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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 the quarterly period ended December 31, 2002.
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act for the
transition period from _________________ to _________________.
Commission file number 0-27587
CDKNET.COM, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 22-3586087
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Broadhollow Road
Suite 103
Melville, New York 11747
(631) 385-6200
WWW.CDKNET.COM
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(Address, including zip code, telephone number,
including area code, and web address of the principal
executive offices of the registrant)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Applicable Only to Corporate Issuers: State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: February 14, 2013 36,196,267
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Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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PART I-- FINANCIAL INFORMATION
Item 1. Financial Statements.
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Page
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FINANCIAL STATEMENTS
Consolidated Balance Sheet at December 31, 2002 (unaudited) F-1
Consolidated Statements of Operations for the three and six
months ended December 31, 2002 and 2001 (unaudited) F-2
Consolidated Statements of Cash Flows for the six months
ended December 31, 2002 and 2001 (unaudited) F-3
Notes to Consolidated Financial Statements F-4
Management's Discussion and Analysis 1
PART II - OTHER INFORMATION
Item 1. Legal Proceedings II-1
Item 2. Changes in Securities II-1
Item 3. Defaults Upon Senior Securities II-1
Item 4. Submission of Matters to a Vote of Security Holders II-2
Item 5. Other Information II-2
Item 6. Exhibits and Reports on Form 8-K II-2
CDKNET.COM, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31,
2002
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ASSETS
CURRENT ASSETS
Cash & cash equivalents $ 761,017
Assets held for sale, net 147,085
Investments available for sale 100,000
Prepaid expenses and other current assets 70,839
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Total current assets 1,078,941
NOTES RECEIVABLE 559,500
FURNITURE AND EQUIPMENT - at cost,
less accumulated depreciation and amortization of $506,808 107,183
OTHER ASSETS 11,774
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$ 1,757,398
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expense $ 252,183
Due to related parties 38,000
Other notes payable 28,500
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Total current liabilities 318,683
SUBORDINATED CONVERTIBLE DEBENTURES 165,000
MINORITY INTEREST 91,448
COMMITMENTS and CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A 5.75% Convertible Preferred stock - par value $.0001 per share; authorized
2,250,000 shares; 1,632,459 shares outstanding , liquidation value $1,632,459 1,480,142
Common stock - par value $.0001, per share; authorized,
40,000,000 shares; 36,196,267; shares issued and outstanding 3,620
Additional paid in capital 23,069,762
Accumulated deficit (23,355,257)
Trerasury stock (400,000 shares), at cost (16,000)
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1,182,267
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$ 1,757,398
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The accompanying notes are an integral part of this statement.
F-1
CDKNET.COM, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months Six months Six months
ended ended ended ended
December 31 December 31 December 31 December 31
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenues $ 170,813 $ 170,813
Cost of revenues 139,560 139,560
------------ ------------ ------------ ------------
Gross profit (loss) 31,253 31,253
Selling, general and administrative expenses $ 218,633 262,161 $ 433,069 530,902
Depreciation and amortization 26,593 25,561 53,186 47,936
------------ ------------ ------------ ------------
Loss from operations (245,226) (256,469) (486,255) (547,585)
Other income and (expense)
Interest income 12,217 7,996 20,440 24,153
Interest expense, (5,340) (2,600) (9,302) (5,708)
Loss on sale of assets (68,933)
Other income 2,500 2,500
Minority interest in loss of subsidiary 2,943 42,216
------------ ------------ ------------ ------------
NET LOSS $ (232,906) $ (251,073) $ (499,334) $ (529,140)
============ ============ ============ ============
Preferred Dividend 28,538 26,539 57,075 53,807
------------ ------------ ------------ ------------
Net Loss to common Stockholders' $ (261,444) $ (277,612) $ (556,409) $ (582,947)
============ ============ ============ ============
Basic and diluted earnings (loss) per share $ (0.01) $ (0.01) $ (0.02) $ (0.02)
============ ============ ============ ============
Weighted-average shares outstanding-
basic and diluted 36,196,267 32,848,036 36,196,267 31,718,267
============ ============ ============ ============
The accompanying notes are an integral part of this statement.
