UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 October 31, 2003
[ ] Transition Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
Commission File Number: 000-30071
KIK TECHNOLOGY INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
California 91-2021602
(State of incorporation) (IRS Employer ID Number)
590 Airport Road, Oceanside CA 92054
(Address of principal executive offices)
(760) 967-2777
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: December 11, 2003: 25,021,865
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
KIK TECHNOLOGY INTERNATIONAL, INC.
Form 10-QSB for the Quarter ended October 31, 2003
Table of Contents
Page
----
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 19
Item 3 Controls and Procedures 22
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 22
Item 2 Changes in Securities 22
Item 3 Defaults Upon Senior Securities 22
Item 4 Submission of Matters to a Vote of Security Holders 22
Item 5 Other Information 22
Item 6 Exhibits and Reports on Form 8-K 23
SIGNATURES 23
2
PART I
ITEM 1 - FINANCIAL STATEMENTS
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
October 31, 2003 and 2002
(UNAUDITED)
October 31, October 31,
2003 2002
---------- ----------
ASSETS
CURRENT ASSETS
Cash on hand and in bank $ 46,253 $ 74,870
Accounts receivable
Trade, net of allowance for doubtful accounts
of approximately $9,262 and $62,000, respectively 449,655 476,237
Other 7,009 --
Inventories 339,691 430,576
Prepaid expenses 2,316 9,766
---------- ----------
TOTAL CURRENT ASSETS 844,924 991,449
---------- ----------
PROPERTY AND EQUIPMENT - AT COST,
NET OF ACCUMULATED DEPRECIATION 157,982 139,858
---------- ----------
OTHER ASSETS
Note receivable from officer 53,400 53,400
Refundable deposits 4,800 --
Deferred debt issuance costs, net of accumulated
amortization of approximately $20,930 and $10,010, respectively 910 11,830
---------- ----------
TOTAL OTHER ASSETS 59,110 65,230
---------- ----------
TOTAL ASSETS $1,062,016 $1,196,537
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - CONTINUED
October 31, 2003 and 2002
(UNAUDITED)
October 31, October 31,
2003 2002
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to investors, net of accompanying warrant
discount of approximately $354 and $6,249, respectively $ 74,646 $ 68,751
Current maturity of capital lease payable 3,738 3,657
Accounts payable - trade 365,842 504,886
Other accrued expenses 3,719 47,396
Management fee payable to majority shareholder 90,000 --
Advances from majority shareholder 16,000 16,000
----------- -----------
TOTAL CURRENT LIABILITIES 553,945 640,690
----------- -----------
LONG-TERM DEBT
Capital lease payable 11,666 15,432
----------- -----------
TOTAL LIABILITIES 565,611 656,122
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - $0.001 par value
100,000,000 shares authorized
25,021,865 and 24,040,287 shares issued and outstanding 25,022 24,040
Additional paid-in capital 5,146,573 5,064,747
Accumulated deficit (4,675,190) (4,548,372)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 496,405 540,415
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,062,016 $ 1,196,537
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Nine and Three months ended October 31, 2003 and 2002
(UNAUDITED)
Nine months Nine months Three months Three months
ended ended ended ended
October 31, October 31, October 31, October 31,
2003 2002 2003 2002
----------- ----------- ----------- -----------
REVENUES - net of returns
and allowances $ 2,712,570 $ 2,490,800 $ 990,843 $ 862,039
COST OF SALES (2,336,076) (2,069,100) (874,381) (729,929)
----------- ----------- ----------- -----------
GROSS PROFIT 376,494 421,700 116,462 132,110
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, general and
administrative expenses 523,362 465,175 167,418 158,333
Compensation expense related
to common stock issuances
at less than "fair value" 945 -- -- --
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 524,307 465,175 167,418 158,333
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (147,813) (43,475) (50,956) (26,223)
OTHER INCOME
Interest and other
income (expense) - net (2,012) 7,779 997 5,490
----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (149,825) (35,696) (49,959) (20,733)
PROVISION FOR INCOME TAXES -- -- -- --
----------- ----------- ----------- -----------
NET LOSS (149,825) (35,696) (49,959) (20,733)
OTHER COMPREHENSIVE INCOME -- -- -- --
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS $ (149,825) $ (35,696) $ (49,959) $ (20,733)
=========== =========== =========== ===========
Net loss per weighted-average share
of common stock outstanding, calculated
on Net Loss - basic and fully diluted $ (0.01) nil nil nil
=========== =========== =========== ===========
Weighted-average number of shares
of common stock outstanding 24,779,879 24,004,305 25,021,865 24,028,950
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended October 31, 2003 and 2002
(UNAUDITED)
Nine months Nine months
ended ended
October 31, October 31,
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 70,066 $ 156,638
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (47,706) (22,159)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (47,706) (22,159)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on bank line of credit -- (99,981)
Payments on long-term capital lease (2,799) (1,992)
Cash advanced by majority shareholder -- 16,000
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (2,799) (85,973)
--------- ---------
INCREASE (DECREASE) IN CASH 19,561 59,191
Cash at beginning of period 26,692 15,679
--------- ---------
CASH AT END OF PERIOD $ 46,253 $ 74,870
========= =========
SUPPLEMENTAL DISCLOSURE OF
INTEREST AND INCOME TAXES PAID
Interest paid for the period $ 982 $ 1,172
========= =========
Income taxes paid for the period $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Acquisition of equipment on a long-term capital lease $ -- $ 21,080
========= =========
Trade accounts payable settled with issuance of common stock $ 73,401 $ --
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
6
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
KIK Technology International, Inc. (KTII) was incorporated on February 1, 2000
under the laws of the State of California as Russian-Imports.com.
