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: September 30, 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)
Command International Corporation
----------------------------------------------------
(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 1,004,960 shares of the
registrant's common stock, par value $.0001 per share, outstanding as of
November 10, 2005.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
- INDEX -
Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet as of September 30, 2005 (Unaudited) F-1
Condensed Statements of Operations for the
Nine and Three Months Ended September 30, 2005 and 2004 (Unaudited) F-2
Condensed Statements of Cash Flow for the
Nine Months Ended September 30, 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 2. Unregistered Sales of Equity Securities and Use of Proceeds 6
Item 3. Defaults Upon Senior Securities 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K. 6
Signature Page 8
Exhibit 31.1
Exhibit 32.1
i
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED BALANCE SHEET
SEPTEMER 30, 2005
(UNAUDITED)
ASSETS
2005
---------
Current Assets:
Cash and cash equivalents $ --
---------
TOTAL ASSETS $ --
=========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
LIABILITIES
Current Liabilities:
Taxes payable $ 6,367
Accounts payable and accrued expenses 4,000
---------
Total Current Liabilities 10,367
---------
STOCKHOLDERS' (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
1,004,960 shares issued and outstanding 100
Additional paid-in capital 139,349
Accumulated deficit (149,836)
---------
Total Stockholders' (Deficit) (10,367)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ --
=========
The accompanying notes are an integral part of
these condensed financial statements.
F-1
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMER 30, 2005 AND 2004
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Reclassified) (Reclassified)
2005 2004 2005 2004
----------- ----------- ----------- -----------
OPERATING REVENUES
Sales $ 3,472 $ -- $ -- $ --
OPERATING EXPENSES
Office and administrative 42,842 1,137 7,552 --
----------- ----------- ----------- -----------
Total Operating Expenses 42,842 1,137 7,552 --
----------- ----------- ----------- -----------
LOSS BEFORE OTHER (EXPENSE) (39,370) (1,137) (7,552)
----------- ----------- ----------- -----------
OTHER (EXPENSE)
Interest expense -- (138) -- --
----------- ----------- ----------- -----------
Total Other (Expense) -- (138) -- --
----------- ----------- ----------- -----------
NET LOSS FROM CONTINUING OPERATIONS (39,370) (1,275) (7,552) --
----------- ----------- ----------- -----------
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations (net of taxes) -- 8,164 -- (10,089)
Loss on disposal of subsidiary -- (3,378) -- --
----------- ----------- ----------- -----------
Total discontinued operations -- 4,786 -- (10,089)
----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (39,370) 3,511 (7,552) (10,089)
Provision for Income Taxes -- -- -- --
----------- ----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES $ (39,370) $ 3,511 $ (7,552) $ (10,089)
=========== =========== =========== ===========
BASIC AND DILUTED INCOME (LOSS) PER SHARE $ (0.04) $ 0.01 $ (0.01) $ (0.02)
=========== =========== =========== ===========
Basic and diluted from continuing operations $ (0.04) $ (0.00) $ (0.01) $ --
=========== =========== =========== ===========
Basic and diluted from discontinued operations $ -- $ 0.02 $ -- $ (0.02)
=========== =========== =========== ===========
Basic and diluted from disposal of subsidiary $ -- $ (0.01) $ -- $ --
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,004,960 264,931 1,004,960 552,611
=========== =========== =========== ===========
The accompanying notes are an integral part of
these condensed financial statements.
F-2
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMER 30, 2005 AND 2004
(UNAUDITED)
(Reclassified)
2005 2004
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES
Continuing Operations:
Net (loss) $(39,370) $ (1,275)
-------- --------
Adjustments to Reconcile Net (Loss) to Net Cash (
used in) operating activities:
Changes in assets and liabilities
Increase in taxes payable 6,367 --
(Decrease) in accounts payable and
and accrued expenses 13,003 --
-------- --------
Total adjustments 19,370 --
-------- --------
Net cash (used in) operating activities -
continuing operations (20,000) (1,275)
-------- --------
Discontinued Operations:
Income from discontinued operations -- 4,786
Net effect on cash flow from spin-off of subsidiary -- 19,489
Adjustments to Reconcile Net Cash provided by
discontinued operations -- --
-------- --------
Net cash provided by operating activities -
discontinued operations -- 24,275
-------- --------
Net cash provided by (used in) operating activities (20,000) 23,000
-------- --------
CASH FLOWS FROM FINANCING ACTIVITES
Repayment of line of credit, net -- (23,500)
Proceeds from preferred stock issuance 20,000 --
-------- --------
Net cash provided by (used in) financing activities 20,000 (23,500)
-------- --------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS -- (500)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD -- 500
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ -- $ --
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest expense $ -- $ --
======== ========
The accompanying notes are an integral part of
these condensed financial statements.