F-2
CDKNET.COM, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended Six months ended
December 31, December 31,
2002 2001
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Cash flows from operating activities
Net loss $ (499,334) $ (529,140)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 53,186 47,936
Stock based compensation 166,500
Common stock and stock warrants issued for services 28,000
Loss on sale of assets 68,933
Minority interest in loss of consolidated subsidiary (42,216)
Changes in assets and liabilities
Prepaid expenses and
other current assets (34,100) 8,647
Accounts payable and accrued expense (52,547) (259,303)
Due to related party
Deferred revenue
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Net cash used in operating activities (437,878) (537,360)
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Cash flows from investing activities
Investment in notes receivable (53,848) (1,025,000)
Purchase of equipment (4,738)
Cash escrow 500,000
Investments held for sale 400,000
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Net cash used in investing activities 846,152 (1,029,738)
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Cash flows from financing activities
Repayment of notes payable (83,251) (15,000)
Proceeds from notes payable 50,000
Principal payments on capital lease obligations (21,133)
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Net cash provided by financing activities (83,251) 13,867
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NET INCREASE (DECREASE) IN CASH 325,023 (1,553,231)
Cash at beginning of period 435,994 2,257,000
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Cash at end of period $ 761,017 $ 703,769
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Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest 4,352 5,708
Noncash investing and financing transactions:
Stock issued upon conversion of preferred stock 50,598
The accompanying notes are an integral part of this statement.
F-3
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
CDKNET.com, Inc. ( the "Company") included herein have been prepared in
accordance with generally accepted accounting principles for interim period
reporting in conjunction with the instructions to Form 10-QSB. Accordingly,
these statements do not include all of the information required by generally
accepted accounting principles for annual financial statements, and are subject
to year-end adjustments. In the opinion of management, all known adjustments
(consisting of normal recurring accruals and reserves) necessary to present
fairly the financial position, results of operations and cash flows for the
three and six month periods ended December 31, 2002 and 2001 have been included.
The interim statements should be read in conjunction with the financial
statements and related notes included in the Company's June 30, 2002 Form
10-KSB.
The operating results for the three and six months ended December 31, 2002 are
not necessarily indicative of the results to be expected for the full year.
NOTE 2. REVERSE STOCK SPLIT APPROVAL
On November 22, 2002, the Board of Directors and a majority of common
shareholders (67%) approved a one for fifty reverse stock split and, also,
increased the amount of authorized common shares to 100 million. Both the
reverse stock split and increase in authorized shares may be effected at the
discretion of the Board up to November 21, 2003. See Item 4.
NOTE 3. SALES OF ASSETS
In July 2002, we sold an investment in common stock to Target Growth Fund Ltd.
subject to a one year note receivable in the amount of $450,000. With interest
at 8% annually. The Company's carrying value in this investment was $518,933.
Accordingly, the Company recorded a loss of $68,933 on the sale of this
investment during the six months ended September 30, 2002. Target Growth Fund
Ltd. is a preferred stockholder of the Company.
On October 22, 2002 we entered into an agreement to sell certain assets
including the business of Diversified Capital Holdings, LLC (Diversified), CDK
Financial Corp. and CDKNet, LLC to National Management Consultants, Inc.
(National), formerly Universal Media Holdings, Inc. At the time of the
transaction, James W. Zimbler served as President and a Director of National and
also served as Secretary and Executive Vice President of CDKNet.com. On the same
day, Steven A. Horowitz, our CEO and Andrew Schenker, our COO were appointed
President, CEO and CFO respectively, of National. Certain of the assets
comprising the consulting business of Diversified Capital Holdings, LLC and
investments we made were transferred to National. CDKNet, LLC has not been
transferred to National pending receipt of requisite approvals.