Russian-Imports.com was initially founded to develop an e-commerce internet
website which would sell handmade lacquer boxes, Matroshka dolls and crystal
imported from Russia. This venture was unsuccessful.
On September 4, 2001, KTII (formerly Russian-Imports.com) issued 16,700,000
shares of restricted, unregistered common stock to KIK Tire Technologies, Inc.
(a publicly-owned Canadian corporation) (KTTI) for 100.0% of the issued and
outstanding stock of KIK Technology, Inc. (a wholly-owned subsidiary of KTTI).
By virtue of this transaction, KIK Technology, Inc. became a wholly-owned
subsidiary of KTII and KTTI became an approximate 73.6% shareholder in KTII.
Concurrent with this transaction, Russian-Imports.com changed it's corporate
name to KIK Technologies International, Inc.
At the transaction date, KTII was a "shell company" as the Company had no assets
or liabilities, had generated no revenues since inception and had incurred total
expenses of approximately $940,000 since its inception on February 1, 2000
through the September 4, 2001 transaction.
KIK Technology, Inc (KIK) was incorporated in June 1988 under the laws of the
State of California. KIK manufactures and markets an extensive and high quality
line of off-highway micro-cellular polyurethane tires for the healthcare, light
industrial, lawn and garden and recreational industries. KIK operates from a
sole manufacturing plant and marketing offices located in Oceanside, CA.
The Company's principal raw materials are purchased from a sole supplier who is
also a major customer for the Company's products. In the event of any disruption
in the availability of raw materials or a market for the Company's products
purchased by this key supplier, the Company may experience a negative economic
impact. The Company believes that suppliers of raw materials are available at
comparable prices and management is seeking other avenues of distribution of the
Company's products to consumers. Management is of the opinion that no
interruption of either raw materials or product demand will occur.
NOTE B - PREPARATION OF FINANCIAL STATEMENTS
The acquisition of KIK Technology, Inc. (KTI), on September 4, 2001, by KTII
effected a change in control of KTII and was accounted for as a "reverse
acquisition" whereby KTI is the accounting acquiror for financial statement
purposes. Accordingly, the historical consolidated financial statements of the
Company are those of KTI from it's inception and those of the consolidated
entity subsequent to the September 4, 2001 transaction date.
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
adopted a year-end of January 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
7
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - PREPARATION OF FINANCIAL STATEMENTS - CONTINUED
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB/A for the year ended
January 31, 2003. The information presented within these interim financial
statements may not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending January 31, 2004.
For segment reporting purposes, the Company operated in only one industry
segment during the periods represented in the accompanying financial statements
and makes all operating decisions and allocates resources based on the best
benefit to the Company as a whole.
These financial statements reflect the books and records of KIK Technology
International, Inc. (formerly Russian-Imports.com) (KTII) and KIK Technology,
Inc. (KTI) as of and for the nine and three months ended October 31, 2003 and
2002, respectively. All significant intercompany transactions have been
eliminated in consolidation. The consolidated entities are referred to as
Company.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. CASH AND CASH EQUIVALENTS
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
8
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
2. ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers which are located throughout the United
States and are principally concentrated in the midwest region of the
country. Depending upon management's assessment of creditworthiness and
order size, certain shipments are made on "COD" terms using common
carriers. Because of the credit risk involved, management has provided an
allowance for doubtful accounts which reflects its opinion of amounts which
will eventually become uncollectible. In the event of complete
non-performance, the maximum exposure to the Company is the recorded amount
of trade accounts receivable shown on the balance sheet at the date of
non-performance.
