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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, 2006; 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 1820 - 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, 2006, was 25,926,247.
Transitional Small Business Disclosure Format. Yes No X
--- ---
1
Report on Form 10-QSB
For the Six Months Ended December 31, 2006
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 ...............................16
Part II. Other Information
Item 1. Legal Proceedings .....................................17
Item 2. Changes in Securities .................................17
Item 3. Defaults Upon Senior Securities .......................17
Item 4. Submission of Matters to a Vote of Security Holders ...17
Item 5. Other Information .....................................17
Item 6. Exhibits and Reports on Form 8-K ......................17
Signatures.............................................18
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying balance sheets of Komodo, Inc. at December 31, 2006 and March
31, 2006, and the related statements of operations, stockholders' equity
(deficit) and cash flows for the three months and nine months ending December
31, 2006 and 2005, have been prepared by our management in conformity with
accounting principles generally accepted in the United States. 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, 2006, are not necessarily indicative of the results that can
be expected for the fiscal year ending March 31, 2007.
KOMODO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 2006 and March 31, 2006
3
KOMODO, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
------
December 31, March 31,
2006 2006
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 209 $ 1,096
Prepaid expenses - related party - 4,114
Prepaid expenses - 5,046
------------ ------------
Total Current Assets 209 10,256
------------ ------------
FIXED ASSETS, NET 146,891 183,669
------------ ------------
TOTAL ASSETS $ 147,100 $ 193,925
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 65,129 $ 41,504
Accounts payable and accrued liabilities
- related parties 70,561 237,337
------------ ------------
Total Current Liabilities 135,690 278,841
------------ ------------
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, 25,926,247 and 14,888,793 shares
issued and outstanding, respectively 25,926 14,889
Additional paid-in capital 17,937,902 16,862,727
Stock subscriptions receivable (390,370) (495,500)
Deficit accumulated during the development stage (17,564,048) (16,469,032)
------------ ------------
Total Stockholders' Equity (Deficit) 11,410 (84,916)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 147,100 $ 193,925
============ ============
The accompanying condensed notes are an integral part
of these interim financial statements.
4
KOMODO, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the Three Months For the Nine Months November 10,
Ended December 31, Ended December 31, 1995 Through
------------------------- ------------------------- December 31,
2006 2005 2006 2005 2006
------------ ------------ ------------ ------------ -------------
REVENUES $ - $ - $ 9,441 $ - $ 9,441
----------- ----------- ----------- ----------- ------------
EXPENSES
Impairment of asset - - - - 50
Research and development 53,071 77,528 270,923 217,079 686,552
Depreciation and amortization 12,653 13,887 37,927 36,247 277,548
Management fees-related parties 120,000 120,000 360,000 360,000 1,177,500
General and administrative 5,506 1,095,362 435,607 1,425,499 4,722,321
----------- ----------- ----------- ----------- ------------
Total Expenses 191,230 1,306,777 1,104,457 2,038,825 6,863,971
----------- ----------- ----------- ----------- ------------
LOSS FROM OPERATIONS (191,230) (1,306,777) (1,095,016) (2,038,825) (6,854,530)
----------- ----------- ----------- ----------- ------------
OTHER (EXPENSES)
Interest expense - - - - (5,464)
----------- ----------- ----------- ----------- ------------
Total Other (Expense) - - - - (5,464)
----------- ----------- ----------- ----------- ------------
LOSS BEFORE DISCONTINUED
OPERATIONS (191,230) (1,306,777) (1,095,016) (2,038,825) (6,859,994)
LOSS FROM DISCONTINUED
OPERATIONS NET OF ZERO TAX
EFFECT - 205,676 - 205,676 (10,704,054)
----------- ----------- ----------- ----------- ------------
NET LOSS $ (191,230) $(1,101,101) $(1,095,016) $(1,833,149) $(17,564,048)
=========== =========== =========== =========== ============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.01) $ (0.08) $ (0.07) $ (0.13)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 22,029,911 14,410,469 17,507,897 14,201,984
=========== =========== =========== ===========
The accompanying condensed notes are an integral part
of these interim 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,
2006 2005 2006
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,095,016) $(1,833,149) $(17,564,048)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization expense 37,927 36,247 301,031
Common stock issued for services 245,975 980,419 4,133,498
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 - - 246,761
Warrants and options issued for services - 80,036 1,322,050
Currency translation adjustment - - (168,626)
Impairment of asset - - 50
Forgiveness of debt by shareholder - - 90,705
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
and accounts receivable-related parties - 51,559 (213,312)
(Increase) decrease in deposits and
prepaid expenses 9,160 48,131 (85,365)
Increase in accounts payable and
