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: March 31, 2005
|_| 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
------------------------------- -------------------
(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
----------------------------------------
(Address of principal executive offices)
(212) 446-0006
---------------------------
(Issuer's telephone number)
N/A
----------------------------------------------------
(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 |X| No |_|
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 1,004,928 shares of the
registrant's common stock, par value $.0001 per share, outstanding as of March
31, 2005.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
- INDEX -
Page(s)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of
March 31, 2005 (Unaudited) F-1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2005 and 2004 (Unaudited) F-2
Condensed Consolidated Statements of Cash Flow for the
Three Months Ended March 31, 2005 and 2004 (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
i
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2005
(UNAUDITED)
ASSETS
Current Assets:
Cash $ --
-----------
Total Current Assets --
-----------
TOTAL ASSETS $ --
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Taxes payable $ 193,626
Accounts payable and accrued expenses 543,877
-----------
Total Current Liabilities 737,503
-----------
Officers loans payable 511,084
-----------
Total Liabilities 1,248,587
-----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value, 5,000,000 shares authorized,
20,000 shares issued and outstanding 20
Common stock, $.0001 Par Value; 100,000,000 shares authorized
1,004,928 shares issued and outstanding 100
Additional paid-in capital 40,431
Retained earnings (deficit) (1,289,138)
-----------
Total Stockholders' Equity (Deficit) (1,248,587)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ --
===========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
F-1
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
2005 2004
--------------------------
OPERATING REVENUES
Sales $ -- $ 15,589
OPERATING EXPENSES
Office and administrative 24,700 7,626
--------------------------
Total Operating Expenses 24,700 7,626
--------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS (24,700) 7,963
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations (net of taxes) -- 10,242
--------------------------
Total discontinued operations -- 10,242
--------------------------
NET INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES $ (24,700) $ 18,205
Provision for Income Taxes -- --
--------------------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (24,700) $ 18,205
==========================
NET INCOME (LOSS) PER BASIC AND DILUTED SHARES (0.02458) (0.15233)
==========================
From Continuing Operations $ (0.02458) $ 0.06663
==========================
From Discontinued Operations $ (0.02458) $ 0.08570
==========================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,004,928 119,511
==========================
The accompanying notes are an integral part of the
condensed consolidated financial statements.
F-2
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
2005 2004
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES
Continuing Operations:
Net loss $(24,700) $ 7,963
-------- --------
Adjustments to Reconcile Net (Loss) to Net Cash
provided by (used in) operating activities:
Changes in assets and liabilities
Decrease in accounts receivable -- 7,431
(Decrease) in accounts payable and
and accrued expenses (19,544) --
-------- --------
Total adjustments (19,544) 7,431
-------- --------
Net cash provided by (used in) operating
activities - operations (44,244) 15,394
-------- --------
Discontinued operations
Income from discontinued operations -- 10,242
Adjustments to Reconcile Net Cash (provided by)
discontinued operations -- (4,704)
-------- --------
Net cash provided by operating activities -
discontinued operations -- 5,538
-------- --------
Net cash provided by (used in) Operating Activities $(44,244) $ 20,932
-------- --------
The accompanying notes are an integral part of the
condensed consolidated financial statements.
F-3
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
2005 2004
-------- --------
CASH FLOW FROM FINANCING ACTIVITES
Continuing Operations:
Proceeds from common stock issuances, net $ -- $ --
Proceeds from preferred stock issuance 20,000 --
Loans from officer, net 24,244 --
Repayments from line of credit -- (23,500)
-------- --------
Net cash provided by (used in) financing activities 44,244 (23,500)
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS -- (2,568)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD -- 4,905
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ -- $ 2,337
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest expense $ -- $ --
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
Net effect of stock acquisition between CIC and CIGI
Common stock -- 12,051
Additional paid in capital -- --
Deficit -- (22,297)
Accounts payable -- 10,246
-------- --------
$ -- $ --
======== ========
The accompanying notes are an integral part of the
condensed consolidated financial statements.
F-4
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 AND 2004
(UNAUDITED)
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. For purposes of these financial statements, CIC is synonymous with
Spiderfuel post-merger.
F-5
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
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.
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.
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 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.
F-6
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
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.
In July, 2004 the Company changed its name to Key Command International
Corp.
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
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
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
There was no depreciation expense for the three months ended March 31,
2005 and 2004.
