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UNITED STATES
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: September 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 1322 - 1111 WEST GEORGIA ST, VANCOUVER BC V6E 4M3 CANADA
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(604) 689-9417
-------------------------
(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 September 30, 2003, was 7,538,460.
Transitional Small Business Disclosure Format. Yes No X
--- ---
1
Report on Form 10-QSB
For the Quarter Ended September 30, 2003
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements (unaudited)........................3
Balance Sheets .........................................4
Statements of Operations ...............................5
Statements of Cash Flows..............................6-7
Notes to the Financial Statements ...................8-12
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 .................................14
Item 3. Defaults Upon Senior Securities .......................14
Item 4. Submission of Matters to a Vote of Security Holders ...14
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 September 30,
2003 and March 31, 2003, related statements of operations and cash flows for the
six months ended September 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 September 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
September 30, 2003 and March 31, 2003
3
KOMODO, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
------ September 30, March 31,
2003 2003
------------- -------------
CURRENT ASSETS (Unaudited)
Cash $ - $ -
Prepaid expenses 90 210
------------ ------------
Total Current Assets 90 210
------------ ------------
OTHER ASSETS
E-virus technology 50 50
------------ ------------
Total Other Assets - 50
------------ ------------
TOTAL ASSETS $ 140 $ 260
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Cash overdraft $ 76 $ 176
Accounts payable and accrued liabilities 124,365 40,534
Accounts payable - related parties 44,264 20,482
Liabilities of discontinued operations 205,676 205,676
------------ ------------
Total Current Liabilities 374,381 266,868
------------ ------------
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 September 30, 2003 and
March 31, 2003 7,539 7,539
Additional paid-in capital 12,839,904 12,824,154
Deferred compensation (9,250) -
Stock subscriptions receivable (203,170) (236,511)
Deficit accumulated during the development stage (13,011,264) (12,863,790)
------------ ------------
Total Stockholders' Equity (Deficit) (374,241) (266,608)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 140 $ 260
============ ============
The accompanying notes are an integral part of the financial statements.
4
KOMODO, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the Three Months Ended For the Six Months November 10,
September 30, Ended September 30, 1995 Through
-------------------------- ------------------------- September 30,
2003 2002 2003 2002 2003
------------ ------------ ------------ ------------ -------------
REVENUES $ - $ - $ - $ - $ -
----------- ----------- ----------- ----------- ------------
EXPENSES
Depreciation and amortization - - - - 170,538
General and administrative 79,971 146,127 145,441 230,841 1,925,933
----------- ----------- ----------- ----------- ------------
Total Expenses 79,971 146,127 145,441 230,841 2,096,471
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (79,971) (146,127) (145,441) (230,841) (2,096,471)
----------- ----------- ----------- ----------- ------------
OTHER (EXPENSES)
Interest expense (1,157) - (2,033) - (5,063)
----------- ----------- ----------- ----------- ------------
Total Other (Expense) (1,157) - (2,033) - (5,063)
----------- ----------- ----------- ----------- ------------
LOSS BEFORE DISCONTINUED
OPERATIONS (81,128) (146,127) (147,474) - (2,101,534)
----------- ----------- ----------- ----------- ------------
LOSS FROM DISCONTINUED
OPERATIONS NET OF ZERO TAX
EFFECT - - - - (10,909,730)
----------- ----------- ----------- ----------- ------------
NET LOSS $ (81,128) $ (146,127) $ (147,474) $ (230,841) $(13,011,264)
=========== =========== =========== =========== ============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.01) $ (0.02) $ (0.02) $ (0.03)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,538,460 7,154,643 7,538,460 7,143,458
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
5
KOMODO, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the Six Months Ended November 10,
September 30, 1995 Through
------------------------- September 30,
2003 2002 2003
------------ ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (147,474) $ (230,841) $(13,011,264)
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 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 - 120,000 339,750
Services performed to reduce stock subscription
receivable - - 10,250
Warrants granted below market value 15,750 - 513,331
Currency translation adjustment - - (168,626)
Changes in operating assets and liabilities:
(Increase) in accounts receivable - - (213,312)
(Increase) decrease in deposits and
prepaid expenses 120 110 (85,455)
Increase in accounts payable and
accounts payable-related parties 129,680 6,389 318,451
Increase in accrued liabilities 2,024 1,180 8,117
Increase in liabilities of discontinued
operations - - 258,161
----------- ----------- ------------
Net Cash Provided (Used) by Operating Activities 100 (7,162) (3,912,628)
----------- ----------- ------------
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
Change in cash overdraft (100) (3) 76
Proceeds from common stock - - 5,340,175
Proceeds on notes payable - related party - 7,193 1,472,420
---------- ----------- ------------
Net Cash Provided (Used) by Financing Activities (100) 7,190 6,824,181
---------- ----------- ------------
NET INCREASE IN CASH - 28 -
---------- ----------- ------------
CASH AT BEGINNING OF PERIOD - - -
---------- ----------- ------------
CASH AT END OF PERIOD $ - $ 28 $ -
========== =========== ============
The accompanying notes are an integral part of these financial statements.
6
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,
2003 2002 2003
------------ ------------ -------------
CASH PAID FOR:
Interest $ - $ - $ -
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.
7
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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 six months ended September 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.