payable-related parties 424,462 117,055 812,849
Increase in accounts payable and accrued
liabilities 23,624 19,959 36,369
Increase (Decrease) in liabilities of
discontinued operations - (205,676) 64,042
----------- ----------- ------------
Net Cash Used by Operating Activities (353,868) (705,419) (6,535,821)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,149) (43,080) (402,916)
Purchase of mineral property and deferred
exploration costs - - (2,762,539)
----------- ----------- ------------
Net Cash Used by Investing Activities (1,149) (43,080) (3,165,455)
----------- ----------- ------------
The accompanying condensed notes are an integral part
of these interim 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,
2006 2005 2006
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock offering costs (16,000) (23,000) (248,249)
Cash received on stock subscription 360,130 (20,000) 631,140
Proceeds from common stock 10,000 345,000 7,846,174
Proceeds on notes payable - related party - - 1,472,420
----------- ----------- ------------
Net Cash Provided by Financing Activities 354,130 302,000 9,701,485
----------- ----------- ------------
NET INCREASE IN CASH (887) (446,449) 209
CASH AT BEGINNING OF PERIOD 1,096 583,609 -
----------- ----------- ------------
CASH AT END OF PERIOD $ 209 $ 137,110 $209
=========== =========== ============
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 $ 591,238 $ - $ 1,801,957
Common stock issued for mineral properties $ - $ - $ 550,000
Common stock issued for services $ 245,975 $ 980,419 $ 4,133,498
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 $ - $ - $ 246,761
The accompanying condensed notes are an integral part
of these interim financial statements.
7
KOMODO, INC.
(A Development Stage Company)
Condensed Notes to the Financial Statements
December 31, 2006 and March 31, 2006
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, 2006 Annual Report on Form
10-KSB. Operating results for the three months and nine months ended
December 31, 2006 are not necessarily indicative of the results that
may be expected for the year ending March 31, 2007.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using United States
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. However, the Company has
not an established a reliable source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern.
Management's plans are to continue marketing its secure e-mail service
and virus free SPC 1 internet laptop and in the interim meet the
operational cash flow needs of the Company through the private
placement of shares of its common stock. The Company began the soft
launch in early 2006 and plans a mass scale release in 2007.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plan described in the
8
KOMODO, INC.
(A Development Stage Company)
Condensed Notes to the Financial Statements
December 31, 2006 and March 31, 2006
NOTE 3 - GOING CONCERN (Continued)
preceding paragraph and eventually attain profitable operations. The
accompanying financial statements do not include any adjustments that
may be necessary if the Company is unable to continue as a going
concern.
NOTE 4 - RELATED PARTY TRANSACTIONS
As of December 31, 2006, the Company owed related parties $70,561 for
amounts advanced to the Company to cover operating expenses and for
accrued salaries.
NOTE 5 - COMMON STOCK OPTIONS AND WARRANTS
OPTIONS
-------
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 options
in 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 at the date of grant 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 whom options shall be granted, the
number of options in 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 at
the date of grant shall not be less than the fair market value of the
underlying shares.
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 options in 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 at
the date of grant shall not be less than the fair market value of the
underlying shares.
On December 1, 2004, in connection with the private placement of its
common stock, the Company granted warrants to purchase 500,000 shares
of its common stock at $1.50 per share, warrants to purchase 500,000
shares of its common stock at $3.00 per share and warrants to purchase
500,000 shares of its common stock at $5.00 per share.
9
KOMODO, INC.
(A Development Stage Company)
Condensed Notes to the Financial Statements
December 31, 2006 and March 31, 2006
NOTE 5 - OPTIONS AND WARRANTS (Continued)
OPTIONS (Continued)
-------------------
On November 11, 2005, the Company established the 2005 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 whom options shall be granted, the
number of options in each grant and any additional conditions and
limitations. The total number of shares of common stock subject to
outstanding options shall be 2,200,000 shares. The exercise price is
$0.72 per share. On the same date the 2,200,000 options were granted to
various consultants. The grantees were vested for 25% of the options
with additional vesting to be determined by the board of directors. The
Company recognized an expense of $310,214 for the value of warrants
vested using the Black-Scholes formula.
On December 9, 2005, the Company established the 2006 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 whom options shall be granted, the
number of options in each grant and any additional conditions and
limitations. The total number of shares of common stock subject to
outstanding options shall be 2,200,000 shares.