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
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
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
March 31, March 31,
2005 2004
----------- ----------
Net Income (Loss) $ (24,700) $ 18,205
----------- ----------
Weighted-average common shares
outstanding (Basic) 1,004,928 119,511
Weighted-average common stock equivalents:
Stock options -- --
Warrants -- --
----------- ----------
Weighted-average common shares
outstanding (Diluted) 1,004,928 119,511
=========== ==========
Options and warrants outstanding to purchase stock were not included in
the computation of diluted EPS because inclusion would have been
antidilutive. The Company has no options or warrants outstanding as of
March 31, 2005, and no options or warrants have been granted to date.
Weighted average for 2003 has been restated to account for the surrender
of stock and change in par value, which has been retroactively recorded.
Advertising
Costs of advertising and promotion are expensed as incurred. There were no
advertising costs for the three months ended March 31, 2005 and 2004.
F-9
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
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 for 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.
F-10
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation (Continued)
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.
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.
F-11
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
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 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.
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.
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.
F-12
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
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 entity 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
did not have a significant impact on the Company's results of operations
or financial position.
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.
F-13
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
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 2004, the FASB issued Financial Accounting Standards No. 123
(revised 2004) (FAS 123R), "Share-Based Payment, " FAS 123R replaces FAS
No. 123, "Accounting for Stock-Based Compenasation", and supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees." FAS 123R
requires compensation expense, measured as the fair value at the grant
date, related to share-based payment transactions to be recognized in the
financial statements over the period that an employee provides service in
exchange for the award. The Company intends to adopt FAS 123R using the
"modified prospective" transition method as defined in FAS 123R. Under the
modified prospective method, companies are required to record compensation
cost prospectively for the unvested portion, as of the date of adoption,
of previously issued and outstanding awards over the remaining vesting
period of such awards. FAS 123R is effective January 1, 2006. The Company
is evaluating the impact of FAS 123R on its' results and 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 March 31, 2005 is $511,084. There is no stated interest or
terms of interest on this note.
F-14
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 4- 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
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 and CIGI on May 29, 2002. The lease
has been extended.
CLC has entered into leasing agreements with terms not exceeding one-year
and are not considered to be material. Due to the length of the terms,
there are no annual future minimum rentals due at March 31, 2005.
NOTE 5- 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 March 31, 2005, deferred tax assets consist of the following:
Deferred tax asset $ 386,700
Less: valuation allowance (386,700)
------------
Net deferred tax asset $ -0-
============
At March 31, 2005, the Company had deficits accumulated in the approximate
amount of $1,289,000, 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
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 6- STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
In May 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.
In July 2004, the Company amended its Articles 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.
In August 2004, the Company issued 885,417 shares of common stock to five
investors for cash of $8,500.
On April 5, 2005, the Company effected a one for 96 reverse split of the
common stock. All share and per share data in this report give retroactive
effect to such split.
Preferred Stock
The Company has 5,000,000 shares of preferred stock, $0.001 par value per
share, authorized, and 20,000 shares were issued to various investors on
February 15, 2005, convertible into 4,240,000 shares of Common Stock upon
the completion of a business combination as defined in the Delaware
General Corporation Law.
F-16
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005 AND 2004
(UNAUDITED)
NOTE 7- GOING CONCERN
As shown in the accompanying condensed consolidated financial statements,
the Company incurred substantial net losses through March 31, 2005 and for
the years ended December 31, 2004 and 2003. 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 condensed consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
NOTE 8- 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:
March 31, March 31,
2005 2004
--------- ---------
Revenues $ -- $ 24,892
--------- ---------
Income before income taxes -- $ 10,532
Provision for taxes -- 290
--------- ---------
Net income $ -- $ 10,242
========= =========
Net income per share $ -- $ .08570
========= =========
Diluted income per share $ -- $ .08570
========= =========
NOTE 9- SUBSEQUENT EVENT
On April 5, 2005, the Company effected a one for 96 reverse split of the
common stock. All share and per share data in this report give retroactive
effect to such split.
F-17
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.
