================================================================================
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: June 30, 2004; 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
-----------------------
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 June 30, 2004, was 10,043,793.
Transitional Small Business Disclosure Format. Yes No X
--- ---
1
Report on Form 10-QSB
For the Quarter Ended June 30, 2004
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 .......................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
2
KOMODO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
June 30, 2004 and March 31, 2004
3
KOMODO, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
June 30, March 31,
2004 2004
------------ ------------
CURRENT ASSETS (Unaudited)
Cash $ 89,324 $ 150,908
Prepaid expenses 50,369 24,438
------------ ------------
Total Current Assets 139,693 175,346
------------ ------------
FIXED ASSETS, NET 73,707 77,781
------------ ------------
TOTAL ASSETS $ 213,400 $ 253,127
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 19,570 $ 18,776
Accounts payable - related parties 65,224 26,426
Stock subscription payable -- 10,000
Liabilities of discontinued operations 205,676 205,676
------------ ------------
Total Current Liabilities 290,470 260,878
------------ ------------
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, 10,043,793 and 9,861,793
share issued and outstanding, respectively 10,044 9,862
Additional paid-in capital 13,704,703 13,527,785
Stock subscriptions receivable (150,000) (150,000)
Deficit accumulated during the development stage (13,643,817) (13,397,398)
------------ ------------
Total Stockholders' Equity (Deficit) (77,070) (7,751)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 213,400 $ 253,127
============ ============
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 November 10,
June 30, 1995 Through
---------------------------- June 30,
2004 2003 2004
------------ ------------ ------------
REVENUES $ -- $ -- $ --
------------ ------------ ------------
EXPENSES
Impairment of asset -- -- 50
Depreciation and amortization 4,074 -- 178,316
General and administrative 242,345 65,470 2,550,257
------------ ------------ ------------
Total Expenses 246,419 65,470 2,728,623
------------ ------------ ------------
LOSS FROM OPERATIONS (246,419) (65,470) (2,728,623)
------------ ------------ ------------
OTHER (EXPENSES)
Interest expense -- (876) (5,464)
------------ ------------ ------------
Total Other (Expense) -- (876) (5,464)
------------ ------------ ------------
LOSS BEFORE DISCONTINUED
OPERATIONS (246,419) (66,346) (2,734,087)
------------ ------------ ------------
LOSS FROM DISCONTINUED
OPERATIONS NET OF ZERO TAX
EFFECT -- -- (10,909,730)
------------ ------------ ------------
NET LOSS $ (246,419) $ (66,346) $(13,643,817)
============ ============ ============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.02) $ (0.01)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 9,877,893 7,538,460
============ ============
The accompanying notes are an integral part of the financial statements.
5
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,
2004 2003 2004
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (246,419) $ (66,346) $(13,643,817)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization expense 4,074 -- 201,799
Common stock issued for services -- -- 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 -- -- 339,750
Services performed to reduce stock
subscription receivable -- 54,346 246,761
Warrants granted below market value -- -- 513,331
Currency translation adjustment -- -- (168,626)
Impairment of asset -- -- 50
Forgiveness of debt by shareholder -- -- 90,705
Changes in operating assets and liabilities:
(Increase) in accounts receivable -- -- (213,312)
(Increase) decrease in deposits and
prepaid expenses (25,931) 60 (135,734)
Increase in accounts payable 38,798 9,666 209,320
Increase in accounts payable and accrued
liabilities 794 876 9,322
Increase in liabilities of discontinued
operations -- -- 258,161
------------ ------------ ------------
Net Cash Used by Operating Activities (228,684) (1,398) (4,365,342)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets -- -- (230,499)
Purchase of mineral property and deferred
exploration costs -- -- (2,762,539)
------------ ------------ ------------
Net Cash Used by Investing Activities -- -- (2,993,038)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock offering costs (22,400) -- (77,900)
Cash received on stock subscription -- -- 11,510
Change in cash overdraft -- 1,398 --
Proceeds from common stock 189,500 -- 6,044,674
Proceeds on notes payable - related party -- -- 1,472,420
------------ ------------ ------------
Net Cash Provided by Financing Activities 167,100 1,398 7,450,704
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (61,584) -- 89,324
CASH AT BEGINNING OF PERIOD 150,908 -- --
------------ ------------ ------------
CASH AT END OF PERIOD $ 89,324 $ -- $ 89,324
============ ============ ============
The accompanying notes are an integral part of the financial statements.
6
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,
2004 2003 2004
------------ ------------ ------------
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 $ -- $ -- $ 3,775,523
Common stock issued for license $ -- $ -- $ 125,000
Common stock issued for subscription $ -- $ -- $ 387,750
Common stock issued for payment of
accounts payable $ -- $ -- $ 8,800
Services performed by related parties for
the reduction in stock subscription
receivable $ -- $ 54,346 $ 246,761
The accompanying notes are an integral part of the financial statements.