The exercise price is $1.00 per share. On the same date the 2,200,000
options were granted to various consultants. The grantees were vested
for 25% of the options with additional vesting to be determined by the
board of directors. The Company recognized an expense of $406,205 for
the value of options vested using the Black-Scholes formula.
A summary of the status of the Company's outstanding stock options as
of December 31, 2006 (FY2007) and March 31, 2006 (FY2006) and changes
during the nine months ended December 31, 2006 and the year ended March
31, 2006 is presented below:
10
KOMODO, INC.
(A Development Stage Company)
Condensed Notes to the Financial Statements
December 31, 2006 and March 31, 2006
NOTE 5 - OPTIONS AND WARRANTS (Continued)
OPTIONS (Continued)
-------------------
2007 2006
------------------- -------------------
Weighted Weighted
Shares Average Shares Average
under Exercise under Exercise
Options Price Options Price
--------- -------- --------- ---------
Outstanding, beginning
of year 7,550,000 $ 0.65 3,150,000 $ 0.36
Granted - 0.86 4,400,000 0.86
Expired/Cancelled - - - -
Exercised - - - -
--------- -------- --------- --------
Outstanding, end of year 7,550,000 $ 0.65 7,550,000 $ 0.65
========= ======== ========= ========
Exercisable 3,175,000 $ 0.51 3,175,000 $ 0.51
========= ======== ========= ========
Fair Value of Options Granted $716,419
========
Outstanding Exercisable
---------------------------------------------- ------------------------
Number Number
Outstanding Weighted Exercisable
at Average Weighted at Weighted
Range of December/March Remaining Average December/March Average
Prices 31, 31, Contractual Exercise 31, 31, Exercise
Exercise 2006/ 2006 Life Price 2006/ 2006 Price
------------ ------------ ----------- -------- ------------- ---------
$0.21 - 0.14 7,550,000 8.08 $ 0.65 3,175,000 $ 0.51
------------ ------------ ----------- -------- ------------- ---------
$0.21 - 0.14 7,550,000 8.33 $ 0.65 3,175,000 $ 0.51
============ ============ =========== ======== ============= =========
WARRANTS
--------
A summary of the status of the Company's outstanding warrants as of
December 31, 2006 (FY2007) and March 31, 2006 (FY2006) and changes
during the nine months ended December 31, 2006 and the year ended March
31, 2006 is presented below:
11
KOMODO, INC.
(A Development Stage Company)
Condensed Notes to the Financial Statements
December 31, 2006 and March 31, 2006
NOTE 5 - OPTIONS AND WARRANTS (Continued)
WARRANTS (Continued)
--------------------
2007 2006
------------------- -------------------
Weighted Weighted
Shares Average Shares Average
under Exercise under Exercise
Options Price Options Price
--------- -------- --------- ---------
Outstanding, beginning
of year 7,805,000 $ 1.22 7,500,000 $ 1.21
Granted - 1.50 305,000 1.50
Expired/Cancelled - - - -
Exercised - - - -
--------- -------- --------- --------
Outstanding end of year 7,805,000 $ 1.22 7,805,000 $ 1.22
========= ======== ========= ========
Exercisable 7,805,000 $ 1.22 7,805,000 $ 1.22
========= ======== ========= ========
Fair Value of Warrants Granted $ 80,036
========
Outstanding Exercisable
---------------------------------------------- ------------------------
Number Number
Outstanding Weighted Exercisable
at Average Weighted at Weighted
Range of December/March Remaining Average December/March Average
Prices 31, 31, Contractual Exercise 31, 31, Exercise
Exercise 2006/ 2006 Life Price 2006/ 2006 Price
------------ ------------ ----------- -------- ----------- --------
$ 0.70-5.00 7,805,000 7.89 $0.70-5.00 7,805,000 $ 1.22
------------ ------------ ----------- ---------- ----------- --------
$ 0.70-5.00 7,805,000 8.14 $0.70-5.00 7,805,000 $ 1.22
============ ============ =========== ========== =========== ========
In December 2005, the Company issued 305,000 warrants in connection
with the private placement of its common stock. Accordingly, a
compensation expense $92,300 was recorded as per the Black-Scholes
calculation.
Until March 31, 2005, the Company applied Accounting Principles Board
("APB") Opinion 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for all stock option plans. Under
APB Opinion 25, compensation cost is recognized for stock options
granted to employees when the option price is less than the market
price of the underlying common stock on the date of grant.