It was subsequently determined that certain intangible assets of CDKNet, LLC
will not be transferred and therefore the transaction sale of assets to National
has been modified. On January 5, 2003, we entered into a Revised Asset Purchase
Agreement pursuant to which we will sell certain assets of Diversified to
National. The revised sale price of the assets is a revised promissory note in
the amount of $339,000. plus interest at the rate of five percent (5%), payable
monthly until February 2006. The note will be secured by a security agreement on
all the assets of National.
NOTE 4. SUBSEQUENT EVENTS
In January 2003, the Board of Directors of the Company authorized the issuance
of an aggregate of 72,000 Series A preferred shares to the minority shareholders
of our Valueflash subsidiary in exchange for their common shares of Valueflash.
After this transaction is completed, Valueflash will be a wholly-owned
subsidiary.
In Janaury 2003, the Board of Directors approved an adjustment in the conversion
rate of the $165,000 of subordinated convertible debentures. The new conversion
rate will be $.01 per common share.
F-4
In January 2003, the Board of Directors authorized the issuance of 17,500 shares
of series A preferred stock to Andrew Schenker for services rendered to the
Company.
In January 2003, the Board of Directors authorized the issuance of 470,000
shares of Series B preferred stock to Robert M. Rubin and C. Dean McLain
pursuant to a consulting agreement.
On February 7, 2003, we announced that we entered into an agreement with Western
Power & Equipment Corp. (Western) to acquire a portion of Western's business in
California and Nevada. Western sells, leases, rents and services construction
and industrial equipment for Case Corporation and 30 other manufacturers. CDK
will acquire approximately $15 million of tangible assets and operations, which
reported nearly $50 million of total revenue for the year ended July 31, 2002,
in exchange for the assumption or replacement of existing debt, a cash payment
of $500,000. and a five-year promissory note of $500,000. Certain members of
Western's management will receive approximately 60% of the post transaction
combined entity. The completion of the transaction remains subject to several
conditions including the approval of both companies board's, financing
transactions including an institutional revolving credit facility and other
financing for the purchase, receipt of other third party approvals, delivery of
audited financial statements of the business to be acquired, additional due
diligence and compliance with applicable regulatory requirements.
F-5
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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RESULTS OF OPERATIONS
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The following contains forward-looking statements based on current expectations,
estimates and projections about our industry, management's beliefs, and
assumptions made by management. All statements, trends, analyses and other
information contained in this report relative to trends in our financial
condition and liquidity, as well as other statements, including, but not limited
to, words such as "anticipate," "believe," "plan," "intend," "expect,"
"predict," and other similar expressions constitute those statements. These
statements are not guarantees of future performance and are subject to risks and
uncertainties that are difficult to predict. Accordingly, actual results may
differ materially from those anticipated or expressed in the statements.
Potential risks and uncertainties include, among others, those set forth below.
Particular attention should be paid to the cautionary statements involving our
limited operating history, the unpredictability of our future revenues, the
unpredictable and evolving nature of our business model, the competitive
multimedia compact discs and financial services industries and the risks
associated with capacity constraints, systems development, management of growth
and business expansion, as well as other risk factors.
Overview
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We are a holding company incorporated in the State of Delaware. We have two
subsidiaries through which we conduct our business: (1) CDKnet, LLC, a New York
limited liability company, and (2) Diversified Capital Holdings, LLC, a Delaware
limited liability company. On October 22, 2002 we entered into an agreement to
sell certain assets including the business of Diversified, CDK Financial Corp.
and CDKNet, LLC to National Management Consultants, Inc. (National), formerly
Universal Media Holdings, Inc. Certain of the assets comprising the consulting
business of Diversified and investments we made were transferred to National.
CDKNet, LLC has not been transferred to National. As a result, we remain in the
business of producing custom compact disks.
We have developed a multimedia technology, called CDK(TM), which integrates
audio, video and Internet connectivity on a standard compact disc. Our
technology enables users to create their own personalized compact discs simply
by visiting a Website. These custom compact discs play audio and display videos
on a full-screen, using high-quality videos and digital technology. The custom
compact discs also include software applications and targeted Web links.
