10QSB 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 -------------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to _________ Commission file number 333-82493 --------- California Molecular Electronics Corp. ----------------------------------------- (Exact name of small business is here as specified in its charter) Arizona ------- (State or other jurisdiction of incorporation or organization) 86-0888087 ---------- (IRS Employer Identification No.) 50 Airport Parkway, San Jose, CA 95110 -------------------------------------------- (Address of principal executive offices) (408) 451-8404 --------------- (Issuer's telephone number) Check whether the registrant (1) 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 report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ] The number of shares outstanding of the issuer's common stock on November 1, 2000 was 5,084,023.
CALIFORNIA MOLECULAR ELECTRONICS CORP. INDEX PART I. FINANCIAL INFORMATION Page ---- ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 2 Statements of Operations for the three and nine months ended September 30, 2000 and 1999 (unaudited) 3 Statement of Stockholders' Equity (Deficit) for the nine months ended September 30, 2000 (unaudited) and the year end December 31, 1999 4 Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 5 Notes to Financial Statements. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 PART II. OTHER INFORMATION 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13
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PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA MOLECULAR ELECTRONICS CORP. -------------------------------------- BALANCE SHEET ------------- September 30 December 31 2000 1999 ------------ ------------ (unaudited) A S S E T S ----------- Current assets: Cash and cash equivalents $ 216,419 $ 91,993 Grant receivable 33,334 - Prepaid expenses 13,054 6,493 Stockholder advances 10,000 - ------------ ------------ Total current assets 272,807 98,486 Furniture and fixtures, net 6,590 2,099 Other 1,363 427 ------------ ------------ $ 280,760 $ 101,012 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ---------------------------------------------- Current liabilities: Accounts payable and accrued liabilities $ 22,890 $ 13,800 Deferred grant income 33,334 - Other payable 5,000 5,000 ------------ ------------ Total current liabilities 61,224 18,800 ------------ ------------ Stockholders' equity (deficit): Common stock, no par value: Authorized 20 million shares; 5,087,723 and 4,994,065 issued and outstanding (including treasury shares) at September 30, 2000 and December 31, 1999, respectively 1,905,086 1,280,242 Less: treasury stock at cost; 4,800 shares at September 30, 2000 and December 31, 1999 (28,800) (28,800) Accumulated deficit (1,656,750) (1,169,230) ------------ ------------ 219,536 82,212 ------------ ------------ ------------ ------------ $ 280,760 $ 101,012 ============ ============
See accompanying notes to financial statements. -3-
CALIFORNIA MOLECULAR ELECTRONICS CORP. ----------------------------------------- STATEMENT OF OPERATIONS ----------------------- (UNAUDITED) ----------- Nine months ended Three months ended September 30 September 30 ------------------------ ------------------------ 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenue: Grant income $ 66,666 Interest income 8,502 $ 7,740 $ 3,246 $ 2,916 ----------- ----------- ----------- ----------- 75,168 7,740 3,246 2,916 ----------- ----------- ----------- ----------- Expenses: Research and development expenses 234,666 115,237 79,521 - Officers' compensation donated to the Company (Note 6) 103,600 202,500 24,900 67,500 Selling, general and administrative expenses 223,037 - 64,762 - Preoperating expenses - 213,376 - 87,104 ----------- ----------- ----------- ----------- Total expenses 561,303 531,113 169,183 154,604 ----------- ----------- ----------- ----------- Loss before income taxes (486,135) (523,373) (165,937) (151,688) Provision for state income taxes 1,385 50 1,335 - ----------- ----------- ----------- ----------- Net loss $ (487,520) $ (523,423) $ (167,272) $ (151,688) =========== =========== =========== =========== Basic and diluted loss per common share $ (0.10) $ (0.11) $ (0.03) $ (0.03) =========== =========== =========== =========== Weighted average number of common shares outstanding 5,048,181 4,952,006 5,079,218 4,994,065 =========== =========== =========== ===========
See accompanying notes to financial statements. -4-