12
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying balance sheets of Komodo, Inc. at December 31, 2006
and March 31, 2006, related statements of operations and cash flows for the
three months and nine months ended December 31, 2006 and 2005, 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 nine months and
quarter ended December 31, 2006, are not necessarily indicative of the results
that can be expected for the fiscal year ending March 31, 2007.
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. We are currently selling, supporting,
and continuing development on our personal internet privacy products. Demand for
these products has caused customers to subscribe for Komodo's services in
advance of our mass-scale release in 2007. Komodo's unique technology
infrastructure and web-based applications aim to provide users with privacy and
security and restore confidence in internet communications, while remaining user
friendly and seamless to users. Komodo began the soft launch of the KOGO email
messaging and file storage system in early 2006, and began shipping the SPC 1
secure private computing laptop in late 2006.
Market Potential
- ----------------
Almost daily there are worldwide incidents of identity theft, email piracy and
other security breaches. Companies are spending more and more time and money on
temporary solutions that are proving to be useless against the wits and
13
determination of hackers. It is becoming abundantly clear that threats to
computer security and privacy are increasing in intensity and in sophistication.
Once a fix is found for one virus another more destructive virus has found its
way into corporate networks. The current list of problems includes `hacker'
intrusions, identity theft, online fraud, `phishing' attacks, malware infections
(viruses, worms and Trojan horses), spam, spyware, adware,
operating-system/application vulnerabilities and more. These attacks cost
consumers, companies, organizations and institutions billions of dollars
annually in extra expenses, wasted production-hours, computer downtime, as well
as a loss of confidence with their customers from the implications of
lost/stolen files, information and assets.
At present, no solution, product or service has successfully eliminated all or
any of these threats effectively for computer users. The Internet security
industry is fragmented and populated by narrowly focused companies offering
ineffective solutions that lack the simplicity desired by the average users. In
addition, the majority of present day technologies in anti-virus and anti-spam
software rely on filtration systems designed to relentlessly scan all messages
and files for characteristics associated with virus programs or spam messages.
This requires perpetual updating and monitoring which needlessly consumes
processing resources.
We believe there is a growing consumer market for an Internet privacy and
security solution that will eradicate the aforementioned problems. With spam on
the rise to near epidemic proportions and jamming corporate email networks,
companies are desperate to find a permanent, effective solution. Spy ware
programs have already infected the vast majority of PCs and new virus outbreaks
are creating havoc with corporations all around the world due to their
increasing sophistication. The comprehensive Komodo solutions that are currently
in soft launch phase and those already under development could be an effective
tool in the elimination of these online privacy and security problems.
Products and Services
- ---------------------
Komodo is currently selling and supporting monthly subscriptions for two
internet privacy and security products: KOGO secure email messaging, and the
secure and virus free SPC 1 internet laptop and computing environment. The
majority of the current customer base has subscribed from recommendations by
existing customers while Komodo refines product features and scalability in
preparation for widespread marketing.
Komodo's messaging solution, KOGO, is designed to ensure privacy and security
for its users, as well as provide unique features not available in other email
clients. Utilizing a familiar interface designed to replicate the most popular
email programs, KOGO runs on any java-capable computer on any operating system
and loads directly from a web page without any need to install software
permanently or complete any updates. Customers can send and receive messages
with other KOGO members or any email address in a fully secure fashion without
any risk of interception. Outside emails only reach your inbox with your
approval and with human interaction, virtually eliminating spam.
Included with the service is integrated online file storage which allows for
attachments of almost any size to be sent to any number of users virtually
instantaneously, as well as the ability for data backup and archiving of
important documents from the customer's computer. All messages and data are
14
accessible from any internet-connected java-capable computer, anywhere, and are
fully secure due to the secure KOGO login process which utilizes
state-of-the-art digital security devices with time-limited passwords. Extra
features such as message recall, restricted message reply, and control over file
access are all included above and beyond what normal email service can offer.
Komodo's SPC 1 (Secure Private Computing) system is designed to give customers
all the benefits of KOGO service, plus the peace of mind of a virus free, adware
resistant, and hack-secure internet and computing environment, all for a monthly
charge with a reasonable startup fee. Active subscribers are given the option
for updated hardware every 2 years for no additional charge. Each unit is
custom-built for each customer and, for an additional charge, can be configured
with additional software and configuration to meet specific needs of the
customer. Key features of the basic system include a specially selected,
wireless-capable laptop computer, flash-based hard drive storage with no moving
parts, a custom Linux operating system with support for many Windows
applications, anonymous and secure internet proxy browsing feature, and
specially selected applications for usability and compatibility with popular
file formats like Microsoft Word, Excel, Powerpoint, PDF, and many others.
