10QSB 1 qsb10.txt QUARTERLY REPORT 01-31-2005 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2005 OR [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number: 333-116045 CYGNI SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) Nevada (State of other jurisdiction of incorporation or organization) 20-0909393 (IRS Employer Identification Number) 303-167 Bannatyne Avenue Winnipeg, Manitoba R3B 0R4 Canada (Address of principal executive offices) (204) 295-8015 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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: March 15, 2005: 5,051,700 common shares outstanding. Transitional Small Business Disclosure Format (Check one): Yes [] No [X] -1- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CYGNI SYSTEMS CORPORATION (A Development Stage Company) BALANCE SHEET January 31, 2005 (Unaudited) ASSETS Cash $94,947 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Loans payable-related party $2,907 TOTAL LIABILITIES $2,907 STOCKHOLDERS' EQUITY Common stock, 100,000,000 shares authorized at $0.001 par value; 5,051,700 shares issued and outstanding 5,052 Paid in Capital 100,468 Deficit accumulated during development stage (13,480) Total Stockholders' Equity 92,040 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $94,947 -2- CYGNI SYSTEMS CORPORATION (A Development Stage Company) STATEMENT OF OPERATIONS Three and Nine Months ended January 31, 2005, and Period from March 18, 2004, (inception) through January 31, 2005 (Unaudited) Three months Nine months Inception ended ended Through Jan 31, 2005 Jan 31, 2005 Jan 31, 2005 General and administration $ 10,511 $ 12,784 $ 13,480 Net loss $(10,511) $(12,784) $(13,480) Basic and diluted loss $ (0.00) $ (0.00) per common share Weighted average common shares outstanding Basic and diluted 4,392,853 4,130,951 -3- CYGNI SYSTEMS CORPORATION (A Development Stage Company) STATEMENT OF CASH FLOWS Nine Months ended January 31, 2005, and Period from March 18, 2004, (inception) through January 31, 2005 (Unaudited) 9 months ended Inception to Jan 31, 2005 Jan 31, 2005 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (12,784) $(13,480) Adjustments to reconcile net loss to cash used in operating activities: Changes in: Accounts payable 2,211 2,907 NET CASH USED IN OPERATING ACTIVITIES (10,573) (10,573) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of common stock 105,120 105,520 NET CASH PROVIDED BY FINANCING ACTIVITIES 105,120 105,520 NET CHANGE IN CASH 94,547 94,947 Cash balance, beginning of period 400 - Cash balance, ending of period $ 94,947 $ 94,947 -4- CYGNI SYSTEMS CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim financial statements of Cygni Systems Corporation ("Cygni"), have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in Cygni's latest annual report filed with the SEC on Form SB-2. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal year 2004, as reported in the Form SB-2, have been omitted. -5- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report for the period ended January 31, 2005. This quarterly report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Certain statements contained in this Report, including, without limitation, statements containing the words "believes", "anticipates," "expects" and the like, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments. The Company was incorporated in the State of Nevada on March 18, 2004. The Company is in the development stage of its business of developing online and network security management software and online and network security consulting services. The Company owns a website through which it intends to market its services and sell products. We have been a start-up stage corporation since inception and have not commenced operations nor generated or realized any revenues from our business operations. The ability of the Company to emerge from the development stage with respect to its planned principal operations is dependent upon its ability to secure market acceptance of its business plan and to raise additional funds and/or generate sufficient revenue through operations. There is no guarantee that the Company will be able to complete any of the above objectives and, even if it does accomplish certain objectives, there is no guarantee that the Company will attain profitability. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. In their report letter dated May 20, 2004, our auditors issued a going concern opinion. This means that our auditors believe that there is substantial doubt as to whether we can continue as an on-going business. The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. The Company is in the development stage and will continue to be in the development stage until it generates sufficient revenue from its business operations. To date, the Company has not generated any revenues. Management is currently devoting much of its time to developing a market for its business and considering other avenues of obtaining funds. At January 31, 2005, the Company had $94,947 in cash and $2,907 in liabilities. In the event that the Company proceeds with implementing its planned activities, then we anticipate that cash reserves will be exhausted within approximately six to eight months if sufficient revenue is not generated during -6- this time. For the company to remain in business for more than six to eight months, we believe that we need to raise additional funds through loans and/or equity financing. If we need additional cash and cannot raise it then we will either have to suspend operations until we do raise the cash or cease operations entirely. If we need additional funds, then we will need to find alternative sources, such as a second public offering, a private placement of securities, or loans from our officers or others in order for us to maintain our operations. Other than as described in this paragraph, we have no other financing plans and have not made any arrangements to raise additional cash. Financial Condition, Liquidity and Capital Resources Since inception on March 18, 2004, the purpose of our Company has been to develop online and network security management software and online and network security consulting services. Our principal capital resources have been acquired through issuance of common stock. On October 13, 2004, the Securities and Exchange Commission issued an order declaring our SB-2 Registration Statement effective pursuant to section 8(a) of the Securities Act of 1933, as amended. On January 19, 2005, we completed our public offering by raising $105,120. We sold 1,051,700 shares of our common stock at an offering price of ten cents per share. Approval of our common stock for listing on the Over The Counter Bulletin Board with NASD is currently pending. However, there is no guarantee that we will obtain such approval. At January 31, 2005, we had positive working capital of $92,040 compared to negative working capital of $696 at April 30, 2004. This change is primarily the result of payment of administration, and professional fees. At January 31, 2005, our Company had total assets of $94,947 consisting of cash, which compares with our Company's total assets at April 30, 2004, of $400 consisting of cash. This change is the result of funds raised through our initial offering. At January 31, 2005, our Company's total liabilities were $2,907. Our total liabilities at April 30, 2004, were $696. This amount represents the balance owing of a related party loan. Our Company has not had revenues since inception. Until the Company commences business operations, it anticipates surviving with its current cash reserves and if possible, from shareholder loans and/or funding from sales of its securities. Our Company has no long-term debt and does not regard long-term borrowing as a good, prospective source of financing. We have not conducted any product research or development but do expect to do so in the future since developing online and network security management software is part of our planned activities. We do not expect to purchase or sell any significant equipment nor do we expect any -7- significant changes in the number of our employees. Results of Operations Our Company posted a loss of $10,511 for the three months ending January 31, 2005, and a loss of $12,784 for the nine months ending January 31, 2005. The principal components of the loss were administration and professional fees. Operating expenses for the three months ending January 31, 2005, were $10,511, and for the nine months ending January 31, 2005, were $12,784, compared to operating expenses of $696 for the year ending April 30, 2004. Item 3. Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in connection with the filing of this Quarterly Report on Form 10-QSB for the quarter ended January 31, 2005. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action. Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. (b) Exhibits 31 - Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. -8- 32 - Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized CYGNI SYSTEMS CORPORATION (Registrant) Date: March 15, 2005 By: /s/ Kim Friesen Kim Friesen President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, and a member of the Board of Directors -9-