10QSB 1 0001.txt 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 September 30, 2000 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 000-29965 MOLECULAR ROBOTICS, INCORPORATED (Name of Small Business Issuer in its charter) Delaware 91-1844453 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1015 Gayley Ave., No. 387 Los Angeles, CA. 90024 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (818) 817-7662 (Applicable only to issuers involved in bankruptcy proceedings during the preceding five years) Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] 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 last practicable date: 5,193,150 shares of the registrant's common stock were issued and outstanding as of September 30, 2000, not including 208,000 shares issuable upon the exercise of outstanding warrants. There were an additional 104,000 shares of the registrant's common stock to be issued as of September 30, 2000. 4,956,850 shares of the registrant's preferred stock were issued and outstanding as of September 30, 2000. Traditional Small Business Disclosure Format (Check one): Yes [ ] No [X] TABLE OF CONTENTS Forward Looking Statements PART I - FINANCIAL INFORMATION Item 1. Financial Statements Item 2. Plan of Operation PART II - OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures ---------------------------------------- FORWARD LOOKING STATEMENTS This report contains forward looking statements. The forward looking statements include all statements that are not statements of historical fact. The forward-looking statements are often identifiable by their use of words such as "may," "expect," "believe," "anticipate," "intend," "could," "estimate," "continue," "plans" or the negative or other variations of those or comparable terms. The registrant's actual results could differ materially from the anticipated results described in the forward-looking statements. Factors that could affect the registrant's results include, but are not limited to, those discussed in Item 2, "Plan of Operation" and included elsewhere in this report. PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements. Financial Information INTERIM STATEMENTS (UNAUDITED) The Financial Statements and related notes presented below should be read in conjunction with "PLAN OF OPERATION." In the opinion of the Management, the interim financial statements (unaudited) include all adjustments necessary to make these financial statements in no way misleading. The information below may not be indicative of the Company's future results of operations. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS AS OF JUNE 30, 2000 AND SEPTEMBER 30, 2000 (UNAUDITED) AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED) MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) CONTENTS June 30, 2000 and September 30, 2000 (unaudited) Page FINANCIAL STATEMENTS Balance Sheets 1 Statements of Operations 2 Statements of Stockholders' Equity 3 - 5 Statements of Cash Flows 6 - 7 Notes to Financial Statements 8 - 14 MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS June 30, 2000 and September 30, 2000 (unaudited) ASSETS
September 30, June 30, 2000 2000 (unaudited) (as restated) Assets Equipment $ 199,756 $ 195,506 Total assets $ 199,756 $ 195,506 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Book overdraft $ 6,701 $ 4,833 Accounts payable and accrued expenses 29,500 1,500 Total current liabilities 36,201 6,333 Commitments Stockholders' equity Preferred stock, $0.0001 par value 5,000,000 shares authorized 4,956,850 (unaudited) and 4,956,850 shares issued and outstanding 496 496 Common stock, $0.0001 par value 45,000,000 shares authorized 6,693,150 (unaudited) and 5,193,150 shares issued and outstanding 669 519 Common stock to be issued 306,875 260,000 Additional paid-in capital 36,897,859 32,751,677 Deficit accumulated during the development stage (37,042,344) (32,823,519) Total stockholders' equity 163,555 189,173 Total liabilities and stockholders' equity $ 199,756 $ 195,506 The accompanying notes are an integral part of these financial statements.
MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS For the Three Months Ended September 30, 2000 and 1999 (unaudited) and for the Period from July 29, 1997 (Inception) to September 30, 2000 (unaudited)
For the Period from July 29, For the 1997 Three Months Ended (Inception) to September 30, September 30, 2000 1999 2000 (unaudited) (unaudited) (unaudited) (as restated) Costs and expenses General and administrative expenses $ 4,218,825 $ 567,281 $ 14,884,867 Research and development - - 16,735 Total costs and expenses 4,218,825 567,281 14,901,602 Loss before other income (expense) (4,218,825) (567,281) (14,901,602) Other income (expense) Loss on impairment of intellectual property - - (22,142,125) Interest income - - 272 Other income - - 1,111 Total other income (expense) - - (22,140,742) Net loss $(4,218,825) $(567,281) $ (37,042,344) Basic and diluted loss per share $ (0.37) $ (0.44) $ (14.37) Weighted-average common shares outstanding 11,350,000 1,293,150 2,577,429 The accompanying notes are an integral part of these financial statements.
MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' EQUITY For the Period from July 29, 1997 (Inception) to September 30, 2000 (unaudited)
Deficit Accumulated Common Additional During the Preferred Stock Common Stock Stock Paid-In Development Shares Amount Shares Amount to be Issued Capital Stage Total Balance, July 29, 1997 (Inception) - $ - - $ - $ - $ - $ - $ - Common stock issued for Cash 5,340 - 53,400 53,400 Cash 6,000 1 23,999 24,000 Services 493,000 49 4,929,951 4,930,000 Services 29,050 3 116,197 116,200 Cash and services 450,000 45 4,499,955 4,500,000 Common stock to be issued for cash 4,987 4,987 Issuance costs (15,704) (15,704) Net loss (9,575,570) (9,575,570) Balance, June 30, 1998 - - 983,390 98 4,987 9,607,798 (9,575,570) 37,313 Common stock issued for Cash 113,250 11 133,959 133,970 Cash 17,500 2 34,998 35,000 Cash 19,145 2 76,578 76,580 Cash 665 - 4,987 4,987 Services 126,200 12 502,189 502,201 Services 11,000 1 21,999 22,000 Services 56,100 6 56,094 56,100 The accompanying notes are an integral part of these financial statements.
MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' EQUITY For the Period from July 29, 1997 (Inception) to September 30, 2000 (unaudited)
Deficit Accumulated Common Additional During the Preferred Stock Common Stock Stock Paid-In Development Shares Amount Shares Amount to be Issued Capital Stage Total Common stock to be issued for cash $ $ $ (4,987) $ 4,987 $ $ - Returned and canceled shares (34,100) (3) (15,001) (15,004) Net loss (727,088) (727,088) Balance, June 30, 1999 - - 1,293,150 129 - 10,428,588 (10,302,658) 126,059 Common stock issued for intellectual property (as restated) 3,900,000 390 9,749,610 9,750,000 Common stock to be issued in connection with private placement 260,000 260,000 Forgiveness of debt 81,850 81,850 Options issued for services (as restated) 100,000 100,000 Preferred stock issued for intellectual property (as restated) 4,956,850 496 12,391,629 12,392,125 Net loss (as restated) (22,520,861) (22,520,861) Balance, June 30, 2000 (as restated) 4,956,850 496 5,193,150 519 260,000 32,751,677 (32,823,519) 189,173 Additional investment (unaudited) 96,332 96,332 The accompanying notes are an integral part of these financial statements.
MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' EQUITY For the Period from July 29, 1997 (Inception) to September 30, 2000 (unaudited)
Deficit Accumulated Common Additional During the Preferred Stock Common Stock Stock Paid-In Development Shares Amount Shares Amount to be Issued Capital Stage Total Common stock issued for services (unaudited) $ 1,500,000 $ 150 $ $ 3,749,850 $ $ 3,750,000 Common stock to be issued for services (unaudited) 46,875 46,875 Options issued for services (unaudited) 300,000 300,000 Net loss (unaudited) (4,218,825) (4,218,825) Balance, September 30, 2000 (unaudited) 4,956,850 $ 496 6,693,150 $ 669 $ 306,875 $ 36,897,859 $(37,042,344) $ 163,555 The accompanying notes are an integral part of these financial statements.
MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS For the Three Months Ended September 30, 2000 and 1999 (unaudited) and for the Period from July 29, 1997 (Inception) to September 30, 2000 (unaudited)
For the Period from July 29, For the 1997 Three Months Ended (Inception) to September 30, September 30, 2000 1999 2000 (unaudited) (unaudited) (unaudited) (as restated) Cash flows from operating activities Net loss $ (4,218,825) $ (567,281) $ (37,042,344) Adjustments to reconcile net loss to net cash used in operating activities Loss on impairment of intellectual property - - 22,142,125 Issuance of stock for services 3,796,725 555,160 13,898,226 Issuance of options for services 300,000 - 400,000 Increase in Accounts payable and accrued expenses 28,000 - 29,500 Net cash used in operating activities (94,100) (12,121) (572,493) Cash flows from investing activities Purchase of equipment (4,250) (12,100) (199,756) Net cash used in investing activities (4,250) (12,100) (199,756) Cash flows from financing activities Increase in book overdraft 1,868 - 6,701 Net proceeds from short-term loan payable - related party - 33,950 81,850 Proceeds from issuance of preferred and common stock 96,482 - 683,698 Net cash provided by financing activities 98,350 33,950 772,249 Net decrease in cash and cash equivalents - 9,729 - Cash and cash equivalents, beginning of year - 3,842 - Cash and cash equivalents, end of year $ - $ 13,571 $ - The accompanying notes are an integral part of these financial statements.
MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS For the Three Months Ended September 30, 2000 and 1999 (unaudited) and for the Period from July 29, 1997 (Inception) to September 30, 2000 (unaudited) Supplemental schedule of non-cash investing and financing activities During the year ended June 30, 2000 and the period from July 29, 1997 (inception) to June 30, 2000, the Company issued preferred and common stock in exchange for intellectual property for $22,142,125 (unaudited). During the period from July 29, 1997 (inception) to September 30, 2000, the Company issued 2,665,350 shares (unaudited) of common stock to management and others for consulting and employment services rendered valued at $3,796,725 (unaudited). During the period from July 29, 1997 (inception) to September 30, 2000, the Company issued options to purchase 266,667 shares (unaudited) of common stock for legal services rendered valued at $400,000 (unaudited). The accompanying notes are an integral part of these financial statements. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 1 - BUSINESS AND ORGANIZATION Molecular Robotics, Inc. (the "Company") was incorporated under its former name of NTech Corporation in the State of Delaware on July 29, 1997 for the primary purpose of developing, manufacturing, and marketing nano-scale products ("nano technology"). Nano technology is the concept of miniaturizing products to a point that there becomes a practical commercial application of the products. Effective March 23, 2000, NTech Corporation's name was changed to Molecular Robotics, Inc. The Company's offices are located in Los Angeles, California, and the Company intends to use independent third parties to manufacture its products. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Interim Unaudited Financial Information The unaudited financial information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company's financial position, the results of operations, and cash flows for the periods presented. The results of operations for the three months ended September 30, 2000 are not necessarily indicative of results for the entire fiscal year ending June 30, 2001. The information with respect to three months ended September 30, 2000 and 1999 is unaudited. Going Concern The accompanying financial statements have been prepared in conformity with generally accepted accounting principles that contemplate continuation of the Company as a going concern. As shown in the accompanying financial statements, the Company had losses and negative cash flows from operations and needs to raise additional funds to accomplish its objectives. In addition, the Company's sole reason for the positive equity balance is the continuing effort of Company personnel to sell preferred and common stock. There is no certainty they will be able to continue to do so. Management plans to rely on the sales of securities to sustain operations. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Development Stage Enterprise The Company is a development stage company as defined in Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises." The Company is devoting substantially all of its present efforts to establish a new business, and its planned principal operations have not yet commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. Such estimates affect the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from these estimates. Fair Value of Financial Instruments The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of the Company's financial instruments, including cash and cash equivalents and accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities. Loss per Share The Company calculates loss per share in accordance with SFAS No. 128, "Earnings per Share." Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Because the Company has incurred net losses, basic and diluted loss per share are the same. The preferred stock issued during the year ended June 30, 2000 has the same rights as the common stock. The preferred stock has no liquidation preferences, dividends, or redemption rights. Accordingly, the preferred stock has been treated as common stock for the purpose of computing basic and diluted loss per share (see Note 6). Stock-Based Compensation The Company accounts for employee stock compensation arrangements in accordance with provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," and complied with the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB 25, compensation expense is based on the difference, if any, on the date of grant between the fair value of the Company's common stock and the exercise price. Unearned compensation is amortized over the vesting period of the related options. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of Long-Lived Assets During the year ended June 30, 2000, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under the provisions of this statement, the Company has evaluated its long-lived assets for financial impairment and will continue to evaluate them as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. The Company evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. Based on these evaluations, the Company recorded an impairment loss of $13,825,275 for the year ended June 30, 2000 on the intellectual property acquired during the year. Income Taxes The Company accounts for income taxes under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is required when it is less likely than not that the Company will be able to realize all or a portion of its deferred tax assets. Comprehensive Income The Company utilizes SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. Comprehensive income is not presented in the Company's financial statements since the Company did not have any of the items of comprehensive income in any period presented. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Issued Accounting Pronouncements In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," to provide guidance on the recognition, presentation, and disclosure of revenue in financial statements. Changes in accounting to apply the guidance in SAB No. 101 may be accounted for as a change in accounting principle effective January 1, 2000. Management has not yet determined the complete impact of SAB No. 101 on the Company; however, management does expect that application of SAB No. 101 will have a material effect on the Company's revenue recognition and results of operations. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," (an Interpretation of Accounting Principles Bulletin Opinion No. 25 ("APB 25")) ("FIN 44"). FIN 44 provides guidance on the application of APB 25, particularly as it relates to options. The effective date of FIN 44 is July 1, 2000, and the Company has adopted FIN 44 as of that date. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125." This statement is not applicable to the Company. NOTE 3 - COMMITMENTS During the year ended June 30, 2000, the Company entered into an employment agreement, expiring in May 2005, with the following compensation commitments: Year Ended June 30, 2001 $ 80,000 2002 $ 80,000 2003 $ 80,000 2004 $ 80,000 2005 $ 70,000 MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 3 - COMMITMENTS (Continued) In connection with the acquisition of intellectual property, the Company agreed to issue an additional 1,000,000 shares of its common stock vesting as follows: 100,000 shares in 2001, 200,000 shares in 2002, 300,000 shares in 2003, and 400,000 shares in 2004. The vesting of the shares is contingent upon performance of the intellectual property. Accordingly, the cost of the intellectual property will be measured based on the fair value of the shares at the vesting dates in accordance with Emerging Issues Task Force 96-18, "Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods, or Services." In May 1998, the Company entered into an agreement to construct a piece of equipment. The expenditures associated with this contract will be capitalized to equipment and will be depreciated upon completion of the contract. The Company is required to pay the consultant upon completion of various phases, at a pre-determined fee schedule. The total estimated expenditure is $199,000. As of June 30, 2000, the Company has paid $190,398. On July 1, 2000, the Company entered into a two-year consulting agreement totaling $36,000 per year. The Company also agreed to issue the consultant 150,000 shares of common stock upon completion of the two years. As a result, the Company will record compensation expense of approximately $187,500 per year over the next two years. NOTE 4 - STOCKHOLDERS' EQUITY Preferred Stock The Company's preferred stock has a par value of $0.0001. There are 5,000,000 shares authorized and 4,956,850 shares issued and outstanding. The holders of the preferred stock have voting and other rights similar to common stockholders. During the year ended June 30, 2000, the Company issued 4,956,850 shares of preferred stock in exchange for certain intellectual property acquired for $12,392,125. Common Stock During the year ended June 30, 2000, the Company issued 3,900,000 shares of common stock in exchange for intellectual property for $9,750,000. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 4 - STOCKHOLDERS' EQUITY (Continued) Private Placement In June 2000, the Company entered into a private placement agreement to offer up to $5,000,000 worth of units at $2.50 per unit to accredited investors. As of June 30, 2000, $260,000 was received, and the Company had committed 104,000 units. Each unit consists of one share of the Company's common stock and two warrants at an exercise price of $5 per share. The warrants will be immediately detachable from the common shares for separate transfer and will be exercisable from the closing date of the offering for a period of 12 months thereafter. There was no effect on pro forma results of operations as a result of the issuance of stock purchase warrants as the fair value of the warrants was $0. The fair value was computed using the Black-Scholes option valuation model with the following assumptions: dividend yield of 0%, risk-free interest rate of 7%, expected volatility of 0%, and an expected life of one year. In connection with the offering, the Company issued 208,000 warrants subsequent to June 30, 2000. Options During the year ended June 30, 2000, the Company entered into an agreement to issue options for 400,000 shares of common stock for services rendered at an exercise price of $1. The shares vest over a six-month period commencing June 2000. The fair value of the stock of $2.50 per share was used to record the expense. Accordingly, the Company recorded $300,000 for the three months ended September 30, 2000. NOTE 5 - RELATED PARTY TRANSACTIONS During the year ended June 30, 2000 and the three months ended September 30, 2000, the Company paid consulting fees to stockholders of the Company. Total fees paid during the year ended June 30, 2000 and the three months ended September 30, 2000 were for services rendered in relation to the development of a business plan and the running of daily operations and amounted to $101,933 and $23,054 (unaudited), respectively. MOLECULAR ROBOTICS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS June 30, 2000 and September 30, 2000 (unaudited) NOTE 6 - PRIOR PERIOD ADJUSTMENT Accumulated deficit and additional paid-in capital as of July 1, 2000 have been increased by $8,856,850 to restate the value of stock issued for the acquisition of certain intellectual property, reflecting a revised fair value of $2.50 per share. In addition, the Company has restated the cumulative net loss for the period from July 29, 1997 (inception) to September 30, 2000 for $100,000, representing the stock options issued for services received. As a result, cumulative net loss per share for the period from July 29, 1997 (inception) to September 30, 2000 decreased by $4.98 per share. NOTE 6 - SUBSEQUENT EVENTS On October 12, 2000, the Company recalled all outstanding shares of preferred stock as of June 30, 2000 and reissued the stockholder an equal amount of common stock. Subsequent to September 30, 2000, the Company agreed to issue 2,364,000 shares of common stock to stockholders and consultants for services rendered. ITEM 2. PLAN OF OPERATION. The following Plan of Operation should be read in conjunction with the financial statements and accompanying notes appearing elsewhere in this Report. OVERVIEW Since inception, the Company has developed technologies, acquired technologies from third parties, directed, supervised and coordinated research and development efforts, raised capital and initiated marketing activities with potential customers. The Company will continue to focus in these areas in its daily operations in the near future. At September 30, 2000, the Company had an accumulated net loss since inception (July 1997) of ($37,042,344) (unaudited; restated). Of this accumulated loss, ($22,142,125) has been derived from a loss on impairment of intellectual property, and ($14,884,867) from general and administrative expenses. The Company expects operating losses to continue for the foreseeable future from research and development efforts and general and administrative expenses prior to receiving any revenues from its technologies. The Company does not know if its research and development or marketing efforts will be successful, that it will ever have commercially acceptable products or if it will achieve significant sales of any such products. The Company operates in a highly competitive environment of rapid changes in technologies and is dependent upon the services of its employees, consultants and independent contractors. If the Company is unable to successfully commercialize its technologies, it would likely have to significantly alter its business operations. RESULTS OF OPERATIONS Comparison of the three months ended September 30, 2000 to the three months ended September 30, 1999. Net Loss. The Company reported a net loss of ($4,218,825), or ($0.37) per share, basic and diluted, for operations for the three months ended September 30, 2000 compared to a net loss of ($567,281), or ($0.44) per share, basic and diluted, for the three months ended September 30, 1999. The increase of ($3,651,544) is primarily a result of the recording of ($4,218,825) in general and administrative expenses related to the Company's daily operations. Revenues. The Company had no revenues for the three months ended September 30, 2000 nor since