UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
______________________________________________________________________________
(Mark one)
[XX] 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
EXCHANGE ACT OF 1934
For the transition period from ______ to _________
______________________________________________________________________________
Commission File Number: 0-26059
COMET TECHNOLOGIES, INC.
_______________________________________________________________
(Exact Name of small business issuer as specified in its charter)
Nevada 87-0430322
______________________ _______________________
(State of Incorporation) (IRS Employer ID Number)
8 East Broadway #428, Salt Lake City, Utah 84111
________________________________________________
(Address of principal executive offices)
(801) 532-7851
_________________________
(Issuer's telephone number)
10 West 100 South, Suite 610, Salt Lake City, Utah 84101
___________________________________________________________________
(Former name, address and 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 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 [XX] NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YES [XX] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity: As of the date of this report, there were 4,058,200 shares of
common stock outstanding.
Transitional Small Business Format: Yes [ ] No [XX]
COMET TECHNOLOGIES, INC.
Form 10-QSB for the quarter ended September 30, 2005
Table of Contents
Part I - Financial Information Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or
Plan of Operation 11
Item 3. Controls and Procedures 12
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote
of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
PART I-FINANCIAL INFORMATION
Item 1 - Financial Statements
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 2005 and December 31, 2004
3
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
September 30, December 31,
2005 2004
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 100,064 $ 90,864
------------- -------------
Total Current Assets 100,064 90,864
------------- -------------
TOTAL ASSETS $ 100,064 $ 90,864
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,466 $ 3,065
Payable - related parties 6,000 57,795
------------- -------------
Total Current Liabilities 7,466 60,860
------------- -------------
TOTAL LIABILITIES 7,466 60,860
------------- -------------
STOCKHOLDERS' EQUITY
Common stock: 20,000,000 shares authorized
of $0.001 par value, 4,058,200 and 3,598,000
shares issued and outstanding, respectively 4,058 3,598
Additional paid-in capital 332,896 238,561
Deficit accumulated during the development stage (244,356) (212,155)
------------- -------------
Total Stockholders' Equity 92,598 30,004
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 100,064 $ 90,864
============= =============
The accompanying notes are an integral part of these financial statements
4
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
For the For the Inception on
Three Months Ended Nine Months Ended February 7,
September 30, September 30, 1986 Through
--------------------------- -------------------------- September 30,
2005 2004 2005 2004 2005
------------- ------------- ------------- ------------- --------------
REVENUES $ - $ - $ - $ - $ -
EXPENSES
General and administrative 9,005 17,518 32,467 84,429 393,084
------------- ------------- ------------- ------------- --------------
Total Expenses 9,005 17,518 32,467 84,429 393,084
------------- ------------- ------------- ------------- --------------
LOSS FROM OPERATIONS (9,005) (17,518) (32,467) (84,429) (393,084)
------------- ------------- ------------- ------------- --------------
OTHER INCOME (LOSS)
Dividend income - - - - 5,493
Interest income 186 77 266 297 147,727
Reimbursement for Fees - - - 1,820 2,158
Unrealized loss from
marketable securities - - - - (6,650)
------------- ------------- ------------- ------------- --------------
Total Other Income (Loss) 186 77 266 2,117 148,728
------------- ------------- ------------- ------------- --------------
NET LOSS $ (8,819) $ (17,441) $ (32,201) $ (82,312) $ (244,356)
============= ============= ============= ============= ==============
BASIC LOSS PER SHARE $ (0.00) $ (0.00) $ (0.01) $ (0.02)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,623,011 3,598,000 3,606,429 3,598,000
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
5
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on February 7, 1986 through September 30, 2005
Deficit
Accumulated
Common Stock Capital in During
------------------------- Excess of Development
Shares Amount Par Value Stage
------------- ----------- ----------- -------------
Balance at Inception on
February 7, 1986 - $ - $ - $ -
Issuance of 1,098,000
shares of common stock
to officers, directors
and other individuals
for $0.023 per share on
February 7, 1986 1,098,000 1,098 23,902 -
Public offering of the
Company's common stock 2,500,000 2,500 247,500 -
Deferred offering costs
offset against capital
in excess of par value - - (32,841) -
Net loss from inception on
February 7, 1986 through
December 31, 1997 - - - (41,568)
------------- ----------- ----------- -------------
Balance, December 31, 1997 3,598,000 3,598 238,561 (41,568)
Net loss for the year
ended December 31, 1998 - - - (1,761)
------------- ----------- ----------- -------------
Balance, December 31, 1998 3,598,000 3,598 238,561 (43,329)
Net income for the year
ended December 31, 1999 - - - 145
------------- ----------- ----------- -------------
Balance, December 31, 1999 3,598,000 3,598 238,561 (43,184)
Net loss for the year
ended December 31, 2000 - - - (1,803)
------------- ----------- ----------- -------------
Balance, December 31, 2000 3,598,000 3,598 238,561 (44,987)
Net loss for the year
ended December 31, 2001 - - - (7,412)
------------- ----------- ----------- -------------
Balance, December 31, 2001 3,598,000 $ 3,598 $ 238,561 $ (52,399)
------------- ----------- ----------- -------------
The accompanying notes are an integral part of these financial statements.