Current SPC 1 units can have bug fixes and patches applied remotely by Komodo
staff through contact with the customer and an automated upgrade system is being
developed to automate update and patch installs without user interaction or
outside access. In the future, SPC 1 customers will be able to select from
additional hardware options, including a selection of laptop configurations,
additional storage capacity, and customized software installs. Also, a recent
business agreement with a prominent manufacturer of flash-based drive solutions
ensures that future SPC 1 units will be even faster, and higher capacity, than
ever before.
We expect that we need approximately $1,200,000 over the next 12 month period to
continue operations. In the past 2 years we have raised approximately
$2,000,000. 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
Our net loss for the three months ended December 31, 2006 was $191,230, as
compared to $1,101,101 for the same period in 2005. The net loss for 2006
translates into a loss of $0.01 per share compared to a loss of $0.08 per share
for the same period in 2005. The decrease in the net loss is partially
attributable to research and development fees incurred in the development of our
technology of approximately $53,071 compared to $77,528 in 2005. As we approach
what we believe to be the end of development stage we have reduced the number of
software programmers we employ. Our consulting fees expense was $-0- compared to
$716,409 in 2005 when we started to build public awareness of our email service.
We compensated our management consultants, who are the officers of the Company,
$120,000 in the third quarter of fiscal 2007 compared to $120,000 in the prior
year. The balance of our operating expenses were made up primarily of
depreciation expense of approximately $12,653 compared to $13,887 in the prior
year.
15
We recorded no revenues during the quarter ended December 31, 2006. We expect
our revenues to continue to grow through out the remainder of fiscal 2007 but we
do not expect to become cash flow positive until late in fiscal 2008.
Our net loss for the nine months ended December 31, 2006 was $1,095,016, as
compared to $1,833,149 for the same period in 2005. The net loss for 2006
translates into a loss of $0.07 per share compared to a loss of $0.13 per share
for the same period in 2005. The decrease in the net loss is partially
attributable to reduced consulting fees incurred in the development of public
awareness of our technology of approximately $723,836 compared to $57,171 in
2005. As we approach what we believe to be the end of development stage we have
reduced the number of software programmers we employ. Our research and
development expense for the first nine months of 2006 was $270,923 compared to
$217,079 in 2005. Our marketing and advertising expense was $180,481 compared to
$406,988 in 2005 since we had limited funds for marketing our technology. We are
seeking additional funding to build public awareness of our email service. We
compensated our management consultants, who are the officers of the Company,
$360,000 in the first three quarters of fiscal 2007 compared to $360,000 in the
prior year. The balance of our general and administrative expenses were made up
primarily of legal and accounting of approximately $34,231 and rent of $83,720
compared to $43,540 and $91,116, respectively.
We recorded revenues of $9,441 during the nine months ended December 31, 2006.
We expect our revenues to continue to grow through out the remainder of fiscal
2007 but we do not expect to become cash flow positive until late in fiscal
2008.
Liquidity and Capital Resources
We had $209 of cash on hand at December 31, 2006 compared to $1,096 at March 31,
2006. We used $353,868 of cash for operations during the nine months ended
December 31, 2006 compared to approximately $705,419 for the same period of FYE
2006. The decrease was primarily due to the deferral of management compensation
by our management team of $360,000 in 2006. We raised net cash of $354,130
during the nine months ended December 31, 2006 from the collection of stock
subscriptions receivable and the private placement of our common stock. We
estimate that we will need approximately $1,200,000 of additional funds over the
next twelve months.
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will satisfy our projected working capital
requirements through fiscal 2007. Our ability to maintain sufficient liquidity
through fiscal 2008 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
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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 March 31st, 2006:
Valued
Date No. of Shares Title At Reason
April 6, 2006 171,000 Common $0.35 Services
April 28, 2006 25,000 Common $0.80 Services
June 28, 2006 13,333 Common $0.75 Private Placement
June 28, 2006 60,000 Common $0.50 Services
June 29, 2006 50,000 Common $0.44 Services
June 30, 2006 313,333 Common $0.75 Private Placement
June 30, 2006 40,000 Common $0.50 Private Placement
June 30, 2006 150,000 Common $0.40 Services
July 10, 2006 27,500 Common $0.15 Services
August 21, 2006 180,000 Common $0.15 Services
September 13, 2006 153,334 Common $0.15 Services
November 10, 2006 9,853,954 Common $0.06 Debt
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
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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
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 6, 2007 / s / Gordon Muir
-----------------------------
President / Director
Principal Accounting Officer
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