its inception. The Company anticipates that it will realize revenues within the next twelve months from sales of its coded microtaggant and optical reader, but there is no assurance that this indeed will occur. Operating Costs and Expenses. Operating costs and expenses for the three months ended September 30, 2000 totaled ($4,218,825) compared to operating costs and expenses of ($567,281) for the three months ended September 30, 1999. These operating costs and expenses were a result of general and administrative expenses of ($4,218,825) for the three months ended September 30, 2000, which consisted of consultant fees, accounting, travel, legal, telephone and other day to day operating expenses, compared to general and administrative expenses of ($567,281) for the three months ended September 30, 1999. This increase was primarily the result of the issuance of stock for services. The Company does not anticipate any significant change in general and administrative expenses in the near future. Research and Development. The Company expects research and development expenses to increase as it furthers the development of its existing technologies and acquires and/or licenses new technologies. The future research and development will be funded primarily from additional financings the Company expects to consummate. There is no assurance that the Company will consummate such additional financing. For the next twelve months, the Company anticipates the hiring of an additional 15 employees, comprised of both scientific/technical and administrative positions. LIQUIDITY As a development stage company, Molecular Robotics needs to continue to raise capital to continue its operations. The Company has relied primarily upon its management, private placements and subscription sales of stock to fund its continuing operations. Until the Company can generate revenue from sales and licensing of its technologies, or receive a large infusion of cash from a potential strategic partner, it intends to rely upon these methods of funding operations during the next year. The Company's fundings to date have been allocated to the taggant/reader development, as well as general business set up and operating expenses. The Company will use additional capital raised in the next twelve months to further the development of its taggant and optical reader and other products in development, as well as general operating expenses. The Company has not entered into any outside funding commitments to date. Stockholders' equity totaled $163,555 on September 30, 2000. Based upon current projections, the Company's principal cash requirements for the next twelve months consist of (1) fixed expenses, including rent (new lease projected), payroll, investor relations services, public relations services, consultant services and (2) variable expenses, including technology research and development, intellectual property protection, utilities and telephone, office supplies, and legal and accounting services. The Company intends to satisfy its capital requirements for the next twelve months by continuing to pursue private placements to raise capital, using stock as payment for services in lieu of cash where appropriate and borrowing as appropriate. The Company does not know if these resources will be adequate to cover its capital requirements. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings. The registrant's current legal proceedings have been disclosed in previous Form 10-SB and Form 10-KSB filings, filed March 15, 2000 and October 13, 2000, respectively. There has been no material change in such proceedings as of the date of this filing. ITEM 2. Changes in Securities. Recent Sales of Unregistered Securities; Use of Proceeds From Registered Securities a. Securities Sold Between July 1, 2000 and September 30, 2000 the Company issued 1,500,000 shares of common stock for services to two parties (related) for consideration of $2.50 per share. With respect to the sales of these unregistered securities by Molecular Robotics, the Company believes that these transactions did not involve any public offering, in as much as all these shares were issued to the Company's Officers, Directors and others, who purchased the shares for investment purposes only and not with a view to further public distribution. Further, no commissions were paid to any persons in connection with such sales, no advertising of any nature was made in connection with the sale of said shares, all Company information was made available to said purchasers, and said purchasers were required to execute a subscription agreement restating the aforementioned, among other things. Accordingly, the Company believes that the aforementioned transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. b. Use of Proceeds From Registered Securities None ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders. None ITEM 5. Other Information. None ITEM 6. Exhibits and Reports on Form 8-K a. The following exhibits are attached hereto: Exhibit Number Description of Exhibit 27.1 Financial Data Schedule b. The Company filed the following reports on Form 8-K during the quarter ended September 30, 2000: None Signatures Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. Molecular Robotics, Inc. (Registrant) Date: November 20, 2000 By:/s/SUSAN M. ALT Susan M. Alt Chairman of the Board