UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended December 31, 2003.
[_] Transition Report under Section 13 or 15(d) of the Exchange Act for the
transition period from _________________ to _________________.
Commission file number 0-27587
DELAWARE 22-3586087
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
FINANCIAL STATEMENTS
Consolidated Balance Sheet at December 31, 2003 (unaudited) F-1
Consolidated Statements of Operations for the three and six
months ended December 31, 2003 and 2002 (unaudited) F-2
Consolidated Statements of Cash Flows for the six months
ended December 31, 2003 and 2002 (unaudited) F-3
Notes to Consolidated Financial Statements F-4
Item 2. Management's Discussion and Analysis 1
Item 3. Controls and Procedures 3
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings II-1
Item 2. Changes in Securities II-1
Item 3. Defaults Upon Senior Securities II-1
Item 4. Submission of Matters to a Vote of Security Holders II-2
Item 5. Other Information II-2
Item 6. Exhibits and Reports on Form 8-K II-2
ASSETS
CURRENT ASSETS
Cash & cash equivalents $ 295,473
Prepaid expenses and other current assets 118,000
------------
Total current assets 413,473
FURNITURE AND EQUIPMENT - at cost,
less accumulated depreciation and amortization of $603,408 9,583
------------
$ 423,056
============
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expense $ 228,721
Due to related parties 38,000
------------
Total current liabilities 266,721
SUBORDINATED CONVERTIBLE DEBENTURES 165,000
COMMITMENTS and CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible Preferred stock - par value $.0001 per share;
authorized 5,000,000 shares; 0 shares outstanding
Common stock - par value $.0001, per share; authorized,
40,000,000 shares; 4,488,525; shares issued and outstanding 449
Additional paid in capital 25,064,729
Accumulated deficit (25,057,843)
Treasury stock (8,000 shares), at cost (16,000)
------------
(8,665)
------------
$ 423,056
============
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The accompanying notes are an integral part of this statement.
CDKNET.COM, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months Six months Six months
ended ended ended ended
December 31 December 31 December 31 December 31
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net revenues
Cost of revenues
---------- ---------- ---------- ----------
Gross profit 0 0 0 0
Selling, general and administrative expenses $ 100,785 $ 218,633 $ 180,955 $ 433,069
Depreciation and amortization 1,200 26,593 2,400 53,186
---------- ---------- ---------- ----------
Loss from operations (101,985) (245,226) (183,355) (486,255)
Other income and (expense)
Interest income 564 12,217 1,437 20,440
Interest expense, (2,475) (5,340) (4,950) (9,302)
Other income 2,500
Loss on sale of assets (68,933)
Minority interest in loss of subsidiary 42,216
---------- ---------- ---------- ----------
NET LOSS ($ 103,896) ($ 238,349) ($ 186,868) ($ 499,334)
========== ========== ========== ==========
Preferred Dividend 16,531 28,538 47,976 57,075
---------- ---------- ---------- ----------
Net Loss to common Stockholders' ($ 120,427) ($ 266,887) ($ 234,844) ($ 556,409)
========== ========== ========== ==========
Basic and diluted earnings (loss) per share ($ 0.05) ($ 0.34) ($ 0.15) ($ 0.72)
========== ========== ========== ==========
Weighted-average shares outstanding-
basic and diluted 2,443,546 776,665 1,608,284 776,665
========== ========== ========== ==========
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The accompanying notes are an integral part of this statement.
