UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: JUNE 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from _________ to __________
COMMISSION FILE NUMBER: 000-26627
KEY COMMAND INTERNATIONAL CORP.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-4031359
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
C/O VERTICAL CAPITAL PARTNERS, INC.
488 MADISON AVENUE
NEW YORK, NY 10022
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(Address of principal executive offices)
(212) 446-0006
-------------------------
(Issuer's telephone number)
COMMAND INTERNATIONAL CORPORATION
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(Former name, former address and former fiscal year,
if changed since last report)
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 the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [ X]
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: There were 96,473,040 shares of the
registrant's common stock, par value $.0001 per share, outstanding as of October
7, 2004.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
- INDEX -
Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of
June 30, 2004 (Unaudited) F-1
Condensed Consolidated Statements of Operations for the
Six and Three Months Ended June 30, 2004 and 2003(Unaudited) F-2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2004 and 2003 (Unaudited) F-3
Notes to Condensed Consolidated Financial Statements (Unaudited) F-5
Item 2. Management's Discussion and Analysis or Plan of Operation 1
Item 3. Controls and Procedures 5
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 6. Exhibits and Reports on Form 8-K. 6
Signature Page 7
Exhibit 31.1
Exhibit 32.1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
INDEX TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheet as of June 30, 2004 F-1
Condensed Consolidated Statements of Operations for the Six
and Three Months Ended June 30, 2004 and 2003 F-2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2004 and 2003 F-3
Notes to Condensed Consolidated Financial Statements F-5
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 3,334
Accounts receivable, net 9,633
-----------
TOTAL ASSETS $ 12,967
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Taxes payable $ 143,626
Accounts payable and accrued expenses 538,208
-----------
Total Current Liabilities 681,834
-----------
Officers loans payable 486,840
-----------
TOTAL LIABILITIES 1,168,674
-----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value, 5,000,000 shares
authorized, 0 shares issued and outstanding --
Common stock, $.001 Par Value; 40,000,000 shares authorized
12,051,976 shares issued and outstanding 12,051
Additional paid-in capital --
Retained earnings (deficit) (1,167,758)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,155,707)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 12,967
===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-1
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
(RESTATED)
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
------------- ------------ -------------- ------------
OPERATING REVENUES
Sales $ 15,589 $ 44,538 -- $ 16,575
------------ ------------ ------------ ------------
OPERATING EXPENSES
Salaries, commissions and payroll related expenses -- 125,000 -- 62,500
Office and administrative 8,310 32,065 684 1,195
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 8,310 157,065 684 63,695
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE) 7,279 (112,527) (684) (47,120)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Depreciation and amortization -- (13,991) -- (6,995)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) -- (13,991) -- (6,995)
------------ ------------ ------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 7,279 (126,518) (684) (54,115)
------------ ------------ ------------ ------------
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations (net of taxes) 9,699 46,460 (543) (1,718)
Loss on disposal of subsidiary (3,378) -- (3,378) --
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 13,600 (80,058) (4,605) (55,833)
Provision for Income Taxes -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ 13,600 $ (80,058) $ (4,605) $ (55,833)
============ ============ ============ ============
BASIC AND DILUTED INCOME (LOSS) PER SHARE
Basic and diluted from continuing operations $ 0.00060 $ (0.01050) $ (0.00006) $ (0.00449)
============ ============ ============ ============
Basic and diluted from discontinued operations $ 0.00080 $ 0.00385 $ (0.00005) $ (0.00014)
============ ============ ============ ============
Basic and diluted from disposal of subsidiary $ (0.00028) $ -- $ (0.00028) $ --
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,051,976 12,051,976 12,051,976 12,051,976
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
(RESTATED)
2004 2003
--------- ---------
CASH FLOW FROM OPERATING ACTIVITES
Net income (loss) $ 13,600 $ (80,058)
--------- ---------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities
Depreciation and amortization -- 13,991
(Income) from discontinued operations (9,699) (46,460)
Loss on disposal of subsidiary 3,378 --
Net cash provided by
(used in) discontinued operations 5,538 (4,809)
Common stock issued for services -- 250
CHANGES IN ASSETS AND LIABILITIES
Decrease in accounts receivable 9,112 19,761
(Decrease) in deferred revenue -- (3,904)
Increase in accounts payable and
accrued expenses -- 121,121
--------- ---------
Total adjustments 8,329 99,950
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,929 19,892
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITES
Loans from officer, net -- (18,011)
Proceeds (repayment) of line of credit, net (23,500) --
--------- ---------
NET CASH (USED IN) FINANCING ACTIVITIES (23,500) (18,011)
--------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (1,571) 1,881
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 4,905 1,814
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,334 $ 3,695
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest expense $ -- $ 470
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
(RESTATED)
2004 2003
---------- ----------
SUPPLEMENTAL DISCLOSURE OF NONCASH
ACTIVITIES:
Net effect of stock acquisition between CIC and CIGI
Common stock $ 12,051 $ 12,051
Additional paid in capital -- --
Deficit (22,297) (22,598)
Accounts payable 10,246 10,547
---------- ----------
$ -- $ --
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The condensed consolidated unaudited interim financial statements included
herein have been prepared without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The condensed
consolidated financial statements and notes are presented as permitted on
Form 10-QSB and do not contain information included in the Company's
annual consolidated financial statements and notes. 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 pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the December 31, 2003 audited financial
statements of the Company and the accompanying notes thereto. While
management of the Company believes the procedures followed in preparing
these condensed consolidated financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the facts that
will exist, and procedures that will be accomplished by the Company later
in the year.
