U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 For the transition period from . . . . to . . . .
Commission file number 33-98526
CALIFORNIA APPLIED RESEARCH, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 84-1345053
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1945 South Poplar Street, Denver, Colorado 80224
(Address of principal executive offices) (Zip Code)
(303) 758-5057
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all the reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve 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 ..
The number of shares of common stock outstanding as of June 30, 1998 is
2,470,000.
Transitional Small Business Disclosure Format (check one): Yes ... No .X.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
December 31,
March 31,
1998
1999
<S> <C> <C>
ASSETS
Current asset
Cash 618
600
Other asset
Deferred public offering costs 10,924
10,924
11,542
11,524
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liability
Accrued liabilities 5,000
5,000
Contingencies and commitments (notes 2, 4 and 5)
Stockholders' equity
Common stock, $.001 par value per share; 100,000,000 shares
authorized; 2,470,000 shares issued and outstandi 2,470
2,470
Additional paid-in capital 11,281
11,281
Deficit accumulated during the development stage (7,209)
(7,227)
6,542
6,524
11,542
11,524
</TABLE>
The accompanying notes are an integral part of this statement.
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March
31,
1998
1999
<S> <C> <C>
Expenses
Stock issued for services $ $
- -
Travel -
- -
Other general and administrative 1,076
18
1,076
18
Net loss (1,076)
(18)
Weighted average number of shares 2,470,000
2,470,000
Net loss per common share (0.001)
(0.000)
</TABLE>
The accompanying notes are an integral part of this statement.
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March
31,
1998
1999
<S> <C>
<C>
Cash flows from operating activities
Net loss (1,076)
(18)
Non-cash items included in the net loss
Stock issued for services -
- -
Changes in operating assets and liabilities
Accounts payable (55)
- -
Net cash from operating activities (1,131)
(18)
Cash flows from financing activities
Proceeds from sale of common stock -
- -
Contribution of stock by founder -
- -
Costs related to public offering (2,363)
- -
Net cash from financing activities (2,363)
0
Increase (decrease) in cash (3,494)
(18)
Cash, beginning of period 4,166
618
Cash, end of period 672
600
</TABLE>
The accompanying notes are an integral part of this statement.
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Notes to Financial Statements
Basis of Presentation
The unaudited interim condensed financial statements and related notes have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. However, in the opinion of
management, the accompanying unaudited financial statements contain all
adjustments (consisting of only normal recurring accruals) considered
necessary to present fairly the results for the interim periods presented.
The accompanying condensed financial statements and related notes should be
read in conjunction with the Company's most recent audited financial
statements. The results of operations for the period presented herein are not
necessarily indicative of the results to be expected for the full calendar
year.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization. California Applied Research, Inc. (the "Company") was
incorporated under the laws of the State of Nevada on March 25, 1992. The
Company is in the development stage as more fully defined in Statement No. 7
of the Financial Accounting Standards Board. Planned principal operations of
the Company have not yet commenced, and activities to date have been limited
to its formation and obtaining its initial capitalization. The Company
intends to seek, investigate and, if such investigation warrants, acquire an
interest in business opportunities presented to it by persons who or firms
which desire to employ the Company's funds in their business or seek the
perceived advantages of a publicly held corporation.
Deferred Costs Related To Proposed Public Offering. Costs incurred in
connection with the proposed public offering of common stock have been
deferred and will be charged against capital if the offering is successful or
against operations if it is unsuccessful.
Shares Issued In Exchange For Services. The fair value of shares
issued in exchange for services rendered to the Company was determined by the
Company's officers and directors.
Income Taxes. The Company has made no provision for income taxes because of
financial statement and tax losses since its inception. As of December 31,
1998, the Company has deferred tax assets of approximately $1,600 relating
primarily to the capitalization of start-up costs for tax purposes. A
valuation allowance has been provided to reduce the deferred tax assets to
zero.
Net Loss Per Common Share. The net loss per common share is computed
by dividing the net loss for the period by the weighted average number of
shares outstanding. For purposes of computing the weighted average number of
shares, all stock issued prior to the public offering is considered to be
"cheap stock" as defined in SEC Staff Accounting Bulletin 4D and is therefore
counted as outstanding for the entire period.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
2. GOING CONCERN CONTINGENCY
The Company has minimal capital resources presently available to meet
obligations which normally can be expected to be incurred by similar
companies, and with which to carry out its planned activities. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
In order to begin any significant operations, the Company will have
to pursue other sources of capital, such as additional equity financing as
discussed in Note 4. There is no assurance that the Company will be able to
obtain such financing. The accompanying financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
3. RELATED PARTY TRANSACTIONS
In December 1994 the Company's President began providing to the
Company free of charge a minimal amount of office space in his home.
In November 1994 one of the Company's founders who was also an officer and
director of the Company, transferred 800,000 shares of her originally issued
shares, valued at $1, to the Company's corporate attorney in consideration
for said attorney's undertaking to provide legal services incurred in
connection with the Company's proposed public offering.
See also Note 5 regarding a legal fee relative to the public offering
of common stock.
4. CONTINGENT PUBLIC OFFERING OF COMMON STOCK
The Company sold 99,325 shares of its $.001 par value common stock at a price
of $.25 per share in connection with a public offering. The shares were
offered and sold on a "best efforts" 100,000 share minimum, 1,000,000 share
maximum basis, pursuant to a continuing offer over 360 days after the date of
the Prospectus which was May 19, 1998. Offering expenses incurred by the
Company totaled $10,924 and consist of professional fees, printing,
registration, and other out-of-pocket expenses. No selling commissions were
paid.