CDKNET.COM, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended
December 31, December 31,
2003 2002
---------- ----------
Cash flows from operating activities
Net loss ($ 186,868) ($ 499,334)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 2,400 53,186
Loss on sale of assets 68,933
Minority interest in loss of consolidated subsidiary (42,216)
Changes in assets and liabilities
Prepaid expenses and
other current assets (7,522) 34,100
Accounts payable and accrued expense (37,812) (52,547)
---------- ----------
Net cash used in operating activities (229,801) (437,878)
---------- ----------
Cash flows from investing activities
Purchase of furniture and equipment
Investment in notes receivable 170,000 (53,848)
Cash escrow 500,000
Investments held for sale 400,000
---------- ----------
Net cash used in investing activities 170,000 846,152
---------- ----------
Cash flows from financing activities
Repayment of notes payable (83,521)
---------- ----------
Net cash provided by financing activities 0 (83,521)
---------- ----------
NET INCREASE (DECREASE) IN CASH (59,801) 324,753
Cash at beginning of period 355,274 435,994
---------- ----------
Cash at end of period $ 295,473 $ 760,747
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest $ -- $ 4,352
========== ==========
Noncash financing activity
Preferred Stock Conversion $1,605,874 --
========== ==========
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The accompanying notes are an integral part of this statement
CDKNET.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of CDKNET.com, Inc. ( the "Company") included herein have been prepared in accordance with generally accepted accounting principles for interim period reporting in conjunction with the instructions to Form 10-QSB. Accordingly, these statements do not include all of the information required by generally accepted accounting principles for annual financial statements, and are subject to year-end adjustments. In the opinion of management, all known adjustments (consisting of normal recurring accruals and reserves) necessary to present fairly the financial position, results of operations and cash flows for the three and six month periods ended December 31, 2003 and 2002 have been included. The interim statements should be read in conjunction with the financial statements and related notes included in the Company's June 30, 2003 Form 10-KSB.
The operating results for the three and six months ended December 31, 2003 are not necessarily indicative of the results to be expected for the full year.
NOTE 2. REVERSE STOCK SPLIT
On November 22, 2002, the Board of Directors and a majority of the shares of stock entitled to vote approved a one-for-fifty reverse split of the Company's common stock to be effective as directed by the Company's officers. The reverse split became effective November 21, 2003. Fractional shares were rounded up. Accordingly, per share amounts for all period presented have been adjusted to give effect to the reverse stock split effective to the beginning of the periods presented.
On November 21, 2003, all of the then outstanding shares of Series A Convertible Preferred stock were converted into 3,711,860 shares of Company common stock.
The following contains forward-looking statements based on current expectations, estimates and projections about our industry, management's beliefs, and assumptions made by management. All statements, trends, analyses and other information contained in this report relative to trends in our financial condition and liquidity, as well as other statements, including, but not limited to, words such as "anticipate," "believe," "plan," "intend," "expect," "predict," and other similar expressions constitute those statements. These statements are not guarantees of future performance and are subject to risks and uncertainties that are difficult to predict. Accordingly, actual results may differ materially from those anticipated or expressed in the statements. Potential risks and uncertainties include, limited operating history, the unpredictability of our future revenues, the unpredictable and evolving nature of our business model, acquiring or financing the acquisition of a business, as well as other risk factors.
We are a holding company incorporated in the State of Delaware. We conduct our business through a subsidiary, CDKnet, LLC, a New York limited liability company. CDKnet, LLC has had no revenues since fiscal 2002.
We have developed a multimedia technology, called CDK(TM), which integrates audio, video and Internet connectivity on a standard compact disc. Our technology enables users to create their own personalized compact discs simply by visiting a Website. These custom compact discs play audio and display videos on a full-screen, using high-quality videos and digital technology. The custom compact discs also include software applications and targeted Web links.
The CDK(TM) product is targeted at the following industries: (1) entertainment
(music, movies, and TV); (2) travel and tourism; (3) professional sports; (4)
financial services; (5) education; (6) toys/games; (7) fashion; (8)
food/cooking; (9) automotive; and (10) healthcare. Its primary customers and/or
strategic partners include Central Park Media, CollegeMusic.com, Megaforce
Records, HappyPuppy.com, theglobe.com and SugarBeats.com.
We have a limited operating history with no revenues since fiscal 2002.
As of February 14, 2004, we had 4,488,525 shares of common stock issued and outstanding. Our stock is traded on the Over-the-Counter Bulletin Board under the symbol "CDKN."
We have not issued a common stock dividend to date.
We did not have revenues or cost of goods sold for the three month periods ended December 31, 2003 and 2002.
During the three months ended December 31, 2003, we incurred a net loss of $103,986 on revenues of $0 compared to a net loss of $238,349 on revenues of $0 for the three months ended December 31, 2002. We did not generate any revenues from our CDK operations the three months ended December 31, 2003 or 2002.
For the three months ended December 31, 2003, other operating expenses were $100,785 compared to $218,633 for the three months ended December 31, 2002. Operating expenses consist of primarily consulting and other professional fees.
We did not have revenues or cost of goods sold for the six month periods ended December 31, 2003 and 2002.
