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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For quarterly period ended: December 31, 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 December 31, 2003, was 9,861,793.
Transitional Small Business Disclosure Format. Yes No X
--- ---
1
Report on Form 10-QSB
For the Quarter Ended December 31, 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 ...................8-11
Item 2. Management's Discussion and Analysis .................12
or Plan of Operation
Item 3. Controls and Procedures ...............................13
Part II. Other Information
Item 1. Legal Proceedings .....................................14
Item 2. Changes in Securities .................................14
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
2
KOMODO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 2003 and March 31, 2003
3
KOMODO, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
------ December 31, March 31,
2003 2003
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash $ 310,529 $ -
Prepaid expenses 10,836 210
------------ ------------
Total Current Assets 321,365 210
------------ ------------
FIXED ASSETS, NET 39,333 -
------------ ------------
OTHER ASSETS
E-virus technology 50 50
------------ ------------
Total Other Assets 50 50
------------ ------------
TOTAL ASSETS $ 360,748 $ 260
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Cash overdraft $ - $ 176
Accounts payable and accrued liabilities 31,928 40,534
Payable - related parties 36,831 20,482
Liabilities of discontinued operations 205,676 205,676
------------ ------------
Total Current Liabilities 274,435 266,868
------------ ------------
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, 9,861,793 and 7,538,460
shares issued and outstanding at December
31, 2003 and March 31, 2003, respectively 9,862 7,539
Additional paid-in capital 13,583,286 12,824,154
Stock subscriptions receivable (347,420) (236,511)
Deficit accumulated during the development
stage (13,161,415) (12,863,790)
----------- -----------
Total Stockholders' Equity (Deficit) 86,313 (266,608)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 360,748 $ 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 Nine Months Ended November 10,
December 31, December 31, 1995 Through
---------------------------- -------------------------- December 31,
2003 2002 2003 2002 2003
------------- -------------- ------------- ------------ ------------
REVENUES $ - $ - $ - $ - $ -
------------ ------------- ------------ ------------ ------------
EXPENSES
Depreciation and amortization 667 - 667 - 171,205
General and administrative 148,848 66,190 294,289 297,031 2,074,781
------------ ------------- ------------ ------------ ------------
Total Expenses 149,515 66,190 294,956 297,031 2,245,986
------------ ------------- ------------ ------------ ------------
LOSS FROM OPERATIONS (149,515) (66,190) (294,956) (297,031) (2,245,986)
------------ ------------- ------------ ------------ ------------
OTHER (EXPENSES)
Interest expense 636 - 2,669 - (5,699)
------------ ------------- ------------ ------------ ------------
Total Other (Expense) (636) - (2,669) - (5,699)
------------ ------------- ------------ ------------ ------------
LOSS BEFORE DISCONTINUED
OPERATIONS (150,151) (66,190) (297,625) (297,031) (2,251,685)
------------ ------------- ------------ ------------ ------------
LOSS FROM DISCONTINUED
OPERATIONS NET OF ZERO TAX
EFFECT - - - - (10,909,730)
------------ ------------- ------------ ------------ ------------
NET LOSS $ (150,151) $ (66,190) $ (297,625) $ (297,031) $(13,161,415)
============ ============= ============ ============ ============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.02) $ (0.01) $ (0.04) $ (0.04)
============ ============= ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,167,867 7,541,600 8,073,667 7,276,655
============ ============= ============ ============
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 Nine Months Ended November 10,
December 31, 1995 Through
--------------------------- December 31,
2003 2002 2003
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (297,625) $ (297,031) $(13,161,415)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization expense 667 - 194,688
Common stock issued for services - 96,000 3,775,523
Common 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 9,250 180,000 349,000
Services performed to reduce stock
subscription receivable 29,841 - 40,091
Warrants granted below market value 15,750 - 513,331
Currency translation adjustment - - (168,626)
Forgiveness of debt by shareholder 90,705 - 90,705
Changes in operating assets and liabilities:
(Increase) in accounts receivable - - (213,312)
(Increase) decrease in deposits and
prepaid expenses (10,626) 163 (96,201)
Increase in accounts payable and
payable-related parties (11,156) 2,330 177,615
Increase in accrued liabilities 18,899 1,942 24,992
Increase in liabilities of discontinued
operations - - 258,161
------------ ------------ ------------
Net Cash Used by Operating Activities (154,295) (16,596) (4,067,023)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (40,000) - (189,014)
Purchase of mineral property and deferred
exploration costs - - (2,762,539)
------------ ------------ ------------
Net Cash Used by Investing Activities (40,000) - (2,951,553)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received on stock subscription - - 11,510
Change in cash overdraft (176) 253 -
Proceeds from common stock 505,000 - 5,845,175
Proceeds on notes payable - related party - 16,343 1,472,420
------------ ------------ ------------
Net Cash Provided by Financing Activities 504,824 16,596 7,329,105
------------ ------------ ------------
NET INCREASE IN CASH 310,529 - 310,529
CASH AT BEGINNING OF PERIOD - - -
------------ ------------ ------------
CASH AT END OF PERIOD $ 310,529 $ - $310,529
============ ============ ============
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 Nine Months Ended November 10,
December 31, 1995 Through
-------------------------- December 31,
2003 2002 2003
------------- ------------ ------------
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 $ 39,091 $ 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
December 31, 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 nine months ended
December 31, 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 accounting
principles generally accepted in the United States of America
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
December 31, 2003 and March 31, 2003
NOTE 3 - RELATED PARTY TRANSACTIONS
As of December 31, 2003, the Company owed related parties $36,831 for
amounts advanced to the Company to cover operating expenses and
accrued salaries.
On July 23, 2003, the Company granted 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 granted 700,000 stock options to
related parties under the 2003 stock option plan (See Note 4).
NOTE 4 - 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 interests 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 December 31, 2003 (FY2003) and March 31,2003 (FY2002) and changes
during the nine months ended December 31, 2003 and the year ended
March 31,2003 is presented below:
9
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and March 31, 2003
NOTE 4 - OPTIONS AND WARRANTS (Continued)
2003 2002
--------------------- --------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ---------- ---------- ---------
Outstanding, beginning
of year 1,000,000 $ 0.21 - $ -
Granted 1,150,000 0.14 1,000,000 0.21
Expired/Cancelled - - - -
Exercised - - - -
--------- --------- --------- --------
Outstanding, end of year 2,150,000 $ 0.17 1,000,000 $ 0.21
========= ========= ========= ========
Exercisable 2,150,000 $ 0.17 1,000,000 $ 0.21
========= ========= ========= ========
Outstanding Exercisable
--------------------------------------------- ----------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Dec. 31, Contractual Exercise at Dec. 31, Exercise
Prices 2003 Life Price 2003 Price
------------ ----------- ----------- -------- ------------ ---------
$0.14 - 0.21 2,150,000 10.00 $ 0.17 2,150,000 $ 0.17
------------ --------- ------ ------- --------- ------
$0.14 - 0.21 2,150,000 10.00 $ 0.17 2,150,000 $ 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 $ 0.30 100,000 $ 1.00
Granted 2,000,000 0.12 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
========= ======== ========= ========
10
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 2003 and March 31, 2003
NOTE 4 - OPTIONS AND WARRANTS (Continued)
Outstanding Exercisable
---------------------------------------------- --------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Dec. 31, Contractual Exercise at Dec. 31, Exercise
Prices 2003 Life Price 2003 Price
----------- ----------- ----------- ---------- ----------- --------
$0.12-1.00 3,600,000 9.50 $0.12-1.00 3,600,000 $ 0.20
---------- --------- ---- ---------- --------- --------
$0.12-1.00 3,600,000 9.50 $0.12-1.00 3,600,000 $ 0.20
========== ========= ==== ========== ========= ========
The warrants were repriced on March 19, 2001. The exercise price was
less than the trading price of the stock. Accordingly, a compensation
expense of $51,761 was recorded as per the Black Scholes calculation.
NOTE 5 - COMMON STOCK
On October 8, 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.