The Company recognizes revenue from the sale of tires and accessories upon
shipment to, or receipt by customers, depending upon contractual terms and
when there is no significant uncertainty regarding the consideration to be
received and the associated costs to be incurred. Additionally, the Company
recognizes reductions of recorded revenue for product returns from
unsatisfied customers and other billing adjustments or corrections, at the
point that the returned products are received by the Company or upon the
completion of negotiations between the Company and it's customer.
3. INVENTORY
Inventory consists of raw materials, principally chemical feedstocks, and
finished goods, principally tires and accessories manufactured by the
Company and other minor miscellaneous items purchased from third-party
vendors for resale as a component of the Company's products.
Inventory is valued at the lower of cost or market value, using principally
the average cost method.
4. PROPERTY AND EQUIPMENT
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives, generally two (2) to seven (7)
years, of the individual assets using the straight-line method. Gains and
losses from the disposition of property and equipment are included in
operations as incurred.
In accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
Company follows the policy of evaluating all property and equipment as of
the end of each reporting quarter. For each of the quarters ended October
31, 2003 and 2002, no charges to operations were made for impairments in
the future benefit of property and equipment.
5. DEFERRED DEBT ISSUE COSTS
Deferred debt issue costs represent monies paid investment bankers and
legal counsel in connection with the $75,000 in convertible notes payable.
These costs are amortized as a component of operations over the life of the
underlying debt instrument using the straight line method.
9
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
6. INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. At October 31, 2003 and 2002, the deferred tax asset and deferred
tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
As of October 31, 2003 and 2002, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved.
7. ADVERTISING COSTS
The Company does not conduct any direct response advertising activities.
For non-direct response advertising, the Company charges the costs of these
efforts to operations at the first time the related advertising is
published.
8. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of October 31, 2003 and 2002, the
Company's issued and outstanding, warrants, options and convertible debt
are considered antidilutive due to the Company's net operating loss
position.
9. EMPLOYEE STOCK OPTIONS
For periods prior to November 1, 2002, the Company has chosen to account
for employee stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, employee compensation cost for stock options and warrants is
measured as the excess, if any, of the market price of the Company's stock
at the date of the grant over the amount an employee must pay to acquire
the stock. This treatment was allowed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation"
(SFAS 123).
In December 2002, FASB issued Statement of Financial Accounting Standards
No. 148 "Accounting for Stock-Based Compensation - Transition and
Disclosure" (SFAS 148). This statement amends SFAS 123 and provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. This
statement also amends the disclosure requirements of SFAS 123 to require
more prominent and frequent disclosures in financial statements about the
effects of stock-based compensation. The transition guidance and annual
disclosure provisions of SFAS 148 are effective for financial statements
issued for fiscal years ending after December 15, 2002. Effective November
1, 2003, the first day of the reporting quarter including the effective
date of SFAS 148, the Company's Board of Directors, in conjunction with
public opinion and SFAS 148, elected to expense the imputed compensation
cost related to any stock options granted during Fiscal 2003 and for future
periods.
10
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
9. EMPLOYEE STOCK OPTIONS
The Company did not issue any stock options during Fiscal 2003, nor
subsequent thereto, and the adoption of SFAS 148 did not have a material
impact on our results of operations or financial condition.
10. NEW AND PENDING ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (" SFAS") No. 141 "Business
Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". SFAS
No. 141, among other things, eliminates the pooling of interests method of
accounting for business acquisitions entered into after June 30, 2001. SFAS
No. 142 requires companies to use a fair-value approach to determine
whether there is impairment of existing and future goodwill. In August
2001, FASB issued SFAS No. 144 "Accounting for Impairment of Long-Lived
Assets". SFAS No. 144 supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" and APB No. 30 "Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" and combines the two accounting models into a single model
based on the framework established in SFAS No. 121. We were required to
implement these pronouncements for the fiscal year beginning February 1,
2002. The implementation of these pronouncements did not have a material
impact on our results of operations or financial condition.
In June 2001, FASB also issued SFAS No. 143 "Accounting for Asset
Retirement Obligations" that addresses asset retirement obligations that
result from the acquisition, construction or normal operation of long-lived
assets. It requires companies to recognize asset retirement obligations as
a liability when the liability is incurred at its fair value. There was no
impact on our results of operations or financial condition as a result of
the adoption of the standard.
In April 2002, FASB issued SFAS No. 145 "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 13 is amended to eliminate any inconsistency between
the required accounting for sale leaseback transactions and the required
accounting for certain lease modifications that have economic effects that
are similar to leaseback transactions. This statement also amends other
existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under
changed conditions. We were required to adopt this standard in our fiscal
year beginning February 1, 2003. There was no material impact on our
results of operations or financial condition as a result of the adoption of
this standard.