During the six months ended December 31, 2003, we incurred a net loss of $186,868 on revenues of $0 compared to a net loss of $499,334 on revenues of $0 for the six months ended December 31, 2002. We did not generate any revenues from our CDK operations the three months ended December 31, 2003 or 2002.
For the six months ended December 31, 2003, other operating expenses were $180,955 compared to $433,069 for the six months ended December 31, 2002. Operating expenses consist of primarily consulting and other professional fees.
As of December 31, 2003, we had $295,473 in cash and cash equivalents. Our principal commitments are $165,000 in subordinated convertible debentures and $228,722 in accounts payable and accrued expenses. In October 2003, the Company received $170,000 in cash from collection of the current note receivable.
Net cash used in operating activities was $229,801 for the six months ended December 31, 2003 compared to net cash used in operating activities of $437,878 for the six months ended December 31, 2002. Cash used by operations primarily resulted from net losses offset by non-cash depreciation and amortization.
Net cash provided in investing activities was $170,000 for the six months ended December 31, 2003 compared to cash provided of $846,152 for the six months ended
December 31, 2002. For the six months ended December 31, 2003, we received $170,000 in cash from collection of the current note receivable. For the six months ended December 31, 2002, we received $400,000 cash from the maturity of certain investments and $500,000 of previously escrowed cash.
Net cash used by financing activities was $83,251 for the six months ended December 31, 2002 compared to no cash provided or used for the six months ended December 31, 2003. We used cash during the six months ended December 31, 2002 to make principle payments on a note payable.
Our management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended, (the "1934 Act"), as of the end of the period covered by this Quarterly Report on Form 10-QSB. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
There have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the period covered by this report.
PART II -- OTHER INFORMATION
On or about February 3, 2004, CDKnet LLC, received a copy of a summons
and complaint served on the NY Secretary of State relating to an action
commenced by Fisk Building Associates, LLC in the Supreme Court of the
State of New York, New York County captioned Fisk Building Associates,
LLC v. Kelly Music & Entertainment Corp., Elbit Vflash, Inc.
CDKNET.COM, Inc., CDKNET LLC and VALUEFLASH.COM, INCORPORATED (Index
No. 100528/04). The complaint alleges damages of at least $166,807.91,
plus interest from September 1, 2003 and, as to CDKNET, LLC and alleges
sums due for the use and occupancy of office space. We have retained
counsel to investigate and defend this action and believe that all
claims and expenses, if any, of the action are indemnified under the
agreement between ValueFlash.com Incorporated and Elbit under which the
lease was assigned to Elbit Vflash, Inc.
(a) On November 21, 2003, we reverse split our outstanding shares one for fifty pursuant to director and shareholder approval given November 22, 2002. The details of such a reverse split was set forth in an information statement mailed to shareholders in December, 2002 and filed in definitive form with the Securities and Exchange Commission pursuant to Schedule 14C on December 6, 2002.
(b) On November 18, 2003, the Company's Board of Directors, with Mr. Steven Horowitz abstaining due to his previously disclosed interest as a holder of Series A shares, adopted a second amendment to the designation setting forth the rights of holders of Series A Preferred Stock. The amendment, and related agreement with the holders of Series A shares, changed the conversion rate from $.01 per share to $.009091 in exchange for the holders of a majority of the Series A shares consenting to the automatic conversion of the Series A shares into common stock on the effective date of the reverse split described in (a), above. The issuance of 10% more common shares on the effective date of the reverse split, eliminated all preferential rights of the Series A shares as of the effective date.
(c) None.
II-1
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Amendment to Certificate of Incorporation (Reverse Split)
filed November 21, 2003.
3.2 Certificate of Amendment to Certificate of Incorporation
(increasing authorized common shares) filed November 21,
2003.
3.3 Certificate of Amendment to Series A Designation filed
November 21, 2003.
10.1 Letter agreement dated November 19, 2003 between
CDKnet.Com, Inc. and certain holders of Series A
Preferred Stock.
31.1 Certification of Chief Executive Officer of Periodic
Report pursuant to Rule 13a-14a and Rule 15d-14(a).
31.2 Certification of Chief Financial Officer of Periodic
Report pursuant to Rule 13a-14a and Rule 15d-14(a).
32.1 Certification of Chief Executive Officer of pursuant to
18 U.S.C. - Section 1350.
32.2 Certification of Chief Financial Officer of pursuant to
18 U.S.C. - Section 1350.
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II-2
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.