Command Line Corp. ("CLC") was formed on January 8, 1985 in the State of
New Jersey and is qualified to do business in several other states. CLC
markets interactive systems used in manufacturing, purchasing and maritime
management. CLC specializes in modifying existing application software to
fit a customer's unique business needs. All of CLC's products can be run
on either a PC network or in a Web environment.
Spiderfuel, Inc. was originally incorporated in the State of Delaware on
February 13, 1997 under the name of Global Internet Group, Inc. Global
Internet Group, Inc. changed its corporate name to PlanetWebcom.com on
November 2, 1999, and on November 21, 2000, to Spiderfuel, Inc.
("Spiderfuel").
Spiderfuel is a provider of web-based software and implementation
services. Spiderfuel helps companies use technologies, like the Internet,
to build closer customer relationships, increase their revenues and reduce
their operating expenses. Spiderfuel's completely integrated applications
suite helps mid-sized businesses run their growing businesses more
efficiently.
On May 21, 2002, Command Internet Corp. ("CIC") was formed. On May 22,
2002, CIC entered into an Asset Purchase Agreement with Spiderfuel,
whereby CIC acquired all of the assets, and assumed a portion of the
liabilities, of Spiderfuel, in exchange for 1,334 shares of common stock
of CIC (See Note 9). For purposes of these financial statements, CIC is
synonymous with Spiderfuel post-merger.
On May 29, 2002, CLC entered into a Stock Purchase Agreement with Command
International Group, Inc. ("CIGI"), whereby CIGI acquired all of the
capital stock of CLC in exchange for 165 shares of common stock of CIGI;
and therefore, CLC became a wholly-owned subsidiary of CIGI (See Note 10).
F-5
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
On June 3, 2002, CIC entered into a Stock Purchase Agreement with CIGI,
whereby CIGI acquired all of the capital stock of CIC; and therefore, CIC
became a wholly-owned subsidiary of CIGI (See Note 11).
Command International Acquisition Corporation, a Delaware corporation
("CIAC") entered into an Agreement and Plan of Reorganization dated as of
July 1, 2002, as amended as of February 24, 2003 (the "CIG Agreement"),
with CIGI and stockholders of CIGI, whereby CIAC was given the right to
acquire all of the issued and outstanding common stock of CIGI in exchange
for shares of common stock of CIAC.
Algiers Resources, Inc., a Delaware corporation ("Algiers") was formed on
October 6, 1998, as a blind pool. On April 26, 2003, pursuant to an
Agreement and Plan of Merger dated as of March 20, 2003 (the "Merger
Agreement"), CIAC merged (the "Merger") with and into Algiers Merger Co.,
a Delaware corporation and wholly-owned subsidiary of Algiers ("Algiers
Merger Co."), with Algiers Merger Co. continuing as the surviving entity.
As a result of the Merger, Algiers Merger Co. changed its corporate name
to Command International Corporation and each issued and outstanding share
of common stock, par value $0.001 per share, of CIAC was converted into
one share of common stock, par value $0.001 per share, of Algiers.
Accordingly, stockholders of CIAC received an aggregate of 5,239,238
shares of common stock of Algiers. In addition, pursuant to the Merger,
the former president of Algiers retired 1,272,500 shares of common stock
of Algiers.
In connection with the Merger Agreement and pursuant to the Assignment and
Assumption Agreement dated as of March 20, 2003, by and between CIAC and
Algiers, CIAC assigned to Algiers all of its right, title and interest,
subject to any and all liabilities in connection therewith, to acquire
1,500 shares of common stock of CIGI, constituting all of the issued and
outstanding common stock of CIGI, in (a tax-free) exchange for 5,239,238
shares of common stock of the Algiers under the CIGI Agreement. In
accordance therewith, on April 26, 2003, Algiers deposited in escrow with
Snow Becker Krauss P.C., 5,239,238 shares of its common stock for issuance
to stockholders of CIGI upon the closing of the CIGI Agreement.
On July 7, 2003, Command International Corporation (f/k/a Algiers Merger
Co.) merged with and into Algiers, with Algiers continuing as the
surviving entity and changed its name from Algiers Resources, Inc. to
Command International Corporation (the "Company").
On May 12, 2004, the Company sold to Staffin Group International, LLC
("Staffin") 100 shares of its wholly - owned subsidiary CLC, which
constituted all of the issued and outstanding capital stock of CLC. In
consideration of the CLC shares, Staffin surrendered 578,936 shares of the
Company representing 100% of its ownership in the Company.