F-3
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
CONDENSED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMER 30, 2005 AND 2004
(UNAUDITED)
(Reclassified)
2005 2004
----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH
ACTIVITIES:
Net effect of stock acquisition between CIC and CIGI
Common stock $ -- $ 12,051
Deficit -- (22,598)
Accounts payable -- 10,547
----------- -----------
$ -- $ --
=========== ===========
Net effect of spin-off of CIC
Accumulated deficit $(1,153,972) $(1,067,382)
Cash -- (3,334)
Accounts receivable -- (9,633)
Accounts payable and accrued expenses 473,506 449,883
Taxes payable 193,626 143,626
Officers Loans 486,840 486,840
----------- -----------
$ -- $ --
=========== ===========
Forgiveness of Officer's Loan Payable to Additional Paid-in Capital $ 48,930 $ --
=========== ===========
Forgiveness of Accounts Payable to Additional Paid-in Capital $ 49,988 $ --
=========== ===========
The accompanying notes are an integral part of
these condensed financial statements.
F-4
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The condensed 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
financial statements and notes are presented as permitted on Form
10-QSB and do not contain information included in the Company's
annual 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
financial statements be read in conjunction with the December 31,
2004 audited financial statements of the Company and the
accompanying notes thereto. While management of the Company believes
the procedures followed in preparing these condensed 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 FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 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 FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 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.
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.
On May 19, 2005, CIGI merged with and into the Company with the
Company continuing as the surviving corporation and assuming all
CIGI's obligations. Also on May 19, 2005, the Company spun-off all
of the outstanding shares of CIC to the Company's current Common and
Preferred shareholders. As a result of these transactions, the
Company no longer has any subsidiaries.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
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.
F-7
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 nine months ended
September 30, 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.
F-8
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amount reported in the condensed 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.
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:
September 30, September 30,
2005 2004
----------- -----------
Net Income (Loss) $ (39,370) $ 3,511
----------- -----------
Weighted-average common shares
outstanding (Basic) 1,004,960 264,931
Weighted-average common stock equivalents:
Stock options -- --
Warrants -- --
----------- -----------
Weighted-average common shares
outstanding (Diluted) 1,004,960 264,931
=========== ===========
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 September 30, 2005, and no options or warrants have been granted
to date.
Weighted average for 2004 has been restated to account for the
surrender of stock and change in par value, which has been
retroactively recorded.
F-9
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising
Costs of advertising and promotion are expensed as incurred. There
were no advertising costs for the nine months ended September 30,
2005 and 2004.
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.
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.
F-10
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
On December 16, 2004, FASB issued Statement of Financial Accounting
Standards No. 153, "Exchanges of Non-monetary Assets, an amendment
of APB Opinion No. 29, Accounting for Non-monetary Transactions"
("SFAS 153"). This statement amends APB Opinion 29 to eliminate the
exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of
non-monetary assets that do not have commercial substance. Under
SFAS 153, if a non-monetary exchange of similar productive assets
meets a commercial-substance criterion and fair value is
determinable, the transaction must be accounted for at fair value
resulting in recognition of any gain or loss. SFAS 153 is effective
for non-monetary transactions in fiscal periods that begin after
June 15, 2005. The Company does not anticipate that the
implementation of this standard will have a material impact on its
financial position, results of operations or cash flows.
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.
F-11
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
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
balance due such officer at September 30, 2005 is $535,770. There is
no stated interest or terms of interest on this note.
As a result of the spin-off, $486,840 went to CIC. The balance, the
officer forgave $40,377 in June 2005 and $8,553 in September 2005,
respectively, with the corresponding credit to Additional Paid-in
Capital.
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
September 30, 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 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.
F-12
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 5- INCOME TAXES (Continued)
At September 30, 2005, deferred tax assets consist of the following:
Deferred tax asset $ 44,900
Less: valuation allowance (44,900)
---------
Net deferred tax asset $ -0-
=========
At September 30, 2005, the Company had deficits accumulated in the
approximate amount of $149,800, available to offset future taxable
income through 2019. 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.
NOTE 6- STOCKHOLDERS' (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.
On May 19, 2005, CIGI merged with and into the Company with the
Company continuing as the surviving corporation and assuming all
CIGI's obligations.
Also on May 19, 2005, the Company spun-off all of the outstanding
shares of CIC to the Company's current Common and Preferred
shareholders. As a result of these transactions, the Company no
longer has any subsidiaries.
In June 2005, certain legal services included in the Accounts
Payable were forgiven totaling $49,988 and was credited to
Additional Paid-in Capital.
F-13
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 6- STOCKHOLDERS' (DEFICIT) (Continued)
Common Stock (Continued)
In June 2005 and September 2005 respectively, Officer's Loans of
$40,377 and $8,553 were forgiven and were credited to Additional
Paid-in Capital.