The CDK(TM) product is targeted at the following industries: (1) entertainment
(music, movies, and TV); (2) travel and tourism; (3) professional sports; (4)
financial services; (5) education; (6) toys/games; (7) fashion; (8)
food/cooking; (9) automotive; and (10) healthcare. Its primary customers and/or
strategic partners include Central Park Media, CollegeMusic.com, Megaforce
Records, HappyPuppy.com, theglobe.com and SugarBeats.com.
In June 2001, we sold the assets of our subsidiary, ValueFlash to Elbit Limited
for $3.5 million in cash plus the assumption of liabilities and forgiveness of
indebtedness. In connection with the sale of ValueFlash, we entered into a
Technology and License Agreement with Elbit whereby the parties agreed that for
an initial 3-year period, we shall provide CDKs(TM) for Elbit in return for disc
mastering fees and per disc production fees.
We have a limited operating history. While historically we have generated
revenues primarily from development and use fees for client specific compact
discs and the sale of custom compact discs, in fiscal 2002, most of our
resources were directed to developing our corporate management consulting
services in accordance with our fiscal 2002 operating plan, which we abandoned
in October, 2002.
1
As of February 14, 2003, we had 36,196,267 shares of common stock issued and
outstanding. Our stock is traded on the Over-the-Counter Bulletin Board under
the symbol "CDKX."
Stock Dividend
- --------------
We have not issued a common stock dividend to date.
Recent Developments
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In July 2002, we sold an investment in common stock to Target Growth Fund Ltd.
subject to a one year note receivable in the amount of $450,000. With interest
at 8% annually the Company's carrying value in this investment was $518,937.
Accordingly, the Company recorded a loss of $68,933 on the sale of this
investment during the six months ended September 30, 2002. Target Growth Fund
Ltd. is a preferred stockholder of the Company.
On October 22, 2002 we entered into an agreement to sell certain assets
including the business of Diversified, CDK Financial and CDKNet, LLC to National
Management Consultants, Inc. (National), formerly Universal Media Holdings, Inc.
At the time of the transaction, James W. Zimbler served as President and a
Director of National and also served as Secretary and Executive Vice President
of CDKNet.com. On the same day, Steven A. Horowitz, our CEO and Andrew Schenker,
our COO were appointed President, CEO and CFO respectively, of National. Certain
of the assets comprising the consulting business of Diversified and investments
we made were transferred to National. CDKNet, LLC has not been transferred to
National. As a result, we remain in the business of producing custom compact
disks.
It was subsequently determined that certain intangible assets of CDKNet, LLC
will not be transferred and therefore the transaction sale of assets to
National, Inc has been modified. On January 5, 2003, we entered into a Revised
Asset Purchase Agreement pursuant to which we will sell certain assets of
Diversified to National. The revised sale price of the assets is a revised
promissory note in the amount of $339,000. plus interest at the rate of five
percent (5%), payable monthly until February 2006. The note will be secured by a
security agreement on all the assets of National.
In January 2003, the Board of Directors of the Company authorized the issuance
of an aggregate of 72,000 Series A preferred shares to the minority shareholders
of our Valueflash subsidiary in exchange for their common shares of Valueflash.
After this transaction is completed, Valueflash will be a wholly-owned
subsidiary.
In Janaury 2003, the Board of Directors approved an adjustment in the conversion
rate of the $165,000 of subordinated convertible debentures. The new conversion
rate will be $.01 per common share.
In January 2003, the Board of Directors authorized the issuance of 17,500 shares
of series A preferred stock to Andrew Schenker for services rendered to the
Company.
In January 2003, the Board of Directors authorized the issuance of 470,000
shares of Series B preferred sstock to Robert M. Rubin and C. Dean McLain
pursuant to a consulting agreement.