CALIFORNIA MOLECULAR ELECTRONICS CORP. -------------------------------------- STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) ------------------------------------------- Common Stock -------------------------- Treasury Accumulated Shares Amount Stock Deficit Total ------------- ----------- ------------- ------------ ---------- Balance at December 31, 1998 4,887,520 $ 636,556 $ - $ (494,561) $ 141,995 Stock issued in private placement 91,540 347,900 - - 347,900 Stock issuance costs - (49,239) - - (49,239) Officers' compensation donated to the Company (Note 6) - 270,000 - - 270,000 Stock issued for license technology fee 15,005 75,025 - - 75,025 Treasury stock, at cost (4,800) - (28,800) - (28,800) Net loss - - - (674,669) (674,669) ------------- ----------- ------------- ------------ ---------- Balance at December 31, 1999 4,989,265 1,280,242 (28,800) (1,169,230) 82,212 Stock issued in public offering 93,658 561,948 - - 561,948 Stock issuance costs - (40,704) - - (40,704) Officers' compensation donated to the Company (Note 6) - 103,600 - - 103,600 Net loss - - - (487,520) (487,520) ------------- ----------- ------------- ------------ ---------- Balance at September 30, 2000 (unaudited) 5,082,923 $1,905,086 $ (28,800) $(1,656,750) $ 219,536 ============= =========== ============= ============ ==========
See accompanying notes to financial statements. -5-
CALIFORNIA MOLECULAR ELECTRONICS CORP. ----------------------------------------- STATEMENT OF CASH FLOWS ----------------------- (UNAUDITED) ----------- Nine months ended September 30 ------------------------------ 2000 1999 ---------- ---------- Operations: Net loss $(487,520) $(523,423) Items not requiring current use of cash: Officers' compensation, donated to the Company (Note 6) 103,600 202,500 License fees - 75,025 Depreciation and amortization 458 - Legal fees in exchange for stock 28,386 - Changes in other operating items: Grant receivable 33,334 - Payable to related party - (14,500) Prepaid expenses (6,561) - Accounts payable and accrued liabilities 9,090 17,100 Deferred grant income (33,334) - Other - (7,233) ---------- ---------- Cash used for operating activities (352,547) (250,531) ---------- ---------- Investments: Furniture and fixtures (4,885) (2,624) Other investment (1,000) - ---------- ---------- Cash used for investing activities (5,885) (2,624) ---------- ---------- Financing: Issuance of common stock, after stock issuance expense 492,858 319,221 Stockholder advances (10,000) (13,500) Repayment to related party - (1,366) ---------- ---------- Cash provided by financing activities 482,858 304,355 ---------- ---------- Increase in cash and cash equivalents 124,426 51,200 Cash and cash equivalents at beginning of period 91,993 154,626 ---------- ---------- Cash and cash equivalents at end of period $ 216,419 $ 205,826 ========== ========== Supplemental cash flow disclosures: Taxes paid $ 1,385 $ - ========== ========== Interest paid $ 156 $ - ========== ==========
See accompanying notes to financial statements. -6- CALIFORNIA MOLECULAR ELECTRONICS CORP. -------------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- NOTE 1 - Basis of presentation: The financial statements included herein for California Molecular Electronics Corp. ("CALMEC" or the "Company") have been prepared by the Company, without audit pursuant to the rules and regulations of the Securities and Exchange Commission. In management's opinion, the interim financial data presented includes all adjustments (which include only normal recurring adjustments) necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results of operations for the nine months ended September 30, 2000 are not necessarily indicative of the operating results expected for the entire fiscal year. The financial statements included herein should be read in conjunction with other documents the Company files from time to time with the Securities and Exchange Commission, including the Company's Form 10-KSB for the fiscal year ended December 31, 1999. The Company began earning revenue in fiscal 2000 and is no longer considered to be in the development stage. NOTE 2 - Reclassifications: Certain prior period amounts have been reclassified in order to conform to the current period presentation. NOTE 3 - Cash and cash equivalents: CALMEC considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. NOTE 4 - Loss per share: Basic and dilutive loss per common share is calculated by dividing the net loss for the period by the average number of common shares outstanding. For the nine months ended September 30, 2000 and 1999, dilutive loss per share excludes the effect of options, because the effect would have been antidilutive. NOTE 5 - Commitment: The Company has entered into a cost reimbursable contract with San Jose State University Foundation ("Foundation") for the period from April 1, 2000 through March 31, 2001. The contract includes advisory services to be provided by the San Jose State University Department of Chemistry, facilities, supplies and equipment use. -7- NOTE 6 - Related party transactions: CALMEC's three officers have devoted 100% of their time to the business of the Company since their hire in 1997. Planned annual remuneration for the three