<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
(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
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 0-29049
RHOMBIC CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 86-0824125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11811 N. Tatum Blvd. # 3031
Phoenix, Arizona 85028
(Address of principal executive offices (zip code))
602/953-7702
(Registrant's telephone number, including area code)
Indicate by check mark 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 last 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
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at September 30, 2000
Common Stock, par value $0.001 26,286,100
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART 2 - 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 8K
<PAGE>
RHOMBIC CORPORATION
CONSOLIDATED BALANCE SHEET
(A Development Stage Company)
September 30, 2000
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash $ 243,995
Receivables -
Prepaid expenses 83,145
-----------
Total Current Assets 327,140
-----------
OTHER ASSETS:
Investments 217,756
Licensing Agreements and Technologies 2,005,350
Patents 106,238
-----------
Total assets $ 2,656,484
===========
LIABILITIES
CURRENT
Accounts Payable $ 115,226
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
1,000,000 shares authorized, none issued
Common stock, $.001 par value, 70,000,000
shares authorized, 26,286,100 issued and
outstanding 26,286
Additional paid-in capital 6,479,608
(Deficit) accumulated during the development stage (3,964,636)
-----------
Total stockholders' equity 2,541,258
-----------
Total liabilities and stockholders' equity $ 2,656,484
===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
RHOMBIC CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Cummulative from
November 21, 1994
For the 9 months ended For the 3 months ended (Inception) to
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000
-------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Royalty income $ - $ - $ - $ - $ 5,729
Interest income 4,832 - 2,330 - 6,017
----------------------------- ----------------------------------------------------
4,832 - 2,330 - 11,746
EXPENSES
--------
Research and development expense 388,854 167,570 66,196 68,512 580,359
Legal & accounting 234,219 92,734 65,566 23,518 552,086
Transfer Agent Expenses 4,460 11,000 - 2,500 27,115
Consulting, related party 60,000 67,500 15,000 22,500 367,000
Consulting 328,453 55,508 276,158 17,345 1,276,352
Other general & administrative 874,627 37,140 4,787 25,912 1,173,470
----------------------------- ----------------------------------------------------
Total Expenses 1,890,613 431,452 427,707 160,287 3,976,382
NET (LOSS) $ (1,885,781) $ (431,452) $ (425,377) $(160,287) $ (3,964,636
============================= ====================================================
NET LOSS PER SHARE:
Basic #REF! * #REF! *
============================= =================================
Diluted #REF! $ * #REF! $ *
============================= =================================
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic #REF! #REF! #REF! #REF!
============================= =================================
Diluted #REF! #REF! #REF! #REF!
============================= =================================
</TABLE>
* Loss is less than $.01 per share
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
RHOMBIC CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(Deficit)
Accumulated
Common Stock Additional During
--------------------------
Paid-In Development
Shares Amount Capital Stage Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 33,741,100 $ 33,741 $4,580,750 $ (2,078,855) $2,535,636
Acquisition of technology 100,000 100 281,150 281,250
Shares issued to acquire Emerald Investments 200,000 200 (200) 0
Shares issued for services 75,000 75 214,350 214,425
Exercise of stock options 170,000 170 107,080 107,250
Net loss for the quarter ended March 31, 2000 (604,944) (604,944)
-----------------------------------------------------------------------
Balance at March 31, 2000 34,286,100 34,286 5,183,130 (2,683,799) 2,533,617
Acquisition of technology 100,000 100 194,150 194,250
Shares issued for services 350,000 350 661,066 661,416
Net loss for the quarter ended June 30, 2000 (855,460) (855,460)
-----------------------------------------------------------------------
Balance at June 30, 2000 34,736,100 $ 34,736 $6,038,346 ($3,539,259) $2,533,823
Cancellation of escrow shares (9,000,000) (9,000) 9,000 0
Adj of shares issued for services (40,188) (40,188)
Shares issued for services 350,000 350 272,650 273,000
Exercise of stock options 200,000 200 199,800 200,000
Net loss for the quarter ended Sept. 30, 2000 (425,377) (425,377)
-----------------------------------------------------------------------
26,286,100 $ 26,286 $6,479,608 ($3,964,636) $2,541,258
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
RHOMBIC CORPORATION
(A Devlopment Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
For the nine months For the three months Cummulative from
ended Sept. 30, ended Sept. 30, November 21, 1994
-------------------- --------------------- (Inception) to
2000 1999 2000 1999 Sept. 30, 2000
---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income for the period $(1,885,781) $(431,452) $(425,377) $(160,287) $(3,964,636)
Adjustments to reconcile net
cash used by operations:
Common stock issued for services 1,108,653 44,784 232,812 2,500 1,708,984
Fair value of options granted - - 436,980
(Increase) decrease in accounts receivable 15,103 2,435 - 5 -
(Increase) decrease in prepaid expenses 116,855 - 38,748 - (83,145)
Increase (decrease) in accounts payable 72,826 (17,000) 73,390 - 115,226
Increase (decrease) in due to related parties 3,793 64,340 (14,826) (11,324) -