On November 14, 2003, the Company issued 450,000 shares of common
stock at $0.50 per share for cash of $225,000.
On November 28, 2003, the Company issued 373,333 shares of common
stock at $0.75 per share for cash of $280,000.
11
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying balance sheets of Komodo, Inc. at December 31, 2003
and March 31, 2003, related statements of operations and cash flows for the nine
months ended December 31, 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 December 31, 2003, are not necessarily
indicative of the results that can be expected for the fiscal year ending March
31, 2004.
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 software development company in the process of designing and
building a web based application designed to eradicate viruses, spam, unwanted
e-mails while providing complete privacy and or anonymity. E-mail traffic is
rampant with viruses, unwanted spam, unsolicited adult content and causes 100's
of millions of dollars in wasted time and added bandwidth costs to the current
infrastructure. This annoying and costly phenomenon increasingly results in
extra expenses in terms of lost productivity when computers are virus infected
and getting rid of unwanted e-mails. Current solutions are ineffective
filtration methods and usually require special software or equipment to be
installed on the client side.
We believe our e-mail system will be 100% effective in eliminating spam,
viruses, unwanted e-mail solicitations and will dramatically speed up the
delivery of all mail, especially larger files. The application will be a
12
subscription based service which will enable customers to continue using their
current e-mail address thereby minimizing any frustrations and eliminating
unnecessary stress caused by changing e-e-mail addresses or domains. Subscribers
will be able to sign up online for the services and will be provided with a
multiple selection of products designed for eliminating spam, viruses while
providing extremely high levels of security and privacy. 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 of
which we have completed the first $500,000. This funding was completed in the
form of private placement funding from the sale of shares of the company's
common stock. 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.
Results of Operations
Net losses for the quarter ended December 31 of 2003 were $150,151, as compared
to $66,190 for the same period in 2002. The net loss for 2003 translates into a
loss of $0.02 per share compared to a loss of $0.01 per share for the same
period in 2002. The increase in the net loss was primarily attributed to
consulting fees incurred in the development of the technology which began in
October 2003. In October the company also leased office space and incurred
related occupancy expenses in order in connection with engaging the consultants.
Net losses for the nine months ended December 31, 2003 were $297,625 compared to
$297,031 for the same period of 2002. The decrease in expenses from the
termination of the company's prior mining operations has been offset by an
increase in expenses due to the Company's development of its new e-mail security
technology. However, $180,000 of the expenses in 2002 was in the form of non
cash compensation compared to $54,841 in 2003.
Liquidity and Capital Resources
We had approximately $310,000 cash on hand at December 31, 2003 compared to no
cash at December 31, 2002. We used approximately $155,000 of cash for operations
during the nine months ended December 31, 2003 compared to approximately $17,000
for the same period of 2002. The increase was due to the start up of operations
for the development of our e-mail security technology.
We benefited from the contribution of services by a shareholder in the amount of
$90,705 in 2003. We spent $40,000 to purchase equipment from the company which
is sharing offices with us. We received $505,000 from the sale of shares of our
common stock in a private placement during the nine months ended December 31,
2003.
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will not satisfy our projected working capital
13
requirements through calendar 2004. Our ability to maintain sufficient liquidity
through calendar 2004 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.
The following unregistered securities have been issued since October 1st, 2003:
Valued
Date No. of Shares Title At Reason
Oct. 8/03 1,500,000 Common $0.10 Private Placement
Nov. 14/03 450,000 Common $0.50 Private Placement
Nov. 28/03 373,333 Common $0.75 Private Placement
The above noted shares were issued in private, isolated transactions without
registration under the Securities Act. The shares were issued in reliance on the
exemption provided by Rule 506 and/or Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering to Consultants or to
companies owned or controlled by Consultants or Officers of Komodo. Aggregate
gross proceeds realized from the private sale of common stock was $505,000.
None
14
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
Exhibit 31.1 Certification of C.E.O. and Principal Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.1 Certification of C.E.O. and 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: February 10, 2004 / s / Gordon Muir
-----------------------------
President / Director
Principal Accounting Officer
16