F-6
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
On May 12, 2004, the Company sold to the Staffin Group International, LLC
("Staffin") 100 shares of its wholly owned subsidiary CLC, which
constituted all of the issued and outstanding capital stock of CLC. In
consideration of the shares, Staffin surrendered 578, 936 shares of the
Company representing 100% of its ownership in the Company.
On July 6, 2004, the Company amended its Article of Incorporation and
pursuant to a board resolution, increased the authorized level of common
stock from 40,000,000 to 100,000,000 and to change the par value from
$0.001 to $0.0001. In addition, the Company changed its name to Key
Command International Corp.
On August 17, 2004, the Company issued 85,000,000 shares of common stock
to five investors for cash of $8,500.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
CIC and CLC. All significant intercompany accounts and transactions have
been eliminated in the consolidation.
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 disclosures 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.
REVENUE RECOGNITION
Revenue is recognized under the accrual method of accounting whereby
revenue is recognized as the contracts enter different phases of
completion. Contracts may have different phases until they are fully
completed, and management records revenue on these contracts as each phase
is completed and installed. Typical contracts take anywhere from six to
nine months to complete. All costs incurred in servicing these contracts
are expensed as incurred.
F-7
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments and other
short-term investments with an initial maturity of three months or less to
be cash equivalents.
The Company maintains cash and cash equivalent balances at financial
institutions which are insured by the Federal Deposit Insurance
Corporation up to $100,000.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation is computed primarily using
the straight-line method over the estimated useful life of the assets.
Machinery and equipment 3-5 Years
Furniture and fixtures 5-7 Years
Automobile 5 Years
Depreciation expense was $0 and $13,991 for the six months ended June 30,
2004 and 2003.
INCOME TAXES
Income taxes are computed on the pretax income, offset by pre-existing net
operating losses, based on the current tax law. Deferred income taxes are
recognized for the tax consequences in future years of differences between
the tax basis of assets and liabilities and their financial reporting
amounts at each year-end based on enacted tax laws and statutory tax
rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the condensed consolidated balance sheet
for cash and cash equivalents, accounts receivable, accounts payable and
loans payable approximate fair value because of the immediate or
short-term maturity of these financial instruments.
F-8
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding. Diluted earnings per
share (EPS) includes additional dilution from common stock equivalents,
such as stock issuable pursuant to the exercise of stock options and
warrants. Common stock equivalents were not included in the computation of
diluted earnings per share when the Company reported a loss because to do
so would be anti-dilutive for periods presented.
The following is a reconciliation of the computation for basic and diluted
EPS:
(Restated)
June 30, June 30,
2004 2003
------------ ------------
Net Income (Loss) $ 13,600 $ (80,058)
============ ============
Weighted-average common shares
outstanding (Basic) 12,051,976 12,051,976
Weighted-average common stock equivalents:
Stock options -- --
Warrants -- --
------------ ------------
Weighted-average common shares
outstanding (Diluted) 12,051,976 12,051,976
============ ============
ADVERTISING
Costs of advertising and promotion are expensed as incurred. Advertising
costs were $0 for the six months ended June 30, 2004 and 2003.
ACCOUNTS RECEIVABLE
CIC has established a reserve for doubtful accounts for contracts entered
into that have the potential of not being completed due to circumstances
beyond the control of CIC. The allowance for doubtful accounts is adjusted
by management of CIC on a regular basis. At June 30, 2004, there was no
allowance for doubtful accounts.
F-9
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets were stated at cost. Amortization was computed using the
straight-line method over fifteen years. Amortization expense for the year
ended December 31, 2001 was $75,000. Additionally, in 2001, Spiderfuel
determined that the intangible assets that were acquired have been
impaired according to FASB 142, "Goodwill and Other Intangible Assets".
Originally, the intangible assets were recorded by management at $2 per
share for the 750,000 shares given to The Strategy Factory, Inc. (See Note
8). After one full year of operations, Spiderfuel impaired the remaining
unamortized balance to just over $1 per share at $782,800. As such,
Spiderfuel recorded a one-time charge to operations in the amount of
$608,870 as impairment of intangible assets in 2001. Management has
impaired the remainder of this balance during the year ended December 31,
2003.
GOODWILL
In connection with the Asset Purchase Agreement between Spiderfuel and CIC
on May 22, 2002, the fair value of the assets acquired approximated the
fair value of the liabilities assumed by CIC. Therefore, no goodwill was
recorded in the transaction. This transaction did impact the consolidated
financial statements for the year ended December 31, 2002.
In connection with the Stock Purchase Agreement between CLC and CIG on May
29, 2002, the fair value of the assets acquired and liabilities assumed by
CIGI resulted in a negative goodwill amount of $141,234. After applying
the negative goodwill amount to fixed assets ($16,982), other receivables
($93), and security deposits ($1,343), the net effect was an extraordinary
item for the gain on purchase of $122,816, which is reflected in the
consolidated statements of operations in 2002. This transaction did impact
the consolidated financial statements for the year ended December 31,
2002.