------------------------------------------------------------------------
Net Cash (Used) by Operating Activities (568,551) (336,893) (95,253) (169,106) (1,786,591)
FINANCING ACTIVITIES
Proceeds from private placements - 719,268 - - 1,347,830
Proceeds from private placements held in trust - (327,211) - 168,395 -
Proceeds from exercise of stock options 307,250 - 200,000 - 1,006,750
------------------------------------------------------------------------
Cash provided from financing activities 307,250 392,057 200,000 168,395 2,354,580
------------------------------------------------------------------------
INVESTING ACTIVITIES
Cost of patents (52,257) (15,000) (43,941) (1,000) (106,238)
Investment in Rockford Technologies - (40,830) - (111) (207,756)
Investment in marketable securities - - - - (10,000)
------------------------------------------------------------------------
Cash used in investment activities (52,257) (55,830) (43,941) (1,111) (323,994)
------------------------------------------------------------------------
Increase (decrease) in cash (313,558) (666) 60,806 (1,822) 243,995
Cash at beginning of period 557,553 4,660 183,189 5,815 -
------------------------------------------------------------------------
Cash at end of period $ 243,995 $ 3,994 $ 243,995 $ 3,993 $ 243,995
========================================================================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Issuance of common stock for licensing agreements
and technologies $ 475,500 $ 111,200 $ 0 $ 50,000 $ 2,005,350
========================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
RHOMBIC CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000
The unaudited financial statements included herein were prepared from the
records of the Company in accordance with Generally Accepted Accounting
Principles. These financial statements reflect all adjustments which are, in the
opinion of management, necessary to provide a fair statement of the results of
operations and financial position for the interim periods. Such financial
statements generally conform to the presentation reflected in the Company's
Forms 10KSB and 10-KSB/A filed with the Securities and Exchange Commission for
the year ended December 31, 1999. The current interim period reported herein
should be read in conjunction with the Company's Forms 10KSB and 10-KSB/A
subject to independent audit at December 31, 1999 as well as the 10-QSB reports
filed for the three months ended March 31, 2000 and June 30, 2000.
The results of operations for the nine months ended September 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
Prepaid Expenses
On June 15, 2000 the Company entered into an agreement with Vision Magnetics
Corporation "Vision", to manufacture, market and sub-license its Magnesite
Retriever software program. The Company will split the costs of manufacturing
with Vision and receive $10 for each sub-license sold. Rhombic paid Vision
$67,250 to design and package 50,000 copies of the program on floppy disks for
sale.
The Company also has prepaid $10,000 for legal and patent costs and $5,895 for
administrative services.
Stockholders' Equity
On August 16, 2000 the Company issued 350,000 restricted shares of common
stock for financial and business planning services within Europe to a company in
Germany. The deemed value of the shares issued was $ 273,000 which was
determined based upon the trading value of the Company's common stock at the
time of the issuance of the stock. The Company also issued 200,000 restricted
common shares in consideration for $ 200,000 for exercised stock options under
the 2000 stock option plan. The options were exercised at $1.00 per common share
and a director received 100,000 of the total restricted common shares issued.
On August 29, 2000 the Company cancelled a total of 9,000,000 shares under
an escrow agreement. The shares were returned to the Company and cancelled on
its stock ledger.
Stock Options
Rhombic's Board of Directors approved a stock option plan for the year 2000
to authorize the issuance of options for the purchase of 2,500,000 shares of
common stock. During the nine months ended September 30,2000, the Company issued
options exercisable to purchase 2,350,000 shares of the Company's common stock
under the year 2000 plan at an average exercise price of $2 per share. A total
of 200,000 options were exercised during August at $1.00 per common share for a
total of $200,000. There are currently 2,150,000 options outstanding in the year
2000 plan at an average price of $2.09 per share.
There are granted and unexercised options for the purchase of 250,000
shares of the Company's common stock under the 1999 stock option plan at an
average exercise price of $.80 per share.
There is a total of granted and unexercised outstanding options under the
1999 and 2000 plans for the purchase of 2,400,000 shares of the Company's common
stock at an average exercise price of $1.96 per share.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is intended to provide an analysis of the Company's
financial condition and Plan of Operation and should be read in conjunction with
the Company's financial statements and the notes thereto. The matters discussed
in this section that are not historical or current facts deal with potential
future circumstances and developments. Such forwardlooking statements include,
but are not limited to, the development plans for the technologies of the
Company, trends in the results of the Company's development, anticipated
development plans, operating expenses and the Company's anticipated capital
requirements and capital resources. The Company's actual results could differ
materially from the results discussed in the forwardlooking statements.