On February 7, 2003, we announced that we entered into an agreement with Western
Power & Equipment Corp. (Western) to acquire a portion of Western's business in
California and Nevada. Western sells, leases, rents and services construction
and industrial equipment for Case Corporation and 30 other manufacturers. CDK
will acquire approximately $15 million of tangible assets and operations, which
2
reported nearly $50 million of total revenue for the year ended July 31, 2002,
in exchange for the assumption or replacement of existing debt, a cash payment
of $500,000. and a five-year promissory note of $500,000. Certain members of
Western's management will receive approximately 60% of the post transaction
combined entity. The completion of the transaction remains subject to several
conditions including the approval of both companies board's, financing
transactions including an institutional revolving credit facility and other
financing for the purchase, receipt of other third party approvals, delivery of
audited financial statements of the business to be acquired, additional due
diligence and compliance with applicable regulatory requirements.
Results of Operations - Three months ended December 31, 2002 compared to three
months ended December 31, 2001
- ------------------------------------------------------------------------------
As a result of the sale of the assets of our Valueflash subsidiary in June 2001,
we concentrated our resources on developing our financial services business.
We did not have revenues or costs of goods sold for the three or six months
ended December 31, 2002.
During the three months ended December 31, 2002, we incurred a net loss of
$232,906 on revenues of $0 compared to a net loss of $251,073 on revenues of
$170,813 for the three months ended December 31, 2001. We did not generate any
revenues from our CDK operations during the three months ended December 31, 2002
or from the financial services consulting business.
For the three months ended December 31, 2002, other operating expenses were
$245,226 compared to $287,722 for the three months ended December 31, 2001.
Operating expenses consist of primarily consulting and other professional fees
including $50,000 in consulting fees paid to George Sandhu, a representative of
the preferred stockholders.
Results of Operations - Six months ended December 31, 2002 compared to six
months ended December 31, 2001
- ------------------------------------------------------------------------------
As a result of the sale of the assets of our Valueflash subsidiary in June 2001,
we concentrated our resources on developing our financial services business.
We did not have revenues or costs of goods sold for the three or six months
ended December 31, 2002.
During the six months ended December 31, 2002, we incurred a net loss of
$499,334 on revenues of $0 compared to a net loss of $529,140 on revenues of
$170,813 for the six months ended December 31, 2001. We did not generate any
revenues from our CDK operations during the six months ended December 31, 2002
or from the financial services consulting business.
For the six months ended December 31, 2002, other operating expenses were
$486,225 compared to $578,838 for the six months ended December 31, 2001.
Operating expenses consist of primarily consulting and other professional fees
including $50,000 in consulting fees paid to George Sandhu, a representative of
the preferred stockholders.
Liquidity and Capital Resources
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As of December 31, 2002, we had $761,017 in cash and cash equivalents. Our
principal commitments are $165,00 in subordinated convertible debentures and
$28,500 in notes payable and $252,183 in accounts payable and accrued expenses.
In October and November 2002, $400,000 cash was returned from one of the
Company's investments. In December 2002, the Company received $500,000 of
previously escrowed cash.
Net cash used in operating activities was $437,878 for the six months ended
December 31, 2002 compared to net cash used in operating activities of $537,360
for the six months ended December 31, 2001. Cash used by operations primarily
resulted from net losses offset by non-cash depreciation and amortization.
3
Net cash provided in investing activities was $846,152 for the six months ended
December 31, 2002 compared to cash used of $1,029,738 for the three months ended
December 31, 2001. For the six months ended December 31, 2002, we received
$400,000 cash from the maturity of certain investments and $500,000 of
previously escrowed cash. In December 2002, we entered into a series of
settlement agreements related to our purchase of certain companies during fiscal
2002. Certain aspects of the related stock purchase agreements had not been
fully performed and the parties desired to settle their respective obligations.
Accordingly, the Company has adjusted the purchase price and consideration
issued downward to reflect the terms of the settlement agreements. The Company
has reduced the amount of series A preferred stock issued and reduced the amount
of goodwill initially recorded for these acquisitions.