CDKNET.COM, INC.
Date: February 17, 2004 /s/ Steven A. Horowitz
----------------------------
Steven A. Horowitz
Chairman, Chief Executive
Officer and Secretary
Date: February 17, 2004 /s/ Timothy J. Mayette
----------------------------
Timothy J. Mayette
Chief Financial Officer
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II-3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
CDKNET.COM, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That, at a meeting of the Board of Directors of the resolutions
Corporation, subsequently amended by unanimous consent of the Board,
were duly adopted setting forth a proposed amendment to the Certificate
of Incorporation of the Corporation, declaring said amendment to be
advisable and calling a meeting of stockholders of said Corporation for
consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that Article FOURTH of the Corporation's Certificate of
Incorporation shall be amended, subject to stockholder approval, to add
the following paragraphs:
On the Split Effective Date (as defined below), the Corporation shall
effect a one-for-fifty (1 for 50) reverse stock split pursuant to which
every fifty (50) shares of the Corporation's Common Stock issued and
outstanding or held in treasury will be automatically converted into
one (1) new share of Common Stock (the "Reverse Stock Split"). The
Reverse Stock Split shall be effective as of the close of business
November 21, 2003 ( the "Split Effective Date"). The Corporation shall
not issue fractional shares. Stockholders entitled to a fractional
interest in a share of such Common Stock issued pursuant to the Reverse
Stock Split shall receive one additional whole share in lieu of the
fraction.
On the Split Effective Date, each certificate representing existing
shares of Common Stock will automatically be deemed for all purposes to
evidence ownership of the appropriate reduced number of new shares of
Common Stock without any action by the stockholder thereof. As soon as
practicable after the Split Effective Date, the Corporation or its
agent shall notify the stockholders and request the surrender of their
certificates for their existing shares with instructions as to how to
receive new certificates.
SECOND: A majority of the outstanding stock entitled to vote thereon, voted in
favor of the adoption of said amendment to the Certificate of
Incorporation in accordance with Section 228 of the General Corporation
Law of Delaware on November 22, 2002.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State Delaware.
IN WITNESS WHEREOF, said CDKNET.COM, INC. has caused this certificate
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to be signed by its duly authorized officer, Steven A. Horowitz, its Chairman and CEO this 18th day of November, 2003.
CDKNET.COM, INC.
By: /s/ Steven A. Horowitz
----------------------
Steven A. Horowitz
Chairman and CEO
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
CDKNET.COM, INC. a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That at a meeting of the Board of Directors of CDKNET.COM, INC., a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and calling a meeting of stockholders of said
Corporation for consideration thereof.
RESOLVED, that Article FOURTH of the Corporation's Certificate of
Incorporation be amended, subject to stockholder approval, to change
Article FOURTH thereof so that, as amended said article shall read as
follows:
"FOURTH: Number of Shares. The total number of shares of stock which
the Corporation shall have authority to issue is: one hundred and five
million (105,000,000), of which seventy-five million (100,000,000)
shall be shares of Common Stock, $.0001 par value, and five million
(5,000,000) shall be shares of Preferred Stock, $.0001 par value
("Series Preference Stock")."
SECOND: That thereafter, a majority of the outstanding stock entitled to vote
thereon, consented to the adoption of said amendment to the Certificate
of Incorporation in accordance with Section 228 of the General
Corporation Law of Delaware on November 22, 2002.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State to Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said CDKNET.COM, INC. has caused this certificate
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to be signed by its duly authorized officer, Steven A. Horowitz, its Chairman and CEO this 10th day of November, 2003.
CDKNET.COM, INC.
By: /s/ Steven A. Horowitz
-----------------------
Steven A. Horowitz,
Chairman and CEO
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
CDKNET.COM, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That, at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and calling a meeting of stockholders of said
Corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that Article FOURTH of the Corporation's Certificate of
Incorporation shall be amended, subject to stockholder approval, to add
the following paragraphs:
On the Split Effective Date (as defined below), the Corporation shall
effect a one-for-fifty-five reverse stock split pursuant to which every
shares of the Corporation's Common Stock issued and outstanding or held
in treasury will be automatically converted into one new share of
Common Stock (the "Reverse Stock Split"). The Reverse Stock Split shall
be effective as of the close of business on November 20, 2003 (the
"Split Effective Date"). The Corporation shall not issue fractional
shares to the stockholders entitled to a fractional interest in a share
of such Common Stock issued pursuant to the Reverse Stock Split but
shall issue cash in lieu of any such fractional share.