7
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2004 and March 31, 2004
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, 2004 Annual Report on Form
10-KSB. Operating results for the three months ended June 30, 2004
are not necessarily indicative of the results that may be expected
for the year ending March 31, 2005.
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.
8
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2003 and March 31, 2004
Note 2 - GOING CONCERN (Continued)
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 TRANSACTIONS
As of June 30, 2004, the Company owed related parties $65,224 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.
9
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2004 and March 31, 2004
NOTE 4 - OPTIONS AND WARRANTS (Continued)
On February 12, 2004, the Company established the 2004 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 1,00,000 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, 2004 (FY2005) and March 31, 2004 (FY2004) and
changes during the three months ended June 30, 2004 and the year
ended March 31, 2004 is presented below:
2005 2004
----------------------- -------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ---------- ---------- -----------
Outstanding, beginning of
year 3,150,000 $ 0.17 1,000,000 $ 0.21
Granted - - 2,150,000 0.43
Expired/Cancelled - - - -
Exercised - - - -
---------- ---------- ---------- ----------
Outstanding, end of year 3,150,000 $ 0.17 3,150,000 $ 0.36
========== ========== ========== ==========
Exercisable 1,537,500 $ 0.17 1,537,500 $ 0.29
========== ========== ========== ==========
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 2004 Life Price 2004 Price
--------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.14 1,150,000 9.33 $ 0.14 287,500 $ 0.14
0.21 1,000,000 8.50 0.21 1,000,000 0.21
0.77 1,000,000 9.88 0.77 250,000 0.77
--------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.14 - 0.77 3,150,000 9.24 $ 0.36 1,537,500 $ 0.29
===================== ============= ============= ============= ============= ===============
10
KOMODO, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2004 and March 31, 2004
NOTE 4 - OPTIONS AND WARRANTS (Continued)
The Company has the following outstanding warrants:
2005 2004
------------------------ -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------ -------- --------- ---------
Outstanding, beginning of
year 3,500,000 $ 0.18 1,600,000 $ 0.30
Granted - - 2,000,000 0.13
Expired/Cancelled - - (100,000) 1.00
Exercised - - - -
------------ -------- --------- --------
Outstanding end of year 3,500,000 $ 0.18 3,500,000 $ 0.18
============ ======== ========= ========
Exercisable 3,500,000 $ 0.18 3,500,000 $ 0.18
============ ======== ========= ========
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 2004 Life Price 2004 Price
--------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.12 2,000,000 9.66 $ 0.12 2,000,000 $ 0.12
0.25 1,500,000 7.54 0.25 1,500,000 0.25
--------------------- ------------- ------------- ------------- ------------- ---------------
$ 0.12 - 0.25 3,500,000 8.75 $ 0.18 3,500,000 $ 0.18
===================== ============= ============= ============= ============= ===============
NOTE 5 - COMMON STOCK
On June 22, 2004, the Company issued 137,000 shares of common stock
at $1.00 per share for cash of $137,000.
On June 22, 2004, the Company issued 10,000 shares of common stock
at $1.00 per share to extinguish the stock subscription payable
liability.
On June 22, 2004, the Company issued 35,000 shares of common stock
at $1.50 per share for cash of $52,500.
11
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying balance sheets of Komodo, Inc. at June 30, 2004 and
March 31, 2004, related statements of operations and cash flows for the three
months ended June 30, 2004 and 2003, 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, 2004, are not necessarily
indicative of the results that can be expected for the fiscal year ending March
31, 2005.
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.
12
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
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.
In the past 12 months we have raised $700,000. 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 June 30 of 2004 were $246,419, as compared to
$66,346 for the same period in 2003. The net loss for 2004 translates into a
loss of $0.02 per share compared to a loss of $0.01 per share for the same
period in 2003. 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 we also leased office space and incurred related
occupancy expenses in order in connection with engaging the consultants. We paid
or accrued approximately $184,000 to our consultants in the first quarter of
fiscal 2004. The balance of our general and administrative expenses were made up
primarily of legal and accounting of approximately $12,000 and
advertising/marketing of $53,000.
Liquidity and Capital Resources
We had approximately $90,000 cash on hand at June 30, 2004 compared to
approximately $151,000 at March 31, 2004. We used $228,684 of cash for
operations during the three months ended June 30, 2004 compared to $1,398 for
the same period of 2003. The increase was due to the start up of operations for
the development of our e-mail security technology.
We raised $189,500 from the private placement of our common shares in the
quarter ended June 30, 2004 at prices ranging from $1.00 to $1.50 per share.
13
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will not satisfy our projected working capital
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
June 2/04 147,000 Common $ 1.00 Private Placement
June 22/04 35,000 Common $ 1.50 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 $704,499.
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: Aug. 9, 2004 / s / Gordon Muir
-----------------------------
President / Director
Principal Accounting Officer
16