In connection with the Stock Purchase Agreement between CIC and CIG on
June 3, 2002, virtually no change in value occurred due to the
transactions being only two weeks apart, with the fair values unchanged,
and the stock issued to CIC was for the identical number of shares and par
value. Therefore, no goodwill was recorded. This transaction did impact
the consolidated financial statements for the year ended December 31,
2002.
F-10
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Employee stock awards under the Company's compensation plans are accounted
for in accordance with Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees", and related
interpretations. The Company provides the disclosure requirements of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), and related interpretations.
Stock-based awards to non-employees are accounted for under the provisions
of SFAS 123 and the Company has adopted the enhanced disclosure provisions
of SFAS No. 148 "Accounting for Stock-Based Compensation- Transition and
Disclosure, an amendment of SFAS No. 123" ("SFAS 148").
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic-value method. Under the intrinsic-value
method of accounting for stock-based compensation, when the exercise price
of options granted to employees is less than the estimated fair value of
the underlying stock on the date of grant, deferred compensation is
recognized and is amortized to compensation expense over the applicable
vesting period. In each of the periods presented, the vesting period was
the period in which the options were granted. All options were expensed to
compensation in the period granted rather than the exercise date.
The Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board ("FASB")
Emerging Issues Task Force (EITF) Issue No. 96-18, "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services". The fair value of the option
issued is used to measure the transaction, as this is more reliable than
the fair value of the services received. The fair value is measured at the
value of the Company's common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty's
performance is complete. The fair value of the equity instrument is
charged directly to compensation expense and additional paid-in capital.
RECENT ACCOUNTING PRONOUNCEMENTS
On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), that is
applicable to financial statements issued for fiscal years beginning after
December 15, 2001. The FASB's new rules on asset impairment supersede SFAS
No.121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and portions of Accounting
Principles Board Opinion 30, "Reporting the Results of Operations." SFAS
144 provides a single accounting model for long-lived assets to be
disposed of and significantly changes the criteria that would have to be
met to classify an asset as held-for-sale. Classification as held-for-sale
is an important distinction since such assets are not depreciated and are
stated at the lower of fair value and carrying amount.
F-11
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS 144 also requires expected future operating losses from discontinued
operations to be displayed in the period (s) in which the losses are
incurred, rather than as of the measurement date as presently required.
The adoption of SFAS 144 did have an impact on the Company's results of
operations or financial position.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS 145"). SFAS 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", and an amendment
of SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers", and
SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements." SFAS 145 amends SFAS No. 13, "Accounting for Leases," to
eliminate inconsistencies between the required accounting for
sales-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to
sales-leaseback transactions.
Also, SFAS 145 amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their
applicability under changed conditions. Provisions of SFAS 145 related to
the rescissions of SFAS No. 4 were effective for the Company on November
1, 2002 and provisions affecting SFAS No. 13 were effective for
transactions occurring after May 15, 2002. The adoption of SFAS 145 did
not have a significant impact on the Company's results of operations or
financial position.
In June 2003, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 covers
restructuring type activities beginning with plans initiated after
December 31, 2002. Activities covered by this standard that are entered
into after that date will be recorded in accordance with provisions of
SFAS 146. The adoption of SFAS 146 did have an impact on the Company's
results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
Statement No. 123"("SFAS 148"). SFAS 148 amends SFAS No. 123, "Accounting
for Stock-Based Compensation," to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation. SFAS 148 also
amends the disclosure provisions of SFAS No. 123 to require prominent
disclosure about the effects on reported net income of an entity's
accounting policy decisions with respect to stock-based employee
compensation. Finally, SFAS 148 amends Accounting Principles Board ("APB")
Opinion No. 28, "Interim Financial Reporting", to require disclosure about
those effects in interim financial information. SFAS 148 is effective for
financial statements for fiscal years ending after December 15, 2002.
F-12
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
The Company will continue to account for stock-based employee compensation
using the intrinsic value method of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," but has adopted the enhanced disclosure
requirements of SFAS 148.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities" ("SFAS 149"), which
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, except for certain hedging relationships
designated after June 30, 2003. Most provisions of SFAS 149 should be
applied prospectively. The adoption of SFAS 149 did not have a significant
impact on the Company's results of operations or financial position.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity". ("SFAS 150") establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires that an issuer classify a
financial instrument that is within its scope as a liability (or an asset
in some circumstances). SFAS 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at
the beginning of the first interim period beginning after June 15, 2003,
except for mandatory redeemable financial instruments of nonpublic
entities, if applicable. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of SFAS 150 and still
existing at the beginning of the interim period of adoption. The adoption
of SFAS 150 did not have a significant impact on the Company's results of
operations or financial position.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires a
company, at the time it issues a guarantee, to recognize an initial
liability for the fair value of obligations assumed under the guarantees
and elaborates on existing disclosure requirements related to guarantees
and warranties. The recognition requirements are effective for guarantees
issued or modified after December 31, 2002 for initial recognition and
initial measurement provisions. The adoption of FIN 45 did not have a
significant impact on the Company's results of operations or financial
position.