In June 2002, FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities". This statement requires recording costs
associated with exit or disposal activities at their fair value when a
liability has been incurred. Under previous guidance, certain exit costs
were accrued upon management's commitment to an exit plan, which is
generally before an actual liability has been incurred. The provisions of
this statement are effective for exit or disposal activities that are
initiated after December 31, 2002. This standard will not have a material
impact on our results of operations or financial condition.
11
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
10. NEW AND PENDING ACCOUNTING PRONOUNCEMENTS - continued
In November 2002, the FASB issued Interpretation No. 45 ("FIN45")
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others". This
interpretation elaborates on the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
certain guarantees that is has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the guarantee. The
disclosure requirements and initial measurement requirements of FIN45 are
effective prospectively for guarantees issued or modified after December
31, 2002. We are not a party to any agreement in which we are a guarantor
of indebtedness of others. Accordingly, the pronouncement is currently not
applicable to us.
NOTE D - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
NOTE E - CONCENTRATIONS OF CREDIT RISK
The Company and its KIK subsidiary maintain their respective cash accounts in
financial institutions subject to insurance coverage issued by the Federal
Deposit Insurance Corporation (FDIC). Under FDIC rules, the Company and its
subsidiaries are entitled to aggregate coverage of $100,000 per account type per
separate legal entity per financial institution. During the nine months ended
October 31, 2003 and 2002 and for each of the years ended January 31, 2003 and
2002, respectively, the various operating companies had deposits in a financial
institution with credit risk exposures in excess of statutory FDIC coverage. The
Company has incurred no losses as a result of any of these unsecured situations.
NOTE F - INVENTORIES
Inventories consist of the following at October 31, 2003 and 2002:
October 31, October 31,
2003 2002
-------- --------
Raw materials $111,415 $230,971
Finished goods 228,276 199,605
-------- --------
Total $339,691 $430,576
======== ========
12
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - NOTE RECEIVABLE FROM OFFICER
In May 2001, the Company advanced $53,400 to its President to hold in trust as a
contingency fund for the sole use of the Company in the event of a unanticipated
cash shortfall. The advance bears interest at 4.0% annually and is unsecured.
The original documentation required repayment of the advance and accrued, but
unpaid, interest in May 2003. As of October 31, 2003, the Company's President
continues to maintain these funds as trustee on behalf of the Company.
NOTE H - NOTES PAYABLE TO INVESTORS
Pursuant to the terms of a private placement agreement, the Company attempted to
raise up to $600,000 through the placement of two-year senior notes bearing
interest at 10% payable quarterly. This Private Placement Memorandum was
terminated by the Company during the fiscal quarter ended October 31, 2002.
In November 2001, the Company entered into an agreement with an investment
banker whereby the investment banker would act as exclusive dealer-manager in
this private placement of securities to be issued by the Company pursuant to
Regulation D of the Securities Act of 1933, as amended. As compensation, the
investment banker was paid $15,000 for professional fees and will receive a
commission equal to 10% of the gross proceeds, an expense allowance equal to 4%
of the gross proceeds and , for every $500,000 raised, 150,000 shares of the
Company's restricted, unregistered common stock. Such shares will be issued upon
completion of the private placement. In addition, the investment banker will
have the option to nominate one person to the Company's Board of Directors if at
least $2,000,000 is raised. As of the termination of this Private Placement
Memorandum, only $75,000 had been successfully raised and the Company issued
22,500 shares of restricted, unregistered common stock in payment of
commissions.
Note holders can elect, with the consent of the Company, to accept Company
common stock in lieu of cash interest payments. Such payments in stock would be
calculated at 50% of the daily average of the market price of the common stock
for the 30-calendar days preceding the interest due date. After six months from
the date of issue of the notes, the Company can convert the notes to common
stock if the daily average market price of the Company's common stock for any
30-calendar days after the initial six-month period equals or exceeds $1.00. The
conversion of the notes to common stock would also be calculated at 50% of the
daily average market price for the 30 days prior to the Company giving notice of
its plan to convert.
In conjunction with the offering of the notes, each note holder was given one
warrant for each $1.00 invested. Each warrant allows the holder to purchase one
share of the Company's common stock at an initial exercise price of $0.60 per
share, and is exercisable for two years. In March 2002, the Company repriced the
outstanding warrants to an exercise price of $0.40 per share.
Pursuant to the private placement, the Company sold a $50,000 convertible note
on November 12, 2001 and a $25,000 convertible note on December 26, 2001 to two
unrelated investors. Warrants to purchase a combined total of 75,000 shares of
the Company's common stock at $0.60 per share were also issued to the investors.