Proceeds from subscriptions for shares have been deposited into an escrow
account with an independent third party, pursuant to an escrow agreement
between the Company and the Escrow Agent. The securities to be issued to
investors must also be deposited into this escrow account. The deposited
funds and the deposited securities may not be released until an acquisition,
meeting certain specified criteria, has been made and a sufficient number of
investors reconfirm their investment in accordance with certain specified
procedures. Pursuant to these procedures, a new prospectus, which describes
an acquisition candidate and its business and includes audited financial
statements, must be delivered to all investors. The Company must return the
pro rata portion of the deposited funds to any investor who does not elect to
remain an investor. Unless a sufficient number of investors elect to remain
investors, all investors will be entitled to the return of a pro rata portion
of the deposited proceeds (and any interest earned thereon) and none of the
deposited securities will be issued to investors. In the event an acquisition
is not consummated within 18 months of the effective date (May 19, 1998), all
of the deposited proceeds will be returned on a pro rata basis to all
investors.
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statements
This discussion may contain statements that could be deemed forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act, which statements
are inherently subject to risks and uncertainties. Forward-looking statements
are statements that include projections, predictions, expectations or beliefs
about future events or results or otherwise are not statements of historical
fact. Such statements are often characterized by the use of qualifying words
(and their derivatives) such as "expect," "believe," "estimate," "plan,"
"project," "anticipate," or other statements concerning opinions or judgment
of the Company and its management about future events. Factors that could
influence the accuracy of such forward-looking statements include, but are
not limited to, the financial success or changing strategies of the Company's
customers, actions of government regulators, the level of market interest
rate and general economic conditions. All forward-looking statements included
herein are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements due to the
factors cited above. As a result of these factors, there can be no assurance
the Company will not experience material fluctuations in future operating
results on a quarterly or annual basis, which would materially and adversely
affect the Company's business, financial condition and results of operations.
Plan of Operation
The Company, a development stage entity, has neither engaged in any
operations nor generated any revenues to date. Its entire activity since its
inception has been to prepare for its proposed fund raising through an
offering of equity securities as contemplated herein.
The Company sold 99,325 shares of its $.001 par value common stock at a price
of $.25 per share in connection with a public offering. The shares were
offered and sold on a "best efforts" 100,000 share minimum, 1,000,000 share
maximum basis, pursuant to a continuing offer over 360 days after the date of
the Prospectus which was May 19, 1998. Offering expenses incurred by the
Company totaled $10,924 and consist of professional fees, printing,
registration, and other out-of-pocket expenses. No selling commissions were
paid. None of the offering expenses were deducted from the proceeds which
have been deposited in a Rule 419 escrow. In the event an acquisition is not
consummated within 18 months of the effective date (May 19, 1998), all of the
deposited proceeds will be returned on a pro rata basis to all investors.
Substantially all of the Company's working capital needs subsequent to the
offering contemplated hereby will be attributable to the identification of a
suitable Acquired Business, and thereafter to effectuate a Business
Combination with such Acquired Business. Such working capital needs are
expected to be satisfied from the Net Proceeds of the proposed offering.
Although no assurances can be made, the Company believes it can satisfy its
cash requirements until a Business Combination is consummated, with 10% of
the Net Proceeds derived hereby. Due to the possible indefinite period of
time to consummate a Business Combination and the nature and cost of the
Company's expenses related to the Company's search and analysis of a Business
Combination, there can be no assurances that the Company's cash requirements
until a Business Combination is consummated will be satisfied with 10% of the
Net Proceeds of this offering (including interest income earned thereon).
Prior to the conclusion of this offering the Company currently anticipates
its expenses to be limited to accounting fees, legal fees, telephone,
mailing, filing fees, occupational license fees, escrow agent fees, transfer
agent fees. See "Risk Factors."
Year 2000 Compliance
The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000"
problem is concerned with whether computer systems will properly recognize
date sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Year 2000 problem is pervasive and complex as the
computer operation of virtually every company will be affected in some way.
The Company, like most owners of computer software, will be required to
modify significant potions of its software so that it will function properly
in the Year 2000. Preliminary estimates of the total costs to be incurred by
the Company to resolve this problem range from $500 to $1,000. Maintenance or
modification costs will be expensed as incurred, while the costs of new
software will be capitalized and amortized over the software's useful life.
Since the Company mainly uses third party "off-the-shelf" software, it does
not anticipate a problem in resolving the Year 2000 problem in a timely
manner. The Company is currently taking steps to ensure that its computer
systems and services will continue to operate on and after January 1, 2000.
However, there can be no assurance that Year 2000 problems will not occur
with respect to the Company's computer systems. Furthermore, the Year 2000
problem may impact other entities with which the Company transacts business,
and the Company cannot predict the effect of the Year 2000 problem on such
entities or the resulting effect on the Company. The cost to be incurred by
the Company related to externally maintained systems is expected to be
minimal.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Table:
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter.
[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.
California Applied Research, Inc.
(Registrant)
By:/s/__________________________________________
J. Michael Spinali
President, Director, Chief
Financial Officer, Treasurer
Date: ____________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 600
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,542
<CURRENT-LIABILITIES> 5,000
<BONDS> 0
0
0
<COMMON> 2,470
<OTHER-SE> 4,054
<TOTAL-LIABILITY-AND-EQUITY> 11,506
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18)
<EPS-BASIC> (.0)
<EPS-DILUTED> (.0)
</TABLE>