F-13
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51." FIN 46 requires certain variable interest entities to be consolidated
by the primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. FIN 46 is effective for all new variable interest entities
created or acquired after January 31, 2003. For variable interest entities
created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after
June 15, 2003. The adoption of FIN 46 did not have a significant impact on
the Company' results of operations or financial position.
NOTE 3 - OFFICERS LOANS PAYABLE
The CIC loans represent advances to and from its President. These loans
are interest-free and are not anticipated to be paid in the next year, and
therefore are reflected as long-term liabilities. The balances due such
officer at June 30, 2004 was $486,840.
NOTE 4 - LINE OF CREDIT
CLC had lines of credit with two banks. Under each line of credit the
maximum borrowing amount was $50,000 each. Only one of these lines of
credit was borrowed against. This line of credit had a current interest
rate of 5.75% prior to expiring. Once these lines expired, the Company
entered into a line of credit with another bank with availability of
$100,000 at June 30, 2004. As of June 30, 2004 there was no balance
outstanding. The interest expense on the lines of credit was $0 for the
six months ended June 30, 2004 and 2003, respectively.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Related Party Transactions
The Company, as noted in Note 3, is advanced and repays amounts regularly
with its officers. These amounts were funded by its officers for, among
other things, working capital for development of certain products and
marketing of those products, and to float working capital at various times
due to the inconsistent collections based on the nature of the contracts
entered into.
Leases
Beginning in 2001, Spiderfuel entered into a sublease agreement in
Mineola, New York, for approximately $5,000 per month. This sublease
agreement was terminated in
F-14
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Leases (continued)
2002, and Spiderfuel's corporate headquarters were relocated to Edison,
New Jersey in the offices of CLC simultaneously with the asset acquisition
of Spiderfuel by CIC and CIGI's stock acquisition of CIC. All related
party rent has been eliminated in the consolidation.
In addition to the office rental lease, Spiderfuel has entered into other
agreements with a term of one year or month-to-month terms, which are not
considered to be material. Due to the length of the terms, there are no
annual future minimum rentals for CIC due at June 30, 2004.
CLC entered into a lease agreement for office space in Edison, New Jersey
that expired at the end of 2001. CLC paid $3,863 per month. In addition to
the rent, CLC paid an initial security deposit of $1,343, which was
subsequently adjusted for by the negative goodwill at the time of the
Stock Purchase Agreement between CLC CIG on May 29, 2002. The lease has
been extended for another few years.
In addition to the office rental lease, CLC has entered into other
agreements with a term not exceeding one-year that are not considered to
be material. Due to the length of the terms, there are no annual future
minimum rentals due at June 30, 2004.
NOTE 6 - INCOME TAXES
Deferred income taxes will be determined using the liability method for
the temporary differences between the financial reporting basis and income
tax basis of the Company's assets and liabilities. Deferred income taxes
will be measured based on the tax rates expected to be in effect when the
temporary differences are included in the Company's consolidated tax
return. Deferred tax assets and liabilities are recognized based on
anticipated future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases.
At June 30, 2004, deferred tax assets consist of the following:
Net operating loss carryforwards $ 408,700
Less: valuation allowance (408,700)
------------
$ 0
============
At June 30, 2004, the Company had deficits accumulated in the approximate
amount of $1,167,758 available to offset future taxable income through
2023. The Company established valuation allowances equal to the full
amount of the deferred tax assets due to the uncertainty of the
utilization of the operating losses in future periods.
F-15
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
The Company is authorized to issue up to 40,000,000 shares of common
stock, $0.001 par value per share (See Note 15). Prior to the Merger,
2,596,000 shares (includes 51,000 issuable pursuant to outstanding
warrants) of common stock were issued and outstanding. At the closing of
the Merger, 1,272,500 shares of common stock were cancelled and an
aggregate of 10,478,476 shares of common stock were issued in connection
with the Merger. Accordingly, following the Merger, an aggregate of
11,801,976 shares of common stock of the Company were issued and
outstanding.
The Company issued 250,000 additional shares in June 2003 for legal
services rendered to bring the total issued and outstanding shares to
12,051,976. The value of the issuance of the 250,000 shares was $250, the
fair value of the stock at the time (par value).
PREFERRED STOCK
The Company has 5,000,000 shares of preferred stock, $0.001 par value per
share, authorized, and none have been issued.
NOTE 8 - INTANGIBLE ASSETS
In December 2000, Spiderfuel acquired The Strategy Factory, Inc., a Texas
software development corporation for $1,500,000. In consideration of the
assets acquired, Spiderfuel issued 750,000 shares of its common stock to
the former stockholders of The Strategy Factory, Inc. At December 31,
2001, Spiderfuel's management determined that the unamortized amount of
the intangible assets was impaired in accordance with FASB 142, and
$608,870 of the unamortized balance of the intellectual property was
charged to expense. The balance of $782,800 remained until a further
impairment loss of $782,800 during 2003 brought the intangible asset
balance down to $0. Management of the Company does not believe that there
is any value left to the software development.