The warrants were valued at $11,789 using the Black-Scholes option-pricing
model, and therefore $11,789 of the total debt proceeds of $75,000 was allocated
to the warrants, resulting in a discount on the notes, which will be amortized
to interest expense over the term of the underlying debt. During the years ended
January 31, 2003 and 2002, approximately $5,900 and $1,100 of the discount was
amortized to interest expense. The weighted average assumptions utilized to
value the warrants using the Black-Scholes option-pricing model were as follows:
13
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - NOTES PAYABLE TO INVESTORS - CONTINUED
Expected life of the option: The initial life of the corresponding
option, generally two (2) years
Expected volatility in the
Company's stock price: 150.0%, which was based on fluctuations of
the Company's stock price over the past
Fiscal year.
Expected dividends: Zero (0.00) based on past performance
Anticipated risk free
Interest rate: Estimated to be 2.80%.
The convertible notes contained a beneficial conversion feature valued at a
combined total of approximately $63,000. However, because the conversion
features are fully contingent upon the occurrence of certain future events, the
Company did not record a discount resulting from the beneficial conversion
feature.
The aggregate maturities of the notes are as follows:
Year ending January 31, 2004 $ 75,000
Less unamortized discount (354)
--------
Balance at October 31, 2003 $ 74,646
========
NOTE I - CAPITAL LEASE PAYABLE
Capital lease payable is as follows:
October 31, October 31,
2003 2002
-------- --------
$21,080 capital lease payable to a finance corporation
Interest at 8.60%. Payable in monthly installments
of approximately $432, including accrued interest
Final maturity due in April 2007. Collateralized by
equipment $ 15,404 $ 19,089
Less current maturities (3,738) (3,657)
-------- --------
Long-term portion $ 11,666 $ 15,432
======== ========
Future maturities of long-term capital leases payable, as of the Company's last
year-end, January 31, 2003, are as follows:
Year ending
January 31, Amount
----------- ------
2004 $ 3,738
2005 4,092
2006 4,468
2007 4,872
2008 125
-------
Total $17,295
=======
14
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - INCOME TAXES
The components of income tax (benefit) expense for the nine months ended October
31, 2003 and 2002, respectively, are as follows:
October 31, October 31,
2003 2002
------- -------
Federal:
Current $ -- $ --
Deferred -- --
------- -------
-- --
------- -------
State:
Current -- --
Deferred -- --
------- -------
-- --
------- -------
Total $ -- $ --
======= =======
The Company has a net operating loss carryforward of approximately $4,200,000 to
offset future taxable income. Subject to current regulations, this carryforward
will begin to expire in 2005. The amount and availability of the net operating
loss carryforwards may be subject to limitations set forth by the Internal
Revenue Code. Factors such as the number of shares ultimately issued within a
three year look-back period; whether there is a deemed more than 50 percent
change in control; the applicable long-term tax exempt bond rate; continuity of
historical business; and subsequent income of the Company all enter into the
annual computation of allowable annual utilization of the carryforwards.
The Company's income tax expense for the nine months ended October 31, 2003 and
2002, respectively, are as follows:
October 31, October 31,
2003 2002
-------- --------
Statutory rate applied to loss before income taxes $(51,000) $(12,100)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for deferred tax asset 51,000 12,100
-------- --------
Income tax expense $ -- $ --
======== ========
Temporary differences, consisting primarily of net operating loss carryforwards,
statutory deferrals of expenses for organizational costs and accrued, but
unpaid, accruals for officer compensation and statutory differences in the
depreciable lives for property and equipment, between the financial statement
carrying amounts and tax bases of assets and liabilities give rise to deferred
tax assets and liabilities as of January 31, 2003 and 2002, respectively:
January 31, January 31,
2003 2002
----------- -----------
Deferred tax assets
Net operating loss carryforwards $ 1,700,000 $ 1,700,000
Less valuation allowance (1,700,000) (1,700,000)
----------- -----------
Net Deferred Tax Asset $ -- $ --
=========== ===========
15
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - COMMON STOCK TRANSACTIONS
In October 2001, the Company issued 1,200,000 shares of its restricted common
stock to consultants for services provided, which were valued at $84,000, or
$0.07 per share, which represents management's estimate of the fair value of the
common stock at the date of issuance. This amount is included as general and
administrative expense in the accompanying statement of operations for the year
ended January 31, 2002.
In January 2002, the Company sold 85,000 shares of its restricted common stock
to a private investor for $8,500, or $0.10 per share.