Net cash used by financing activities was $83,251 for the six months ended
December 31, 2002 compared to cash provided of $13,867 for the six months ended
December 31, 2001. We used cash for the six months ended December 31, 2002 to
make principle payments on a note payable.
Factors Affecting Future Results
- --------------------------------
We do not provide forward looking financial information. However, from time to
time statements are made by employees that may contain forward looking
information that involve risks and uncertainties. In particular, statements
contained in this quarterly report that do not historically contain predictions
are made under the Safe Harbor Corporate Private Sector Litigation Reform Act of
1995. Our actual result of operations and financial condition have varied and
may in the future vary significantly from those stated in any predictions.
Factors that may cause these differences include without limitation the risk,
uncertainties and other information discussed within this registration
statement, as well as the accuracy of its internal estimate of revenue and
operating expense levels. We will face a number of risk factors which may create
circumstances beyond the control of management and adversely impact the ability
to achieve our business plan.
ITEM 3. CONTROLS AND PROCEDURES.
-----------------------
Within the 90 days prior to the date of this report, the company carried out an
evaluation, under the supervision and with the participation of the company's
management, including the company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the company (including
its consolidated subsidiaries) required to be included in the company's periodic
SEC filings.
4
PART II-- OTHER INFORMATION
Item 1. Legal Proceedings
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None.
Item 2. Changes in Securities
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(a) Not applicable
(b) On November 18, 2002, the Company's Board of Directors, with Mr.
Steven Horowitz abstaining due to his previously disclosed interest in the
transaction, adopted an amendment to the designation setting forth the rights of
holders of Series A Preferred Stock. The amendment, and related agreement with
the holders of Series A shares, eliminated the variable rate at which Series A
shares could be converted into shares of the Company's Common Stock, fixed the
conversion rate at $.01 per share (subject to adjustment in the event one or
more stock splits or combinations), gave the Series A holders the right to vote
on an "as converted basis," cured the existing accumulated and unpaid dividend
arrearage by the issuance of 136,959 additional shares of Series A Preferred,
and eliminated the cumulative dividend going forward. The changes were made, in
part, to release the Company from any claims on the part of the Series A holders
for the Company's failure to maintain a sufficient number of shares of common
stock issuable upon conversion of the Series A shares.
In January 2003, the Board authorized the designation of 470,000
Series B Convertible Shares of Preferred Stock each having a liquidation
preference of $2.50 per share. The Series B shares are convertible into shares
of the Company's common stock at $.0025 per share (subject to adjustment in the
event of one or more common stock splits or combinations), do not have any
dividend rights, or voting rights (except as provided by law), and are
redeemable at the Company's option for $.0001 per share, if certain conditions
relating to a consulting agreement have not been achieved. The Series B Shares
are to be issued as compensation for certain consulting services.
(c) On November 21, 2002, the Company issued 136,959 shares of Series A
Preferred Stock as a dividend. The issuance of the shares is claimed to be
exempt from registration under the Securities Act of 1933, pursuant to the
interpretation of the General Counsel of the SEC (Sec. Act Release 929, 1936)
that the issuance of a stock dividend does not involve a sale.
On January 14, 2003, the Company issued 95,500 shares of Series A
Preferred Stock to three person, in satisfaction of various claims made by such
persons in connection with acquisitions made by the Company in May 2002. Of the
shares issued, 35,500 may be cancelled in certain events. The shares were issued
in reliance on Section 4(2) or 4(6) of the Securities Act, for private offerings
not involving a public offering or for offers solely to accredited investors.
On January 29, 2003, the Company set aside 72,000 Series A Shares
to acquire the remaining interests of CDK Financial Corp., a more than 90% owned
subsidiary. The shares will be issued in reliance upon an exemption from
registration set forth in Section 4(2) or 4(6) of the Securities Act for
offerings not involving a public offering or solely to accredited investors.