On the Split Effective Date, each certificate representing existing
shares of Common Stock will automatically be deemed for all purposes to
evidence ownership of the appropriate reduced number of new shares of
Common Stock without any action by the stockholder thereof. As soon as
practicable after the Split Effective Date, the Corporation or its
agent shall notify the stockholders and request the surrender of their
certificates for their existing shares with instructions as to how to
receive new certificates.
SECOND: That thereafter, a majority of the outstanding stock entitled to vote
thereon, consented to the adoption of said amendment to the Certificate
of Incorporation in accordance with Section 228 of the General
Corporation Law of Delaware on November 22, 2002.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State Delaware.
IN WITNESS WHEREOF, said CDKNET.COM, INC. has caused this certificate
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to be signed by its duly authorized officer, Steven A. Horowitz, its Chairman and CEO this 10th day of November, 2003.
CDKNET.COM, INC.
By: /s/ Steven A. Horowitz
-----------------------
Steven A. Horowitz,
Chairman and CEO
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CDKNET.COM, INC.
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, RIGHTS AND
PREFERENCES OF A SERIES OF PREFERRED STOCK BY RESOLUTION
OF THE BOARD OF DIRECTORS PROVIDING FOR AN
ISSUE OF 2,250,000 SHARES OF SERIES A PREFERRED
STOCK, $.0001 PAR VALUE, DESIGNATED
AS THE "SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK"
I, Andrew Schenker, President, of CDKNET.COM, INC., a Delaware corporation (hereinafter called the "Corporation"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware ("DGCL"), do hereby certify that pursuant to the authority expressly vested in the Board of Directors of the Corporation by the Certificate of Incorporation, the Board of Directors duly adopted the following resolutions amending the Designation relating to the rights and preferences of Series A Preferred Stock (the "Designation"), and these resolutions were approved by the holders of the requisite number of outstanding shares of Series A Preferred Stock in accordance with Section 151 of the DGCL and the Designation:
"NOW, THEREFORE, BE IT RESOLVED:
FIRST: That paragraph (a) of Section 5 of the Designation be amended in its entirety to read as follows:
'(a) The record holder of shares of Series A Preferred Stock shall be entitled, at the option of the holder, to convert such shares into the number of fully-paid and non-assessable shares of Common Stock determined in accordance with the Conversion Formula as set forth below:
Number of shares issued upon conversion = Stated Value/Conversion Price
"Stated Value" = the Stated Value of the shares of Series A
Preferred Stock to be converted;
"Conversion Price" = $.009091'.
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SECOND: That paragraph (d) of Section 5 of the Designation be amended in its entirety to read as follows:
'(d) In connection with the conversion of any shares of Series A Preferred Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall issue to the holder that would be entitled to a fraction of a share one additional whole share of Common Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion by the same holder at the same time, the number of full shares of Common Stock issuable on conversion thereof shall be computed on the basis of the total number of shares of Series A Preferred Stock so surrendered.'
THIRD: That Section 5 be amended by adding the following paragraph (j):
'(j) All outstanding shares of Series A Preferred Stock for which conversion notices have not previously been received which redemption has not been made shall be automatically converted into shares of Common Stock determined in accordance with the Conversion Formula set forth in paragraph 5 (a) hereof on the date that the Corporation's certificate of incorporation is amended to increase the number of authorized shares of Common Stock to an number sufficient to permit the conversion of all outstanding share os Series A Preferred Stock.'"
I further certify that notice of the taking of this action by the consent of the requisite number of holders of Series A Preferred Stock was duly given to the non-consenting holders in compliance with Section 228 of the DGCL.
IN WITNESS WHEREOF, CDKNET.COM, INC. has caused this certificate to be executed by its Chairman and CEO this 19th day of November, 2003.
CDKNET.COM, INC.
By: /s/ Steven A. Horowitz
----------------------
Steven A. Horowitz,
Chairman and CEO
ATTEST:
/s/ Steven A. Horowitz
-----------------------------
Steven A. Horowitz, Secretary
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CDKNET.COM, INC.