Effective at the end of each Fiscal quarter during the year ended January 31,
2003, the Company and the holders of the two convertible notes agreed for the
payment of accrued interest in restricted, unregistered common stock. The
Company issued an aggregate 101,964 shares of restricted, unregistered common
stock in payment of accrued interest. These transactions were valued at an
aggregate approximately $6,978. The convertible note terms allow for the payment
of accrued interest with restricted, unregistered common stock using an average
value of 50% of the daily average of the market price of the common stock for
the 30 calendar days preceding the interest due date. In two instances, the
closing stock price, as discounted was at or in excess of the closing price on
the settlement date. In two instances, the closing stock price on the settlement
date was in excess of the prescribed calculation. The differential between the
discounted "fair value" and the settlement price resulted in a charge to
operations of approximately $906 for compensation expense related to common
stock issuances at less than "fair value".
Effective on February 1, 2003, the Company issued an aggregate 114,771 shares of
restricted, unregistered common stock as payment for accrued interest as of
January 31, 2003 on convertible notes payable.
In February 2003, the Company issued 150,000 restricted, unregistered shares of
common stock in payment of a contract for marketing services. This transaction
was valued at approximately $3,000.
In April 2003, the Company issued 22,500 restricted, unregistered shares of
common stock in settlement of a January 31, 2003 trade account payable in the
amount of approximately $552.
Effective on May 1, 2003, the Company issued an aggregate 92,216 shares of
restricted, unregistered common stock as payment for accrued interest as of
April 30, 2003 on convertible notes payable.
In May 2003, the Company issued 575,664 restricted, unregistered shares of
common stock in payment of trade accounts payable to the Company's primary legal
counsel in the amount of approximately $72,849.
NOTE L - STOCK WARRANTS
At October 31, 2003, all 75,000 warrants sold in conjunction with the
convertible notes private placement were outstanding. Subsequent to October 31,
2003, 50,000 of the then outstanding warrants expired in November 2003 and the
remaining 25,000 warrants will expire in December 2003. In March 2002, the
Company reduced the exercise price on the warrants being offered in the private
placement from $0.60 to $0.40 per share. This new exercise price was
retroactively applied to the note holders who invested $75,000 during the year
ended January 31, 2002. The Company has determined that there is no material
change in the value of the warrants after recalculating the value by using the
Black-Scholes option-pricing model with the new exercise price of $0.40 per
share.
In conjunction with the reverse acquisition, which was concluded in September
2001, The Company granted 2,300,000 warrants to certain shareholders of KTTI.
These warrants have an exercise price of approximately $0.05 per share and
expire in April 2004.
16
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - STOCK WARRANTS - CONTINUED
The following table lists the issued and outstanding stock warrants as of
October 31, 2003 and 2002, respectively:
Warrants
Warrants outstanding at
originally October 31,
issued 2003 Exercise price
--------- --------- --------------
Balance at February 1, 2002 2,375,000 2,375,000 $0.05 - $0.40
Granted -- --
Exercised -- --
Forfeited/Expired -- --
--------- ---------
Balance at October 31, 2002 2,375,000 2,375,000 $0.05 - $0.40
========= =========
Balance at February 1, 2003 2,375,000 2,375,000 $0.05 - $0.40
Granted -- --
Exercised -- --
Forfeited/Expired -- --
--------- ---------
Balance at October 31, 2003 2,375,000 2,375,000 $0.05 - $0.40
========= =========
Warrants exercisable at October 31, 2003 2,375,000
=========
Weighted-average exercise price per warrant $ 0.06
=========
NOTE M - RELATED PARTY TRANSACTIONS
During the year ended January 31, 2002, the Company paid $14,000 to KTTI, its
majority shareholder, for administrative and accounting services rendered.
During the nine months ended October 31, 2003, the Company accrued $90,000 in
management fees payable to KTTI, its majority shareholder for administrative and
accounting services rendered.
(Remainder of this page left blank intentionally)
17
KIK TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - COMMITMENTS AND CONTINGENCIES
LEASED FACILITIES
The Company leases its facilities under a non-cancellable operating lease, which
expires in May 2005. The lease requires monthly payments as follows: $8,307 for
the first 12 months; $8,639 for the next 12 months and $8,984 for the next 12
months. Rent expense incurred under this lease was approximately $97,800 and
$93,000 for the years ended January 31, 2003 and 2002, respectively. Future
amounts due under this agreement are as follows:
Year ending
January 31, Amount
2004 $102,340
2005 106,428
2006 35,936
--------
Total $244,704
========
EMPLOYMENT CONTRACT
In May 2000, KIK entered into an employment agreement with William M.