NOTE 9 - ASSET PURCHASE AGREEMENT - SPIDERFUEL
On May 22, 2002, Spiderfuel entered into an Asset Purchase Agreement with
CIC. Pursuant to such agreement, Spiderfuel sold a majority of its assets,
including its accounts receivable, fixed assets and all of its intangible
assets that it owned the rights to, and CIC also assumed a portion of the
liabilities that related to the operation of Spiderfuel's business,
including vendor payables and deferred revenue relating to the contracts
they had. At the time of this transaction, it was determined that the fair
value of the net assets of Spiderfuel approximated the amount paid by CIC,
and therefore, no goodwill was recognized in the transaction.
F-16
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 10 - STOCK PURCHASE AGREEMENT - CLC
On May 29, 2002, CLC entered into a Stock Purchase Agreement with CIGI,
whereby CIGI acquired all of the capital stock of CIGI in exchange for
shares of common stock of CIGI. Pursuant to such agreement, CIGI acquired
all the rights, title and interest in and to the various products and
properties owned by CLC. At the time of this transaction, it was
determined that the fair value of the net assets of CLC was greater than
the amount paid by CIGI, and therefore, a negative goodwill amount was
generated. As such, according to accounting principles generally accepted
in the United States of America, CLC initially applied this amount against
fixed assets, other receivables and security deposits, and the balance was
then reflected as an extraordinary item for the gain on the purchase.
NOTE 11 - STOCK PURCHASE AGREEMENT - COMMAND INTERNET
On June 3, 2002, CIC entered into a Stock Purchase Agreement with CIGI.
Pursuant to this agreement, CIC exchanged all its issued and outstanding
stock for shares of CIGI, and thus became a wholly-owned subsidiary of
CIGI. Due to only a two week lapse between CIC`s acquisition of Spiderfuel
and CIGI's acquisition of CIC, the fair value of CIC did not significantly
change, and therefore, the transaction netted on goodwill as the fair
value was considered identical to the acquisition price.
NOTE 12 - GOING CONCERN
As shown in the accompanying condensed consolidated financial statements,
the Company incurred substantial net losses through June 30, 2004. There
is no guarantee whether the Company will be able to generate enough
revenue and/or raise capital to support those operations. This raises
substantial doubt about the Company's ability to continue as a going
concern.
Management of the Company believes that they can raise the appropriate
funds needed to support their business plan and acquire an operating, cash
flow positive company. The losses sustained in the periods ended, are
primarily from the result of one-time impairment charges, and the reserve
of accounts receivable.
The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
F-17
COMMAND INTERNATIONAL CORPORATION
(FORMERLY ALGIERS RESOURCES, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2004 AND 2003
NOTE 13 - DISPOSAL OF BUSINESS
In May 2004, the Company sold CLC. The Company's consolidated financial
statements have been restated to reflect this sale as discontinued
operations, for all periods presented. Summarized operating results of
discontinued operations are as follows:
JUNE 30, JUNE 30,
2004 2003
-------- --------
Revenues $ 25,093 $359,939
======== ========
Income before income taxes $ 10,369 $ 46,460
Provision for taxes 670 0
-------- --------
Net income $ 9,699 $ 46,460
======== ========
Net income per share $ .00080 $ .00385
======== ========
Diluted income per share $ .00080 $ .00385
======== ========
NOTE 14 - RESTATEMENT OF FINANCIAL STATEMENTS
The income (loss) from discontinued operations for the six months ended
June 30, 2004 and 2003 were restated to reflect the sale of CLC in the
condensed consolidated statements of operations in accordance with the
provisions of SFAS 144.
NOTE 15 - SUBSEQUENT EVENT
On July 6, 2004, the Company amended its Articles of Incorporation and
increased the authorized number of its common stock from 40,000,000 to
100,000,000 and changed the par value per share from $0.001 to $0.0001. In
addition, the Company changed its name to Key Command International Corp.
On August 17, 2004, the Company issued 85,000,000 shares of common stock
to five investors for cash of 8,500.
F-18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Statements contained in this Plan of Operation of this quarterly report on Form
10-QSB include "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which could cause the actual results of Key Command International
Corp., formerly known as Command International Corporation and Algiers
Resources, Inc. (sometimes referred to as "we", "us" or the "Company"),
performance (financial or operating) or achievements expressed or implied by
such forward-looking statements not to occur or be realized. Such
forward-looking statements generally are based upon the Company's best estimates
of future results, general merger and acquisition activity in the marketplace,
performance or achievement, current conditions and the most recent results of
operations. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "project," "expect,"
"believe," "estimate," "anticipate," "intends," "continue", "potential,"
"opportunity" or similar terms, variations of those terms or the negative of
those terms or other variations of those terms or comparable words or
expressions.
GENERAL
The Company was formed on October 6, 1998, as a blind pool to seek, investigate,
and if such investigation warrants, consummate a merger or other business
combination, purchase of assets or other strategic transaction with a
corporation, partnership, limited liability company or other business entity
desiring the perceived advantages of becoming a publicly reporting and publicly
held corporation.