officers is as follows: $40,000 - Chairman and Treasurer; $110,000 - President and Chief Executive Officer; and $120,000 - Executive Vice President and Secretary. The officers have elected to forego their salaries through December 31, 1999, and certain officers have continued to forego all or a portion of their salaries through September 30, 2000. As required by the Securities and Exchange Commission accounting rules, in the accompanying financial statements the officers' unpaid salaries totaling $24,900 and $67,500 for the quarters ended September 30, 2000 and 1999, respectively, are reflected as compensation expense and a credit to common stock, as the Company does not intend to repay such forfeited salaries in the future. Effective February 2000, the Executive Vice President and Secretary began to receive a salary for his services. Effective May 2000, the President and Chief Executive Officer began to receive a portion of his salary in cash ($1,050 per week) and 250 stock options per week with an exercise price of $6.00 per share. NOTE 7 - Grants: During the first quarter of 2000, the Company received a grant from The National Science Foundation in the amount of $100,000, to be paid in three equal installments. The grant will support research to demonstrate the feasibility of the unique Chiropticene molecular switch. The first installment of $33,333 was received in January 2000, and was recognized as grant income during the quarter ended March 31, 2000. The second installment of $33,333 was received in April 2000, and was recognized as grant income during the quarter ended June 30, 2000. The grant has been recognized in earnings in the period in which the related expenditures were incurred by the Company. The grant receivable of $33,334 included in other current assets and the deferred grant income of $33,334 included in current liabilities at September 30, 2000 represent the last installment of the grant. NOTE 8 - Recent accounting pronouncements: In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments," SFAS 137 extends the effective date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. As amended by SFAS 137, SFAS 133 is effective for the Company's fiscal year ending June 30, 2001. The Company does not anticipate that SFAS No. 137 will have a material impact on its financial statements. -8- CALIFORNIA MOLECULAR ELECTRONICS CORP. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: FORWARD-LOOKING STATEMENTS From time to time, statements made by California Molecular Electronics Corp.'s ("CALMEC" or the "Company") employees or information included in CALMEC's filings with the Securities and Exchange Commission (including this Form 10-QSB) may contain statements that are not historical facts, so called "forward-looking statements," which are subject to risks and uncertainties that could cause actual results to differ materially. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this Form 10-QSB, the terms "anticipates," "expects," "estimates," "believes," and other similar terms as they relate to CALMEC or its management are intended to identify such forward-looking statements. For example, statements made herein relating to acquiring intellectual property, marketing intellectual property to potential customers, maintaining commercial acceptance of our products, and anticipated growth of our target markets are forward-looking statements. Because these forward-looking statements involve risk and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of reasons, including those discussed in the section entitled "Risk Factors" of CALMEC's Form SB-2 filed with the Securities and Exchange Commission on January 31, 2000. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. CALMEC undertakes no obligation to update or revise these statements. OVERVIEW AND PLAN OF OPERATION CALMEC was formed to engage primarily in the business of producing and selling products and services related to the new technological field of molecular electronics. Molecular electronics is the technology of using single molecules to form components of electronic devices. The Company continues to be in the start-up phase of its existence, and through December 31, 1999, CALMEC's three officers had elected to forego their salaries. Commencing February 2000, the Executive Vice President and Secretary began receiving remuneration for his services and the President and Chief Executive Officer began to receive a portion of his salary commencing May 2000. The Company will transition from the start-up phase to the operational phase when the Board of Directors has determined sufficient capital has been accumulated to do so. At that time, all employees and executive officers will receive salaries, additional space will be leased, capital equipment will be purchased, and other operating expenses will be incurred. Prior to that