On January 29, 2003, the company issued 17,500 shares of Series A
Preferred Stock to Andrew Schenker, a director and Chief Operating Officer of
the Company, relying upon Section 4(2) or 4(6) of the Securities Act for
offerings not involving a public offering or solely to accredited investors.
See Item 4, below.
(d) Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
II-1
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
On November 22, 2002, holders of 67% of the Company's voting stock,
consisting of common stock and Series A Preferred Stock consented to the an
amendment to the Company's certificate of incorporation to reverse split the
common stock 50-for-one and increasing the number of authorized common shares
from 40,000,000 to 100,000,000, after the reverse split. Both the reverse split
and increase in authorizes shares may be effected by the board of directors any
time until November 21, 2003. In addition the consenting stockholders re-elected
Steven A. Horowitz, Anthony J. Bonomo and Andrew J. Schenker directors. An
information statement concerning these actions was mailed to holders of common
stock on December 6, 2002.
Item 5. Other Information.
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
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2.1 Asset and Business Purchase Agreement between CDKnet.com,
Inc., GCS Western Power & Equipment Corp., and Western
Power & Equipment Corp.
2.2 Letter Amendment to Asset and Business Purchase Agreement
between CDKnet.com, Inc., GCS Western Power & Equipment
Corp., and Western Power & Equipment Corp.
3.1 Amended and Restated Series A Designation
3.2 Series B Designation
4.1 Amendment to 6% Convertible Debenture due September 1,
2003, dated January 29, 2003 between CDKnet.com, Inc. and
International Investment Group Equities Fund N.V.
4.2 Amendment to 6% Convertible Debenture due September 1,
2003, dated January 29, 2003 between CDKnet.com, Inc. and
New Millennium FSG Ltd.
10.1 Revised Asset Purchase Agreement between CDKnet.com, Inc.
and National Management Consultants, Inc. (formerly
Universal Media Holdings, Inc.) dated January 2003
10.2 Consulting Agreement between CDKnet.com, Inc., Robert M.
Rubin and C. Dean McClain dated January 22, 2003
10.3 Settlement Agreement between CDKnet.com, Inc., Diversified
Capital Holdings, LLC, JWZ Holdings, Inc. and Adelphia
Holdings LLC dated December 31, 2002
10.4 Settlement Agreement between CDKnet.com, Inc., Diversified
Capital Holdings, LLC, JWZ Holdings, Inc. and Lee
Rubinstein dated December 31, 2002
10.5 Settlement Agreement between CDKnet.com, Inc., Diversified
Capital Holdings, LLC and Adelphia Holdings, LLC dated
December 31, 2002
10.6 Settlement Agreement between CDKnet.com, Inc., Diversified
Capital Holdings, LLC and Lee Rubinstein dated December 31,
2002
10.7 Separation and Release Agreement between CDKnet.com, Inc.
and James W. Zimbler dated January 13, 2003, effective
October 22, 2002
II-2
10.8 Letter agreement dated October 15, 2002 between CDKnet.com,
Inc. and the holders of Series A Preferred Stock
99.1 Certification pursuant to 18 U.S.C. 1350.
99.2 Certification pursuant to 18 U.S.C. 1350.
(b) Forms 8-K
---------
None.
II-3
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CDKNET.COM, INC.
Date: February 14, 2003 /s/ Steven A. Horowitz
-----------------------
Chairman, Chief Executive Officer and
Secretary
Date: February 14, 2003 /s/ Timothy J. Mayette
-----------------------
Chief Financial Officer
II-4
CERTIFICATION
I, Steven A. Horowitz, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CDKNet.Com,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respect the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, is made known to me
by others, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
February 14, 2003
/s/ Steven A. Horowitz
------------------------------------
Steven A. Horowitz, Chairman and CEO
CERTIFICATION
I, Timothy J. Mayette, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CDKNet.Com,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respect the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, is made known to me
by others, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
February 14, 2002
/s/ Timothy J. Mayette
--------------------------
Timothy J. Mayette, CFO