodo. Subscribers will be able to sign up for the services on-line by
paying a minimal monthly fee and will be provided with a variety of selections
for eliminating different types of e-mails, addresses, specific content and
known or unknown viruses.
Our technology is still in the development phase and may undergo some
fundamental changes before being released for beta testing. Technology
development requires flexibility and many rewrites of code to get a commercially
viable product.
We expect that we would need up to $1,000,000 over the next 12 month period,
which we anticipate would be in the form of private placement funding. Without
adequate funding the product will not progress at the projected rate. Obtaining
financing will depend on the current market conditions, the ambitiousness of the
investment community to make investments into software development, the timing
of key developments of the software, the ability to find the right programmers
and other similar factors. We cannot provide any assurances that we will be able
to secure the funding, if necessary.
13
Komodo is a development stage company with a product that could have the ability
to perform certain tasks. However, we cannot be certain that we will be able to
finalize the development of a commercially viable product.
Management believes that we will not have to make any equipment purchases in the
immediate future. However, if it becomes necessary or advisable to acquire
equipment, the cost would most likely be part of the $1,000,000 budget that we
anticipate possibly needing during the next 12 months.
Results of Operations
---------------------
Net losses for the first quarter of 2003 were $66,346, as compared to $84,714
for the same period in 2002. The net loss for the first quarter of 2003
translates into a loss of $0.01 per share which is identical to the loss per
share for the same period in 2002. The net loss was primarily attributed to
consulting fees incurred in the development of the technology.
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will satisfy our projected working capital
requirements through fiscal 2003. Our ability to maintain sufficient liquidity
through fiscal 2003 is dependent on our 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, we may be required to curtail operations
significantly or to seek funds through arrangements with strategic partners,
existing investors or other parties.
Item 3. Controls and Procedures
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our chief executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. Based upon that evaluation, our chief executive officer
and principal financial officer concluded that our disclosure controls and
procedures are effective to cause the material information required to be
disclosed by us in the reports that we file or submit under the Exchange Act to
be recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. There have been no significant changes
in our internal controls or in other factors which could significantly affect
internal controls subsequent to the date we carried out our evaluation.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
We are not aware of any pending claims or assessments, that may have a
material adverse impact on Komodo's financial position or results of operations.
14
Item 2. Changes in Securities.
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 and Reports on Form 8-K.
(a) Exhibits
(a) Exhibits
Exhibit 31.1 Certification of C.E.O. Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Principal Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Principal Accounting Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b) Report on Form 8-K
None
15
SIGNATURES
In accordance with the requirements of the 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: 08/13/2003 / s / Gordon Muir
----------------------------
President / Director
Date: 08/13/2003 / s / Brooke Styba
----------------------------
Principal Accounting Officer
16