The Company has not generated revenue from operations during the first nine
months of 2000 or since its inception. The Company has anticipated generating
revenues during the year 2000 from its Magnesite Retriever.
During April 2000, the Company finished core programming the Magnesite Retriever
(the "Magnesite"). The Magnesite is a software program designed to economize on
Internet search and data download costs. It creates site directories and
translates hypertext references, making the information fully useable offline.
The development of the Magnesite is interrelated with the Company's efforts to
develop and launch the Rhombic Explorer, a personal Internet search engine.
During September, the Company and its strategic marketing partner, Vision
Magnetics, conducted quality assurance testing on the Magnesite code to ensure
product reliability and to allow for expansion of Magnesite into Magnesite Pro.
The results of the testing indicated that the program was not suitable for
marketing because of its inability to download graphics and certain web sites in
their entirety. As a result of the testing, the Company is evaluating the cost
and benefits involved in debugging the program and bringing it to the
marketplace. In conjunction with the planned marketing of Magnesite during the
third quarter, Vision Magnetics engaged programmers to create a new website for
Rhombic to sell, deliver and maintain user registration and update information
as well as hard delivery of diskettes containing Magnesite code to end users.
During the nine months ended September 30, 2000, the Company has expensed a
total of $50,523 for the programming costs of Magnesite and its share of the
costs to construct a new website to market the product. In addition it has
disbursed $67,257 to Vision Magnetics for its share of preparing designing and
packaging 50,000 copies of the program on floppy disks for sale.
During the second quarter of this year, the Company paid $22,000 in cash and
issued 50,000 restricted common shares to Roger Duffield to prepare a business
plan to develop and commercialize the Inertial Electrostatic Confinement
technology. On September 1, 2000 Mr. Duffield became the President of the
Company and completed the business plan. While completing the business plan in
late August, Astrium, which is a subsidiary of Daimler-Chrysler Aerospace,
informed Rhombic that they would not continue to self-fund the Neutron Generator
project beyond December 31, 2000. As a result, the business plan provided for
the formation of a joint venture between Astrium, Rhombic, and other partners
that would provide capital and technological expertise to commercialize the
technology within certain applications. Agreements were obtained from all of the
participating joint venture partners to perform their respective roles. The
Company is currently awaiting for the joint venture to be funded by the
participating partner that committed to capitalizing the joint venture. In the
event that a joint venture is not funded by December 31, 2000 the Company
anticipates that the neutron generator project will be stopped due to lack of
funding.
Research on the technology began during 1993 under a licensing agreement between
Daimler-Benz Aerospace (DASA), the University of Illinois and Rockford
Technology Associates (a wholly owned subsidiary of Rhombic). The development
program objective was to develop a neutron generator for multiple applications.
During October 2000, the development program with Astrium successfully proved
the demonstrator model of the neutron generator in continuous operation for over
4,000 hours. This achievement is significant because there are not any known
competitors that have been able to match the longevity of Astrium's
demonstrator. Competitors have been able to generate a higher output of neutrons
per second than the demonstrator. Current applications suitable for the Astrium
demonstrator are:
a. medical cancer treatments
b. bulk foodstuffs quality control
c. On-line measurement of coal quality at the power station for combustion
emission control.
d. On-line measurement of mineral quality in the mining industry.
e. Land mine detection
The Company has also been pursuing the development of the following four
applications of its Diamond Film Forced Diffusion technology:
1. A SiliconCarbide purification technology for the hightech
manufacturing industry,
2. An integrated Diamond Circuit for the computer and electronics
industry,
3. A Heavy Doped Diamond FuelCell Electrode for the fuel cell
industry,
4. Quality colored diamonds for the highend jewelry accessory market.
During the six months ended June 30, 2000, the Company paid the University of
Missouri $160,000 for research and development work on the above applications.
<PAGE>
During the second quarter 2000 the Company paid the University of Missouri
$80,000 to begin designing a third generation reactor capable of handling larger
silicon wafers with a higher impurity transport rate. During September 2000, the
Company determined that its fuel cell technology had the most imminent
commercial potential and asked the University of Missouri to terminate all of
its work programs in order to concentrate on the development of the fuel cell
technology. The Company plans to develop a fuel cell out of diamond which would
be smaller, lighter and more efficient than fuel cells in the market using
metals. A development budget is currently being prepared to enable the Company
to raise money for development from government grants, joint ventures or private
placements.