Knooihuizen, the Company's current President and Director. The term of the
agreement is for a period of five (5) years. For such services, KIK agreed to
pay Mr. Knooihuizen an annual salary in the amount of $143,000, to be paid in
weekly installments.
NOTE O - SIGNIFICANT CUSTOMERS
During the year ended January 31, 2003, the Company had two separate customers
responsible for an aggregate of approximately 80.3% (68.2% and 12.1%,
respectively) of total sales. The largest customer is also a significant vendor
of raw materials. The largest key customer was responsible for approximately
57.2% of accounts receivable and 0.0% of accounts payable at January 31, 2003.
The second key customer was responsible for approximately 9.02% of accounts
receivable and 0.0% of accounts payable at January 31, 2003. There were no other
customers responsible for more than 10.0% of total net sales during Fiscal 2003.
During the year ended January 31, 2002, the Company had a single customer, which
is also a significant vendor of raw materials, who was responsible for an
aggregate of approximately 63% of total sales and approximately 58% of accounts
receivable and 55% of accounts payable at January 31, 2002. There were no other
customers responsible for more than 10.0% of total net sales during Fiscal 2002.
These trends continued through the quarters ended October 31, 2003 and 2002,
respectively.
18
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(1) CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES OR PLAN OF OPERATION
OVERVIEW
During the nine and three months ended October 31, 2003, respectively, the
Company achieved revenues of approximately $2,713,000 and $991,000 as compared
to approximately $2,491,000 and $862,000 for the first nine and three months of
Fiscal 2002, respectively. These revenues were derived primarily from the sale
of tire products. Net loss for the nine and three months ended October 31, 2003
was approximately $(150,000) and $(50,000), respectively as compared to a net
income (loss) of approximately $(36,000) and $(21,000) for the nine and three
months ended October 31, 2002. The net loss per share of common stock for each
of the nine and three month periods ended October 31, 2003 and 2002,
respectively, was approximately $(0.01) and $0.00, respectively.
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes.
NINE MONTHS ENDED OCTOBER 31, 2003 AS COMPARED TO THE NINE MONTHS ENDED OCTOBER
31, 2002
The Company posted net sales of approximately $2,713,000 for the nine months
ended October 31, 2003 as compared to net sales of approximately $2,491,000 for
the nine months ended October 31, 2002. The Company experienced an increase in
volume during the nine month period from May 1, 2003 through October 31, 2003 as
compared to the same period in the previous year. The Company continues to
experience some seasonality in product demand and overall economic and
competitive pressures from competitors with similar product lines.
The Company's cost of sales increased by approximately $267,000 to approximately
$2,336,000 for the nine months ended October 31, 2003 as compared to
approximately $2,069,000 for the nine months ended October 31, 2002 as a result
of increased sales volume. Virtually all of the increase was directly
attributable to raw material purchases as the Company maintains a position of
excess manufacturing capacity and relatively stable other costs associated with
19
production. The Company experienced a gross profit margin of approximately
13.88% (approximately $376,000) for the first nine months of Fiscal 2004 as
compared to approximately 16.93% (approximately $422,000) for the first nine
months of Fiscal 2003.
General and administrative expenses increased by approximately $58,000 to
approximately $523,000 for the nine months ended October 31, 2003 from
approximately $465,000 for the nine months ended October 31, 2002. The largest
contributor to this increase is a $10,000 per month administrative fee charge
which is payable back to the Company's majority shareholder, KIK Tire
Technologies Inc. (a publicly-owned Canadian corporation). Through October 31,
2003, $90,000 has been accrued as a payable to the Company's majority
shareholder to be paid at a future date when cash flows will permit.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of approximately $46,000, $27,000 and
$75,000 at October 31, 2003, January 31, 2003 and October 31, 2002,
respectively. The Company maintained business liquidity and capital resources
during the year adequate to fund all capital and operating expense requirements.
Operations have historically been funded from internally generated funds, line
of credit borrowings, and capital raised via a private placement of securities
in previous years.
For the nine months ended October 31, 2003 and 2002, net cash provided by (used
in) operating activities was approximately $70,000 and $157,000, respectively.
Net cash provided by operating activities consists of cash received from sales
of products to customers, less purchases of raw materials, payment of payroll
and payment of other general operating expenses, including interest.
Cash used in investing activities was approximately $(48,000) and $(22,000) for
each of the nine months ended October 31, 2003 and 2002, respectively. The
Fiscal 2004 and 2003 cash utilization was due solely to the acquisition of
equipment.