6
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)(Continued)
From Inception on February 7, 1986 through September 30, 2005
Deficit
Accumulated
Common Stock Capital in During
------------------------- Excess of Development
Shares Amount Par Value Stage
------------- ----------- ----------- -------------
Balance, December 31, 2001 3,598,000 $ 3,598 $ 238,561 $ (52,399)
Net loss for the year
ended December 31, 2002 - - - (28,074)
------------- ----------- ----------- -------------
Balance, December 31, 2002 3,598,000 $ 3,598 238,561 (80,473)
Net loss for the year
ended December 31, 2003 - - - (40,089)
------------- ----------- ----------- -------------
Balance, December 31, 2003 3,598,000 3,598 238,561 (120,562)
Net loss for the year
ended December 31, 2004 - - - (91,593)
------------- ----------- ----------- -------------
Balance, December 31, 2004 3,598,000 3,598 238,561 (212,155)
Issuance of 324,080 shares
of common stock to officers
and directors under option
for $0.1875 per share on
September 26, 2005 for
related party indebtedness
(unaudited) 324,080 324 60,441 -
Issuance of 36,120 shares
of common stock to an
officer and director for
related party indebtedness
for $0.25 per share on
September 26, 2005
(unaudited) 36,120 36 8,994 -
Issuance of 100,000 shares
of common stock for cash
for $0.25 per share
(unaudited) 100,000 100 24,900 -
Net loss for the nine
months ended September 30,
2005 (unaudited) - - - (32,201)
------------- ----------- ----------- -------------
Balance, September 30, 2005
(unaudited) 4,058,200 $ 4,058 $ 332,896 $ (244,356)
============= =========== =========== =============
The accompanying notes are an integral part of these financial statements.
7
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
February 7,
For the Nine Months Ended 1986 through
September 30, September 30,
2005 2004 2005
------------- ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from operations $ (32,201) $ (82,312) $ (244,356)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization - - 301
Change in operating assets and liabilities:
Increase in taxes payable - - 300
Increase (decrease) in accounts payable
and payable - related parties 16,401 23,570 76,960
------------- ------------ -------------
Net Cash used by Operating Activities (15,800) (58,742) (166,795)
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Organizational costs - - (300)
Sale of stock 25,000 - 25,000
Net stock offering proceeds - - 242,159
------------- ------------ -------------
Net Cash Provided by
Financing Activities 25,000 - 266,859
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH 9,200 (58,742) 100,064
CASH AT BEGINNING OF PERIOD 90,864 151,597 -
------------- ------------ -------------
CASH AT END OF PERIOD $ 100,064 $ 92,855 $ 100,064
============= ============ =============
CASH PAID FOR:
Taxes $ - $ - $ -
Interest $ - $ - $ -
------------- ------------ -------------
The accompanying notes are an integral part of these financial statements.
8
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2005 and December 31, 2004
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods presented have
been made.
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. It
is suggested that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
December 31, 2004 audited financial statements. The results of operations for
the period ended September 30, 2005, are not necessarily indicative of the
operating results for the full year.
NOTE 2 - RELATED PARTY TRANSACTION
As of September 30, 2005, the Company owed $6,000 to related parties for
unpaid services rendered to the Company.
NOTE 3 - STOCK OPTIONS AND WARRANTS AND SALE OF STOCK
On March 11, 1999, the Company granted to each of its three (3) directors,
options to purchase 200,000 shares of common stock each at an exercise price
of $0.1875, which was the average of the bid and asked prices for the common
stock on that date. The options are vested and expire in March 2009. The
options were issued to compensate these persons for their services to the
Company over the past 13 years, for which they had received no other
compensation. The options of one of the directors, now deceased, have passed
on to his estate.