time, activities will be restricted to low cost activities that will keep the Company within its cash resources. -9- In the second quarter of 1999, the Company started paying salaries to two chemists to perform research. Also in the second quarter of 1999, CALMEC began leasing lab space from San Jose State University for the purpose of housing these chemists and developing Chiropticene demonstration chemistry. The lease ran through March 31, 2000, and the Company has renegotiated with San Jose State University to extend the lease until March 31, 2001. On January 31, 2000, CALMEC filed Form SB-2, Registration Statement under the Securities Act of 1933, with the SEC. On February 7, 2000, the Registration Statement became effective and CALMEC commenced its sale of up to 1,000,000 shares of common stock at $6.00 per share. CALMEC plans to raise $6 million with this offering, before payment of estimated offering expenses of $50,000, although no assurance can be made as to how many shares the Company will sell. Subsequent to the effective date of the Registration Statement through November 1, 2000, CALMEC has sold 94,858 shares of its common stock, for a total of $569,148. CALMEC's business currently consists of two major areas of activity, Research and Development ("R&D") and Sales and Corporate Development. R&D consists of Research, Intellectual Property Development and Product Technology Development. The foregoing segments work together. Research develops the Company's knowledge, Intellectual Property Development fashions that knowledge into patent-protectable or trade-secret-protectable units that can be licensed and otherwise exploited for business, and Product Technology Development puts in place those technical processes and technology arrangements necessary for the Company to produce or support the production of salable products. All three research segments are currently functioning at a low but valuable level. Sales and Corporate Development's purpose is to exploit CALMEC's R&D results in order to generate revenue. This area of activity is responsible for selling products and for developing business arrangements so as to foster these sales. The Company's "early" products will be licenses to third parties of the Company's intellectual property and contract research in the development-support of third party products based on these licenses. CASH REQUIREMENTS The full extent of CALMEC's future capital requirements and the adequacy of its available funds will depend on many factors, not all of which can be accurately predicted. Although no assurance can be given, the Company believes it can continue to operate in its present status for at least the next twelve months, and proceeds from the aforementioned offering will be used to accelerate the Company's progress and amplify its influence in molecular electronics. In the event that additional capital is required, CALMEC may seek to raise that capital through public or private equity or debt financings. Future capital funding transactions may result in dilution to stockholders. -10- There can be no assurance that additional capital will be available on favorable terms, if at all. CALMEC's inability to obtain additional capital on acceptable terms could limit its ability to meet its plan of operation. PURCHASE OF CAPITAL EQUIPMENT Over the next year, the Company expects to expend up to approximately 20% of its expenditures on the purchase of capital equipment and capital facilities improvement primarily for use in R&D. The actual percentage will depend upon the availability of cash. If cash is limited, it is possible very little expenditures will be made on capital equipment. In that case, CALMEC will focus on intellectual property development of the type that does not depend upon the use of research equipment. HIRING OF EMPLOYEES CALMEC will transition from its start-up phase to its operational phase when its accumulated cash balances permit it to do so according to the business judgment of management. At that time, employees currently working without pay or for partial pay will begin receiving full compensation. Regardless of when that time occurs, as mentioned above, the Company has already hired and is supporting the lab work of chemists, and is paying one of the executive officers full compensation, and another executive officer a portion of his compensation. -11- CALIFORNIA MOLECULAR ELECTRONICS CORP. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number --------------- 27.1 Financial Data Schedule (b) Reports on Form 8-K. None. -12- CALIFORNIA MOLECULAR ELECTRONICS CORP. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 13, 2000 -------------------------- California Molecular Electronics Corp. ----------------------------------------- (Registrant) ----------------------------------------- James Marek, Jr. President and Chief Executive Officer