The Company experienced cash used in financing activities of approximately
$(2,800) in the first nine months of Fiscal 2004 compared to $(86,000) for the
first nine months of Fiscal 2003. Of the cash used during the nine months ended
October 31, 2002, approximately $(100,000) was used in the repayment and
cancellation of the Company's bank line of credit and was offset by
approximately $16,000 advanced from the Company's majority shareholder.
The Company believes that sufficient cash will be generated internally to fund
its operations for the next twelve months.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 2 to the Consolidated Financial Statements includes a
summary of the significant accounting policies and methods used in the
preparation of the Company's Consolidated Financial Statements. The following is
a brief discussion of the more significant accounting policies and methods used
by the Company.
REVENUE RECOGNITION
Our revenue recognition policy is significant because our revenue is a key
component of our results of operations. The Company recognizes revenue from
the sale of tires and accessories. Revenue is recognized upon shipment to,
or receipt by customers, depending upon contractual terms and when there is
no significant uncertainty regarding the consideration to be received and
the associated costs to be incurred. Additionally, we provide a reduction
of recorded revenue for billing adjustments and billing corrections.
20
ACCOUNTS RECEIVABLE
The Company continuously monitors collections and payments from its
customers and maintains an allowance for estimated uncollectible accounts
based upon historical experience and specific customer collections issues
that have been identified. Depending upon management's assessment of a
customer's creditworthiness and order size, certain shipments are made on
"COD" terms using common carriers.
Since accounts receivable are concentrated in a relatively few customers, a
significant change in the liquidity or financial position of any one of
these customers could have a material adverse impact on the collectibility
of the Company's accounts receivable and future operating results. In the
event of complete non-performance by any customer or customers, the maximum
exposure to the Company would be the recorded amount of trade accounts
receivable shown on the balance sheet at the date of non-performance.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
principally on the average cost method. The Company regularly reviews
inventory quantities on hand and records, when necessary, a provision for
excess and obsolete inventory based primarily on the Company's estimated
forecast of product demand and production requirements for the next twelve
months. Demand for the Company's products can fluctuate significantly. A
significant increase in the demand for the Company's products could result
in a short-term increase in the cost of inventory purchases while a
significant decrease in demand could result in an increase in the amount of
excess inventory quantities on hand. In addition, the Company's industry is
characterized by rapid technological change, frequent new product
development and rapid product obsolescence that could result in an increase
in the amount of obsolete inventory quantities on hand. Additionally, the
Company's estimate of future product demand may prove to be inaccurate, in
which case the Company may have understated or overstated the provision
required for excess and obsolete inventory. Therefore, although the Company
makes every effort to ensure the accuracy of its forecasts of future
product demand, any significant unanticipated changes in demand or
technological developments could have a significant impact on the Company's
inventory value and reported operating results.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation, defines a fair-value based method of accounting for
stock-based employee compensation plans and transactions in which an entity
issues its equity instruments to acquire goods and services from
non-employees, and encourages but does not require companies to record
compensation cost for stock-based employee compensation plans at fair
value.
For periods prior to November 1, 2002, the Company has chosen to account
for employee stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, employee compensation cost for stock options and warrants is
measured as the excess, if any, of the market price of the Company's stock
at the date of the grant over the amount an employee must pay to acquire
the stock. This treatment was allowed under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation"
(SFAS 123).
In December 2002, FASB issued Statement of Financial Accounting Standards
No. 148 "Accounting for Stock-Based Compensation - Transition and
Disclosure" (SFAS 148). This statement amends SFAS 123 and provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. This
statement also amends the disclosure requirements of SFAS 123 to require
more prominent and frequent disclosures in financial statements about the
effects of stock-based compensation. The transition guidance and annual
disclosure provisions of SFAS 148 are effective for financial statements
issued for fiscal years ending after December 15, 2002. Effective November
21
1, 2003, the first day of the reporting quarter including the effective
date of SFAS 148, the Company's Board of Directors, in conjunction with
public opinion and SFAS 148, elected to expense the imputed compensation
cost related to any stock options granted during Fiscal 2003 and for future
periods. The Company did not issue any stock options during Fiscal 2003 and
the adoption of SFAS 148 did not have a material impact on our results of
operations or financial condition.
ITEM 3 - CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive Officer along with the Company's Chief Financial Officer.
Based upon that evaluation, the Company's President and Chief Executive Officer
along with the Company's Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective. There have been no significant
changes in the Company's internal controls or in other factors, which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS ON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -
Chief Executive Officer
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -
Chief Financial Officer
32.1 Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Reports on Form 8-K
None
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KIK TECHNOLOGY INTERNATIONAL, INC.
Dated: December 11, 2003 /s/ Kuldip C. Baid
----------------- --------------------------
Kuldip C. Baid
Chief Financial Officer
and Director
23