On September 26, 2005, the Company's current officers and directors agreed to
eliminate certain indebtedness owed to them through the exercise of certain
stock options referenced above. Accordingly, one of the officers and
directors exercised his stock options in full, for the conversion of a total
of $37,500 in indebtedness to him, into a total of 200,000 shares of
restricted common stock at a price of $0.1875 per share. The other officer
and director agreed to convert the entire obligation to him ($23,265), into a
total of 124,080 shares of common stock under his stock options at a price of
$0.1875 per share. Because he did not exercise all of his stock options, he
was reissued stock options to purchase a total of 75,920 shares at $0.1875 per
share. One of the officers and directors above who was owed an additional
$9,030 converted such debt on the same date to 36,120 shares of restricted
common stock at a price of $0.25 per share.
9
COMET TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2005 and December 31, 2004
NOTE 3 - STOCK OPTIONS AND WARRANTS AND SALE OF STOCK (CONTINUED)
To provide the Company with additional capital, the Company sold on the same
date, to an unrelated party, a total of 100,000 shares of restricted common
stock at a price of $0.25 per share for total cash proceeds of $25,000.
There is an outstanding warrant to purchase 50,000 shares of the Company's
common stock held by an unrelated third party at an exercise price of $0.1875,
which expires in March 2009.
10
Item 2 - Management's Discussion and Analysis or Plan of Operation
(1) Caution Regarding Forward-Looking Information
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27a of the Securities Act of 1933 and Section 21e of the
Securities Exchange Act of 1934 regarding events, conditions, and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons reviewing this
report are cautioned that any forward-looking statements are not guarantees of
future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors.
(2) Plan of Operation
Nine Month Periods Ended September 30, 2005 and 2004
The officers have continued to evaluate potential mergers in an ongoing
effort to increase the value of the shareholders' investment in the Company.
During this period, however, the Company has not been engaged in business
operations, and has had no revenue from continuing operations for the
nine-month periods ended September 30, 2005 and 2004.
General and administrative expenses for the nine-month periods ended
September 30, 2005 and 2004, consisted of general corporate administration,
officer compensation, legal and professional expenses, and accounting and
auditing costs. These expenses were $32,467 and $84,429 for the nine-month
periods ended September 30, 2005 and 2004, respectively.
Interest income in the nine-month periods ended September 30, 2005 and
2004, was $266 and $297, respectively. As a result of the foregoing factors,
the Company realized a net loss of $32,201 for the nine months ended September
30, 2005, as compared to a net loss of $82,312 for the same period in 2004.
Liquidity and Capital Resources
At September 30, 2005, the Company had working capital of approximately
$92,598 as compared to $30,004 at December 31, 2004. This change in working
capital is largely attributable to the conversion of a total of $69,795 in
debt to officers and directors, into equity, and the investment by an
unrelated third party of $25,000, for the purchase of 100,000 restricted
shares of common stock for cash. (See Note 3 to Financial Statements, and
Part II, Item 2). Working capital as of both dates consisted of cash and cash
equivalents less current liabilities.
Management believes that the Company has sufficient cash to meet the
anticipated needs of the Company's operations through at least the next 12
months. However, there can be no assurances to that effect, as the Company has
no significant revenues and the Company's need for capital may change
dramatically if it acquires an interest in a business opportunity during that
period. The Company is dependent upon management and/or significant
shareholders to provide sufficient working capital to preserve the integrity
of the corporate entity during this phase. It is the intent of management and
significant shareholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity. The Company's
current operating plan is to (i) handle the administrative and reporting
requirements of a public company, and (ii) search for potential businesses,
products,
11
technologies and companies for acquisition. At present, the Company has no
understandings, commitments or agreements with respect to the acquisition of
any business venture, and there can be no assurance that the Company will
identify a business venture suitable for acquisition in the future. Further,
there can be no assurance that the Company would be successful in consummating
any acquisition on favorable terms or that it will be able to profitably
manage any business venture it acquires.
Although the Company's assets consist of cash and cash equivalents, the
Company has no intent to become, or hold itself out to be, engaged primarily
in the business of investing, reinvesting, or trading in securities.
Accordingly, the Company does not anticipate being required to register
pursuant to the Investment Company Act of 1940, and expects to be limited in
its ability to invest in securities, other than cash equivalents and
government securities, in the aggregate amount of over 40% of its assets.
There can be no assurance that any investment made by the Company will not
result in losses.