On April 26, 2003, pursuant to an Agreement and Plan of Merger dated as of March
20, 2003 (the "Merger Agreement"), by and among the Company, Algiers Merger Co.,
a Delaware corporation and wholly-owned subsidiary of the Company, and Command
International Acquisition Corporation, a Delaware corporation ("CIAC"), CIAC
merged with and into Algiers Merger Co., with Algiers Merger Co. continuing as
the surviving entity. As a result of such merger, Algiers Merger Co. changed its
corporate name to Command International Corporation and each issued and
outstanding share of common stock of CIAC was converted into one share of common
stock of the Company.
In connection with the Merger Agreement and pursuant to the Assignment and
Assumption Agreement dated as of March 20, 2003, by and between CIAC and the
Company, CIAC assigned to the Company all of its right, title and interest,
subject to any and all liabilities in connection therewith, to acquire all of
the issued and outstanding common stock of Command International Group Inc.
("CIGI") in exchange for shares of common stock of the Company under the
Agreement and Plan of Reorganization dated as of July 1, 2002, as amended as of
February 24, 2003, by and between CIAC, CIGI and stockholders of CIGI.
On July 7, 2003, Algiers Merger Co. merged with and into the Company, with the
Company continuing as the surviving entity and changed its name from Algiers
Resources, Inc. to Command International Corporation. As a result of the Merger,
CIGI became our wholly-owned subsidiary. CIGI is a provider of web-based and
LAN-based software solutions through its wholly-owned subsidiaries, Command Line
Corp., a New Jersey corporation ("CLC") and Command Internet Corp., a Delaware
corporation ("CIC"). The consolidated financial statements included in this
report include the accounts of CLC and CIC.
1
On May 12, 2004, the Company entered into a Settlement Agreement (the "Staffin
Settlement") with Staffin Group International, LLC, formerly known as Command
International Group, LLC ("Staffin") to resolve certain of the disputes under a
Stock Purchase Agreement dated March 18, 2002 between the Company and Staffin.
Pursuant to the Settlement Agreement, the Company gave to Staffin 100 shares of
common stock of CLC held by it, which constituted all of the issued and
outstanding capital stock of CLC, in exchange for Staffin's surrender of 578,936
shares of our common stock held by Staffin.
On July 6, 2004, the Company amended its Articles of Incorporation and:
o changed its corporate name to Key Command International Corp.,
o increased the authorized number of its common stock from 40,000,000
to 100,000,000, and
o changed the par value per share of its common stock from $0.001 to
$0.0001.
As a result of the Staffin Settlement, we no longer have an operating company.
We intend to seek to expand our business through acquisitions or mergers with
other entities. Any decision to make an acquisition or merge will be based upon
a variety of factors, including, among others, the purchase price and other
financial terms of the transaction, the business prospects of the target company
and the extent to which any acquisition/merger would enhance our prospects. To
the extent that we may finance an acquisition/merger with cash and/or equity
securities, any such issuance of equity securities would result in dilution to
the interests of our shareholders. Additionally, to the extent that we, or the
acquisition or merger candidate itself, issue debt securities in connection with
an acquisition, we may be subject to risks associated with incurring
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. We presently have no
agreements, understandings or arrangements for any acquisitions or merger.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of the Company's financial condition and the results
of its operations are based on the Company's financial statements and the data
used to prepare them. The Company's financial statements have been prepared
based on accounting principles generally accepted in the United States of
America. On an on-going basis, we re-evaluate our judgments and estimates. These
estimates and judgments are based on historical experience and various other
assumptions that are believed to be reasonable under current business conditions
and circumstances. Actual results may differ from these estimates under
different assumptions or conditions. The Company believes the following critical
accounting policies affect more significant judgments and estimates in the
preparation of the consolidated financial statements.
2
On October 3, 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), that is applicable to financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new rules on asset impairment
supersede SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and portions of Accounting Principles
Board Opinion 30, "Reporting the Results of Operations." SFAS 144 provides a
single accounting model for long-lived assets to be disposed of and
significantly changes the criteria that would have to be met to classify an
asset as held-for-sale. Classification as held-for-sale is an important
distinction since such assets are not depreciated and are stated at the lower of
fair value and carrying amount. SFAS 144 also requires expected future operating
losses from discontinued operations to be displayed in the period (s) in which
the losses are incurred, rather than as of the measurement date as presently
required. The adoption of SFAS 144 did have an impact on the Company's results
of operations or financial position.
MATERIAL CHANGES IN FINANCIAL CONDITION AS OF JUNE 30, 2004 AS COMPARED WITH
DECEMBER 31, 2003.
At June 30, 2004, we had a working capital deficit of $668,867, as compared with
a deficit of $682,467 at December 31, 2003. The Company had cash on hand of
$3,334 at June 30, 2004, as compared with $4,905 at December 31, 2003. We did
not have sufficient capital on hand to fund our operations. The Company had
repaid its working capital line from its cash flow at June 30, 2004.