150 Broad Hollow Road, Suite 103
Melville, NY 11747
November 19, 2003
Target Growth Fund Ltd.
Chancery Hall
52 Reid Street
Hamilton HM 12 Bermuda
Spiga Limited
c/o Euroba Management Limited
73 Front Street, 4th Floor
Hamilton HM 12 Bermuda
Scarbourough Ltd.
Steven A. Horowitz, Esq.
Moritt, Hock, Hamroff & Horowitz, LLP
400 Garden City Plaza, Suite 202
Garden City, NY 11530
Re: CDKnet.Com, Inc. Series A Convertible Preferred Stock
Gentlemen:
You are holders of an aggregate of 1,214,459 outstanding shares ("Series A Shares') of preferred stock of CDKnet.Com, Inc. (the "Company"), having the rights and preferences set forth in that Certificate of Designation, Rights and Preferences of a Series of Preferred Stock by Resolution of the Board of Directors, as amended Providing for an Issue of 2,250,000 Shares of Series A Preferred Stock, $.0001 par value, Designated as the "Series A Cumulative Convertible Preferred Stock" (the "Series A Designation"). Pursuant to the Series A Designation, you are presently entitled to convert each Series A share into 100 shares of commons stock. We are hereby requesting your consent to the amendment of the Series A Designation to provide for automatic conversion of the outstanding Series A Shares on the effective date of the Company's one for 50 reverse split approved on November 22, 2002. In exchange for your consent to this amendment, our Board of Directors has recommended that the Designation be further amended to permit you and all holders of the Series A shares to convert each Series A share into 110 shares of common stock, subject to such adjustment as set forth in the Designation to give effect to the reverse split. The form of amendment is attached hereto as Exhibit A,
Your execution hereof shall be sufficient written consent to the amendment of the Series A Designation under the General Corporation Law of the State of Delaware in the manner set forth in Exhibit A and we shall mail notice of the taking of this action to the non-consenting holders of the Series A shares.
Target Growth Fund Ltd.
Spiga Limited
Scarbourough Ltd.
Steven Horowitz, Esq.
November 19, 2003
This agreement may be executed in one or more counterparts, which together shall be deemed one instrument.
Please indicate your acceptance of the above by signing and returning a copy of this letter.
Very truly yours,
CDKNET.COM, INC.
By: /s/ Andrew J. Schenker
-----------------------
Andrew J. Schenker, CEO
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[ACCEPTANCE PAGE FOLLOWS]
Target Growth Fund Ltd.
Spiga Limited
Scarbourough Ltd.
Steven Horowitz, Esq.
November 19, 2003
Agreed and Accepted: Beneficial Interest in Shares
TARGET GROWTH FUND LTD. 320,000
By: /s/ Lorenzo Cocco
------------------------------
Name: Lorenzo Cocco
Title: Authorized Signatory
SPIGA LIMITED 244,459
By: /s/ Clive Dakin
------------------------------
Name: Clive Dakin
Title: President
SCARBOUROUGH, LTD. 175,000
By: /s/ Clive R. Dakin
------------------------------
Name: Clive R. Dakin
Title: Authorized Signatory
/s/ Steven A. Horowitz 475,000
----------------------------------- ----------
Steven A. Horowitz
1,2144,459
==========
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CERTIFICATION
I, Steven A. Horowitz, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CDKNet.Com, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respect the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, is made known to me by others, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
February 17, 2004
/s/ Steven A. Horowitz ------------------------------------ Steven A. Horowitz, Chairman and CEO |
CERTIFICATION
I, Timothy J. Mayette, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CDKNet.Com, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respect the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, is made known to me by others, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
February 17, 2004
/s/ Timothy J. Mayette -------------------------- Timothy J. Mayette, CFO |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of CDKNet.Com, Inc. (the "Company") on Form 10-QSB for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on February 17, 2004 (the "Report"), I, Steven A. Horowitz, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Steven A. Horowitz ---------------------------------- Steven A. Horowitz Chief Executive Officer February 17, 2004 |
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of CDKNet.Com, Inc. (the "Company") on Form 10-QSB for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on February 17, 2004 (the "Report"), I, Timothy J. Mayette, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Timothy J. Mayette ---------------------------------- Timothy J. Mayette Chief Financial Officer February 17, 2004 |
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.