Item 3 - Controls and Procedures
As of the end of the period covered by this report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief Financial Officer
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Company's management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that the Company's disclosure controls and procedures were effective. There
have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of the evaluation.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
On September 26, 2005, Jack Gertino and Richard Stuart, officers and
directors, exercised Options resulting in the issuance of 236,120 shares and
124,080 shares of restricted common stock, respectively, to Mr. Gertino and
Dr. Stuart, at a price of $0.1875 per share. Mr. Gertino and Dr. Stuart were
owed $46,530, and $23,265, respectively, for services rendered to the Company,
primarily in connection with a possible merger transaction that, after several
months of efforts, was terminated, as reported in a Form 8-K filed on or about
February 14, 2005, incorporated herein by reference. The purchase price
under the Options was paid through the conversion and cancellation of Company
indebtedness to Mr. Gertino and Dr. Stuart, as described below.
In March, 1999, the Company granted to each of its three then officers
and directors - Jack M. Gertino, Dr. Richard Stuart and Philip Gugel, an
option to purchase a total of 200,000 shares each of the Company's common
stock at an exercise price of $0.1875 per share (the "Option"). Mr. Gugel has
since died, and his Option, which has not been exercised, has passed to his
wife. The Options are exercisable for a period of ten (10) years, ending on
March 11, 2009.
12
As a means of eliminating this debt from the Company's balance sheet,
and to provide the Company with working capital to undertake efforts to locate
and enter into a business opportunity over the next few months, the Company
and Mr. Gertino and Dr. Stuart agreed to eliminate the indebtedness to Gertino
and Stuart through the exercise of the Options referenced above. Accordingly,
Mr. Gertino's exercised his Option in full, for the conversion of a total of
$37,500 in indebtedness to him, into a total of 200,000 shares of restricted
common stock at a price of $0.1875 per share. After the exercise of his entire
Option, Mr. Gertino was still owed the sum of $9,030 by the Company, which he
agreed to convert into a total of 36,120 additional shares of restricted
common stock at a price of $0.25 per share, or the price paid by an
unaffiliated investor, described below. Dr. Stuart agreed to convert the
entire obligation to him ($23,265), into a total of 124,080 shares of common
stock under his Option at a price of $0.1875 per share. Because Dr. Stuart
did not exercise all of his Option, he was reissued an Option to purchase a
total of 75,920 shares at $0.1875 per share. Mr. Gertino's Option has been
exercised in full and is no longer outstanding.
Concurrently with the transactions described above, on September 26,
2005, the Company entered into a stock purchase agreement with American
Eastern Group, Inc. ("American"), a Nevada corporation, providing for the sale
by the Company to American of a total of 100,000 shares of restricted common
stock at a price of $0.25 per share, or a total of $25,000. As a result of
the transactions described above, the Company issued a total of 460,200 shares
of restricted common stock; eliminated a total of $69,795 in indebtedness on
its balance sheet, increased cash by $25,000, and increased its shareholders'
equity by approximately $93,000, after transactional costs, which is now
reflected on the September 30, 2005 balance sheet included as part of this
Form 10-QSB. There were no commissions or fees paid to any third parties in
connection with these transactions.
Item 3 - Defaults on Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
During the quarter ended September 30, 2005, the Company held no
regularly scheduled, called or special meetings of shareholders during the
reporting period, nor were any matters submitted to a vote of this Company's
security holders.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit Description
-------- ------------------------------------------------------------------
31.1 Principal Executive Officer Certification*
31.2 Principal Financial Officer Certification*
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002**
* Included herein pursuant to Item 601(b) 31 of Regulation SB.
** Included herein pursuant to Item 601(b) 32 of Regulation SB.
13
(b) Reports on Form 8-K. On September 28, 2005, the Company filed a
Current Report on Form 8-K, reporting the exercise of options of Jack Gertino
and Richard Stuart, officers and directors, resulting in the issuance of
236,120 shares and 124,080 shares of restricted common stock, respectively, to
Mr. Gertino and Dr. Stuart, and the sale of 100,000 shares of restricted
common stock to American Eastern Group, Inc., a Nevada corporation, at a price
of $0.25 per share, or a total of $25,000. (See Item 2 above).
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
COMET TECHNOLOGIES, INC.
Date: November 16, 2005 By: /s/ Richard B. Stuart
-------------------------------------
Richard B. Stuart, President, CEO and
Principal Executive Officer
Date: November 16, 2005 By: /s/ Jack M. Gertino
-------------------------------------
Jack M. Gertino, Secretary/Treasurer,
CFO and Principal Financial Officer
14