We have funded the business primarily through net income from continuing
operations totaling $7,279 at June 30, 2004. There was no commitment from
officers to continue to lend money to the Company and no further loans were made
to the Company after October 1, 2003. Following the discontinuance of operations
in May 2004, the Company sold 85 million shares, at $.0001 per share, to a group
of five investors including an entity affiliated with the Company's President on
August 17, 2004.
The Company had $538,208 of accounts payable and accrued expenses at December
31, 2003 which remained the same at June 30, 2004. These payables relate mainly
to the operations of CIC which totaled $448,294.
At June 30, 2004, the Company had retained earnings (deficit) of ($1,167,758) as
compared with $1,181,358 at December 31, 2003.
For the six -months ended June 30, 2004 ("Fiscal 2004 Period") the Company had
net cash provided by operating activities of $8,329, as compared with net cash
provide by operating activities of $19,892 for the six-months ended June 30,
2003 ("Fiscal 2003 Period"). The net cash provided by operations resulted from
net income of $13,600 for the Fiscal 2003 Period offset by a income on the
discontinuance of operations of $9,699, loss on disposal of subsidiary of
$3,378, net cash provided by discontinued operations and the collection of the
accounts receivable of $9,112. This is compared to the net loss of $80,058 in
the Fiscal 2003 Period and income from discontinued operations of $46,460 plus
an increase in accounts payable and accrued expenses of $121,121.
3
The Company had net cash used in financing activities of $23,500 during the
Fiscal 2004 Period, as compared with net cash used in financing activities of
$18,011 during the Fiscal 2003 Period. During the Fiscal 2004 Period, the
Company repaid the bank line of credit, while during the Fiscal 2003 Period it
repaid the officer loan.
The Company is concentrating its efforts in finding potential merger partners
that share the same qualities as the Company, and similar business plans. The
Company has devoted substantially all of its efforts in this area. The Company
anticipates that with additional acquisitions and product enhancement that
positive earnings and increased cash flow will occur prior to the Company's year
end.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
SIX AND THREE-MONTHS ENDED JUNE 30, 2004 AS COMPARED WITH THE SIX AND
THREE-MONTHS ENDED JUNE 30, 2003.
Sales in the Fiscal 2004 Period for the six and three months ended was $15,589
and zero as compared with $44,538 and $16,575 in the Fiscal 2003 Period. Sales
of enhancements and upgrades to existing installed systems to a loyal ERP
customer base in the Fiscal 2003 Period decreased in the Fiscal 2004 Period as a
result of the Company not having sufficient working capital to support its
operations. There were no salaries for the six and three-months ended June 30,
2004 compared with $125,000 and $62,500 during the six and three months ended in
the Fiscal Period 2003 as a result of the sale of CLC.
Office and administrative expenses were $8,310 and $684 for the six and three
months ended Fiscal 2004 as compared with $32,065 and $1,195 for six and three
months ended Fiscal Period 2003 as result of the sale of the operating company
during Fiscal 2004.
The Company had income from discontinued operations for the six and three months
ended of $9,699 and a loss of $543 in fiscal 2004 compared to income of
discontinued operations of $46,460 and a loss of $1,718 in Fiscal 2003 primarily
resulting from a timing difference on the sale of CLC.
4
ITEM 3. CONTROL AND PROCEDURES.
As of the end of the period covered by this quarterly report, the Company's
President, acting as its principal executive officer and principal financial
officer, evaluated the effectiveness of the design of the Company's disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934. Based on that evaluation, the President
concluded that the Company's disclosure controls and procedures were effective,
in all material respects, to ensure that the information required to be
disclosed in the reports the Company files and submits under the Exchange Act is
recorded, processed, summarized and reported as and when required.
There have been no significant changes (including corrective actions with
regards to significant deficiencies and material weaknesses) in the Company's
internal controls or in other factors subsequent to the date the Company carried
out its evaluation that could significantly affect these controls.
5
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings against the Company or for which
the Company is a party, other than routine litigation incidental to the
Company's business, nor are there any legal proceedings which terminated during
the quarter ended June 30, 2004.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
Exhibit
Number Description
31.1* Certification of Robert Fallah, as Chief Executive Officer and Chief
Financial Officer, pursuant to Exchange Act Rule 13a-14(a).
32.2* Certification of Robert Fallah, as Chief Executive Officer and Chief
Financial Officer, pursuant to Section 1350 of the Sarbanes-Oxley
Act of 2002.
- ---------
* Filed with this report
(B) REPORTS ON FORM 8-K
A Current Report on Form 8-K dated May 12, 2004 was filed with the
Securities and Exchange Commission on May 27, 2004, reporting under Item 2 the
settlement between registrant and Staffin Group International, LLC.
6
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KEY COMMAND INTERNATIONAL CORP.
Date: March 16, 2005 BY: /s/ Robert Fallah
--------------------------------------
Robert Fallah, Chief Executive Officer
and Chief Financial Officer
(Principal Executive Officer and
Principal Financial Officer
7