8
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2003 and March 31, 2003
NOTE 3 - RELATED PARTY PAYABLE
As of September 30, 2003, the Company owed related parties $44,264
for amounts advanced to the Company to cover operating expenses, as
well as accrued salaries.
On July 23, 2003, the Company issued 1,000,000 warrants to two
directors of the Company for a total of 2,000,000 warrants. The
exercise price is $0.12 per share and expire in ten years.
On August 8, 2003, the Company issued 700,000 stock options to
related parties under the 2003 stock option plan. (See Note 5)
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
September 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.
9
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 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.
On August 8, 2003, the Company established the 2003 stock option
plan (the plan) to promote the interest of the Company. The Board
of Directors of the Company has sole and complete authority to
determine the employees and/or consultants to who 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 1,150,000 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 September 30, 2003 and 2002 and changes during the years
ended September 30, 2003 and 2002 is presented below:
2003 2002
--------------------- ---------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ---------- ---------- ----------
Outstanding, beginning
of year - $ - - $ -
Granted 2,150,000 0.17 - -
Expired/Cancelled - - - -
Exercised - - - -
---------- ---------- ---------- ----------
Outstanding end of year 2,150,000 $ 0.17 - $ -
========== ========== ========== ==========
Exercisable 2,150,000 $ 0.17 - $ -
========== ========== ========== ==========
10
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2003 and March 31, 2003
NOTE 5 - OPTIONS AND WARRANTS (Continued)
Outstanding Exercisable
-------------------------------- --------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Sept.30, Contractual Exercise at Sept. 30, Exercise
Prices 2003 Life Price 2003 Price
------------ ----------- ----------- -------- ------------ --------
$0.14 - 0.21 2,150,000 10.00 $ 0.17 1,287,500 $ 0.17
------------ ----------- ----------- ------- ---------- ------
$0.14 - 0.21 2,150,000 10.00 $ 0.17 1,287,500 $ 0.17
============ =========== =========== ======= ========== ======
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 $ 0.20 100,000 $ 1.00
Granted 2,000,000 - 1,500,000 0.25
Expired/Cancelled - - - -
Exercised - - - -
---------- ---------- ---------- ----------
Outstanding end of year 3,600,000 $ 0.20 1,600,000 $ 0.30
========== ========== ========== ==========
Exercisable 3,600,000 $ 0.20 1,600,000 $ 0.30
========== ========== ========== ==========
Outstanding Exercisable
-------------------------------- --------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Sept.30, Contractual Exercise at Sept. 30, Exercise
Prices 2003 Life Price 2003 Price
------------ ---------- ----------- ---------- ----------- --------
$ 0.12-1.00 3,600,000 9.75 $0.12-1.00 3,600,000 $ 0.20
------------ ---------- ----------- ---------- ----------- --------
$ 0.12-1.00 3,600,000 9.75 $0.12-1.00 3,600,000 $ 0.20
============ ========== =========== ========== =========== ========
11
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2003 and March 31, 2003
NOTE 5 - OPTIONS AND WARRANTS (Continued)
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.
NOTE 6 - SUBSEQUENT EVENTS
On October 15, 2003, the Company authorized the issuance of
1,500,000 shares of common stock at $0.10 per share. All 1,500,000
shares have been issued for stock subscriptions receivable for
$150,000.
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 in the process of building a web
based product designed to eradicate viruses, spam and any unwanted emails.
E-mail traffic is rampant with viruses, unwanted spam, unsolicited adult content
and causes hundreds of thousands of dollars in wasted time. This annoying and
costly phenomenon increasingly results in extra expenses in terms of downtime
lost when computers are virus infected and getting rid of unwanted emails.
Current solutions are totally ineffective and usually require special software
or expensive equipment to be installed on the client side.
We believe our e-mail system will be 100% effective in eliminating spam,
viruses, unwanted email solicitations and will dramatically speed up the
delivery of all mail, especially larger files. The service will be a
subscription service and will enable customers to continue using their current
e-mail address thereby minimizing any frustrations and eliminating unnecessary
stress caused by changing email addresses or domains. Subscribers will sign up
online for the services and will be provided with a variety of selections for
eliminating different types of e-mails, rejecting certain email addresses,
avoiding emails with specific content and refusing emails infected with known or
unknown viruses.
Our technology is in development and it is anticipated will undergo some
structural changes before release in its beta format. Development of web based
technology requires open-ended development and typically code is rewritten,
adjusted and modified during development which may result in delays.
We expect that we need approximately $1,000,000 over the next 12 month period.
This funding will be in the form of private placement funding. Without adequate
funding the product will not progress. Obtaining financing depends on current
market conditions, the willingness of the investment community to make
investments into software development, the timing of key developments of the
software and other similar factors. We cannot provide any assurances that we
will be able to secure the funding.
13
Results of Operations
---------------------
Net losses for the third quarter of 2003 were $81,128, as compared to $146,127
for the same period in 2002. The net loss for the third quarter of 2003
translates into a loss of $0.01 per share compared to a loss of $0.02 per share
for the same period in 2002. The net loss was primarily attributed to consulting
fees incurred in the development of the technology and compensation expense for
the Black Scholes calculation applied to stock options and warrants.
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.
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.
14
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: 11/11/2003 / s / Gordon Muir
-----------------------------
President / Director
Date: 11/11/2003 / s / Brooke Styba
-----------------------------
Principal Accounting Officer
16