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.
NOTE 7- GOING CONCERN
As shown in the accompanying condensed financial statements, the
Company incurred substantial net losses for the years ended December
31, 2004 and 2003 and for the nine months ended September 30, 2005.
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 financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
NOTE 8- DISPOSAL AND SPIN-OFF OF BUSINESSES
In May 2004, the Company sold CLC. In May 2005, the Company spun-off
all of the outstanding shares of CIC to its current Common and
Preferred shareholders. This resulted in the Company no longer
having any subsidiaries. The Company's financial statements have
been restated to reflect this sale and spin-off as
F-14
KEY COMMAND INTERNATIONAL CORP.
(FORMERLY COMMAND INTERNATIONAL CORPORATION)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
NOTE 8- DISPOSAL AND SPIN-OFF OF BUSINESSES (Continued)
discontinued operations, for all periods presented. Summarized
operating results of discontinued operations are as follows:
Sale of CLC:
September 30, September 30,
2005 2004
---------- --------
Revenues $ -- $ 25,093
========== ========
Income before income taxes $ -- $ 6,991
========== ========
Provision for taxes $ -- $ (670)
========== ========
Net income $ -- $ 6,321
========== ========
Net income per share $ -- $ 0.00
========== ========
Diluted income per share $ -- $ 0.00
========== ========
Spin-off of CIC:
September 30, September 30,
2005 2004
---------- --------
Revenues $ -- $ 15,589
========== ========
Income before income taxes $ -- $ 1,535)
========== ========
Provision for taxes $ -- $ 0
========== ========
Net (loss) $ -- $ (1,535)
========== ========
Net loss per share $ -- $ 0.00
========== ========
Diluted income per share $ -- $ 0.00
========== ========
NOTE 9- RECLASSIFICATION OF FINANCIAL STATEMENTS
The income from discontinued operations for the nine months ended
September 30, 2004 was reclassified to reflect the sale of CLC and
the spin-off of CIC in the condensed statements of operations in
accordance with the provisions of SFAS 144. The reclassification had
no effect on net income for the nine month period ended September
30, 2004.
F-15
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
1
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.
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. As a result of the Staffin
Settlement, we no longer have an operating company.
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. After these two
transactions were completed, the Company did not have any subsidiaries or any
operating company. These transactions were meant to be steps in a proposed
merger of the Company with a target company. This transaction never took place.
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 November 10, 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. 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,
2
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.
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 September 30, 2005 as Compared
with December 31, 2004.
At September 30, 2005, we had a working capital deficit of $10,367, as compared
with a deficit of $757,047 at December 31, 2004. The Company had cash on hand of
$0 at September 30, 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 September 30, 2005.
We have funded the business primarily through the issuance of preferred stock of
$20,000. 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 $4,000 at September 30, 2005. These payables relate
mainly to the operations of CIC.
At September 30, 2005, the Company had retained earnings (deficit) of $(149,836)
as compared with $1,264,438 at December 31, 2004.
For the nine months ended September 30, 2005 ("Fiscal 2005 Period") the Company
had net cash used in operating activities of $20,000, as compared with net cash
provided by operating activities of $23,000 for the nine months ended September
30, 2004 ("Fiscal 2004 Period"). The net cash provided by operations resulted
from net loss of $39,370 for the Fiscal 2005 Period and was offset by a decrease
in accounts payable and accrued expenses of $13,003. This is compared to the net
loss of $1,275 in the Fiscal 2004 Period.
The Company had net cash provided by financing activities of $20,000 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
Nine Months Ended September 30, 2005 as compared with the Nine Months Ended
September 30, 2004.
Sales in the Fiscal 2005 Period was $3,472 as compared with zero in the Fiscal
2004 Period. There were no salaries for the nine months ended September 30, 2005
and no salaries during the Fiscal 2004 Period as a result of the sale of CIC.
Office and administrative expenses were $42,842 for the Fiscal 2005 Period as
compared with $1,137 for the Fiscal 2004 Period as result of the sale of the
operating company during the Fiscal 2005 Period.
The Company had income from discontinued operations of zero in the Fiscal 2005
Period compared to income of discontinued operations of $8,164 in the Fiscal
2004 Period 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 September 30, 2005.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no issuances of restricted securities by the Company during
the three-month period ended September 30, 2005.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Schedule 14C Definitive Information Statement filed on June 14, 2005 was
mailed to shareholders on July 7, 2005.
Item 5. Other Information.
None.
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
6
(b) Reports on Form 8-K
None.
7
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: November 28, 2005 BY: /s/ Robert Fallah
---------------------------------------
Robert Fallah,
President, Chief Executive Officer and
Chief Financial Officer
8