On May 19, 2005, the Board of Directors of Key Command International Corp. (the
"Company") unanimously approved: (a) a spin-off for the Company to distribute
all of the outstanding shares of Command Internet Corp. ("CIC"), a wholly-owned
Delaware subsidiary, to the Company's current Common and Preferred Stockholders,
and (b) the merger of Command International Group, Inc. ("CIGI"), a second
wholly-owned Delaware subsidiary, with and, into the Company. Upon the
completion of the aforesaid two transactions, the Company will not have any
subsidiaries nor any operating company. These transactions are required steps in
a proposed merger of the Company with a target company ("Target") and will occur
only if the proposed merger is completed. In the proposed Target merger
transaction, Target shareholders will receive 28,688,000 shares of the Company's
Common Stock and the Company's shareholders will retain 2,608,000 shares of
Common Stock on an as converted basis. On May 26, 2005, CIC effected a charter
amendment which increased the amount of its total authorized shares of Common
Stock from 1,500 to 10,000,000 shares. As of May 20, 2005, the Company had
1,004,960 shares of Common Stock outstanding and 20,000 shares of Series A
Preferred Stock convertible into 4,240,000 shares of Common Stock upon the
completion of a business combination. The shares of CIC will be distributed to
the Company's Common Stockholders and Preferred Stockholders on a one-for-one
as converted basis.
Any decision to engage in this proposed merger or any other acquisition
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. Aside from the Target
merger transaction, we presently have no other agreements, understandings or
arrangements for any acquisitions or merger.
2
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.
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 March 31, 2005 as Compared with
December 31, 2004 (restated).
At March 31, 2005, we had a working capital deficit of $737,503, as compared
with a deficit of $757,047 at December 31, 2004. The Company had cash on hand of
$0 at March 31, 2005, which was the same at December 31, 2004. 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 March 31, 2005.
We have funded the business primarily through proceeds from the issuance of
preferred stock of $20,000 and officer loans of $24,244. 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 885,417 shares, at $.0001 per share, to
a group of five investors including an entity affiliated with the Company's
President on August 17, 2004.
3
The Company had $563,421 of accounts payable and accrued expenses at December
31, 2004 which decreased to $543,877 at March 31, 2005. These payables relate
mainly to the operations of CIC.
At March 31, 2005, the Company had a retained earnings (deficit) of $1,289,138
as compared with $1,264,438 at December 31, 2004.
For the three -months ended March 31, 2005 ("Fiscal 2005 Period") the Company
had net cash used in operating activities of $44,244, as compared with net cash
provided by operating activities of $15,394 for the three-months ended March 31,
2004 ("Fiscal 2004 Period"). The net cash provided by operations resulted a from
a net loss of $24,700 for the Fiscal 2005 Period and a decrease in accounts
payable and accrued expenses of $19,544. This is compared to the net loss of
$7,963 in the Fiscal 2004 Period and a decrease of accounts receivable of
$7,431.
The Company had net cash provided by financing activities of $44,244 during the
Fiscal 2005 Period, as compared with net cash used in financing activities of
$23,500 during the Fiscal 2004 Period.
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
Three-Months Ended March 31, 2005 as compared with the Three-Months Ended March
31, 2004.
Sales in the Fiscal 2005 Period for the three months ended was zero as compared
with $15,589 in the Fiscal 2004 Period. There were no sales in the Fiscal 2005
Period as a result of the Company entering into the Staffin Settlement Agreement
and the discontinuance of CLC's operations. There were no salaries for the
three-months ended March 31, 2005 and no salaries during the three months ended
in the Fiscal Period 2004 as a result of the sale of CLC.
Office and administrative expenses were $24,700 for the three months ended
Fiscal 2005 as compared with $7,626 for three months ended Fiscal Period 2004 as
result of the sale of the operating company during Fiscal 2005.
The Company had income from discontinued operations for the three months ended
of zero in Fiscal 2005 compared to income of discontinued operations of $10,242
in Fiscal 2004 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 March 31, 2005.
Item 2. Unregistered Sales of Equity Securities
On February 15, 2005, the Company issued 20,000 shares of Series A
Convertible Preferred Stock to five (5) persons including Allied International
Fund (4,448 shares), a greater than 5% shareholder, and Global Asset Management
LLC (4,255 shares), a greater than 5% shareholder wholly-owned by Robert Fallah,
the Company's CEO. Each share of Preferred Stock is convertible at the rate of
212 for one or an aggregate of 4,240,000 shares of common stock upon completion
of a business combination as defined under the Delaware General Corporation Law.
The shares were sold at $ 1.06 per share in accordance with the Company's
Certificate of Designation filed on February 4, 2005. There was no underwriter
or placement agent involved in the transaction. Exemption from registration is
claimed under Section 4(2) of the Securities Act of 1933.
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
None.
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: June 6, 2005 BY: /s/ Robert Fallah
-------------------------------------
Robert Fallah,
President and Chief Executive Officer
7