During the nine months ended September 30, 2000, the Company paid International
Computer and Communication Corporation ("IC&C") $60,000 to prepare a business
and development plan that would include identifying the markets for the various
battery technologies of the Company with a recommendation for the development of
specific battery configurations, preparing a development budget to build a
prototype model battery for the marketplace including costs of labor, materials
and estimated time of development, and suggesting a marketing plan to attract
prospective buyers and reflect their technical requirements for the developed
battery. The report from IC&C indicated that the only battery technology with
commercial potential was the Krypton Battery. The report stated that Krypton was
rare; consequently, the commercial feasibility was largely dependent an adequate
supply of Krypton available for manufacturing. IC & C estimated that
approximately $500 million would need to be raised to ensure adequate supplies
of Krypton. As a result of the report, the Company decided not to pursue
development on any of its battery technologies during the remaining part of the
year 2000.
Expenditures of approximately $10,000 were incurred during the third quarter of
2000 to file its second quarter report for the three months ended June 30, 2000.
The Company also incurred approximately $56,000 of legal expenses during the
third quarter for consulting work pertaining to the development and commercial
feasibility of its projects.
During the quarter ended September 30, 2000, the Company issued 350,000
restricted common shares to a company for financial and business consulting in
the European communities. The shares were recorded as a consulting expense at
their deemed value of $ 273,000 at the time of their issuance during August
2000.
On September 1, 2000, the Company moved its administrative offices to Phoenix,
Arizona and terminated the services of Owen and Associates. The Company incurred
expenses of $15,000 to Owen & Associates for office and administrative services
during the quarter ended September 30, 2000.
At September 30, 2000, the Company had $243,995 in cash, as compared to $557,553
at December 31, 1999. The Company will need additional financing over the next
twelve months to continue development work and to pay its general and
administrative expenses.
Rhombic's Board of Directors approved a stock option plan for the year 2000 to
authorize the issuance of options for the purchase of 2,500,000 shares of common
stock. During the nine months ended September 30,2000, the Company issued
options exercisable to purchase 2,350,000 shares of the Company's common stock
under the year 2000 plan at an average exercise price of $2.00 per share. A
total of 200,000 options were exercised during August at $ 1.00 per common share
for a total of $ 200,000. There are currently 2,150,000 options outstanding in
the year 2000 plan at an average price of $2.09 per share.
There are granted and unexercised options for the purchase of 250,000 shares of
the Company's common stock under the 1999 stock option plan at an average
exercise price of $.80 per share.
There is a total of granted and unexercised outstanding options under the 1999
and 2000 plans for the purchase of 2,400,000 shares of the Company's common
stock at an average exercise price of $1.96 per share.
If all outstanding options are exercised under both plans, of which there is no
assurance, the Company would receive a total of $4,700,000 of which $2,550,000
is exercisable by December 31, 2000, $ 600,000 is exercisable by December 31,
2001 and the remaining $1,550,000 by December 31, 2002. No assurances can be
made as to whether any of the options will be exercised.
Management of the Company is in the process of preparing a development budget
and commercial feasibility study for specific applications of its technologies.
Once the development budget is determined, the Company anticipates raising the
necessary capital to develop its targeted technologies and general and
administrative expenses through a registered public offering or private
placement.
The Company does not have any employees and uses consultants for matters
pertaining to coordinating technology development and administration. The
Company may hire employees during the next twelve months depending upon its
success in developing prototype applications for sale and financing more
development. This report contains forwardlooking statements within the meaning
of Section 27A of the Securities Act of 1933, and Section 21E of the Exchange
Act of 1934. Although the Company believes that the expectations reflected in
the forwardlooking statements and the assumptions upon which the forwardlooking
statements are based are reasonable, it can give no assurance that such
expectations and assumptions will prove to be correct.
PART II - OTHER INFORMATION
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is
unaware of any proceedings contemplated against it.
ITEM 2. CHANGES IN SECURITIES
The following information is given with respect to all unregistered
securities sold or issued by the Company in the period covered by this report:
(1) On August 16, 2000 the Company issued 350,000 restricted shares of
common stock for financial and business planning services within Europe to a
company in Germany. The deemed value of the shares issued was $ 273,000 which
was determined based upon the trading value of the Company's common stock at the
time of the issuance of the stock.
(2) On August 16, 2000 the Company issued 200,000 restricted common shares
in consideration for $ 200,000 for exercised stock options under the 2000 stock
option plan. The options were exercised at $1.00 per common share and a director
received 100,000 of the total restricted common shares issued.
(3) On August 29, 2000 the Company cancelled a total of 9,000,000 shares
under an escrow agreement. The shares were returned to the Company and cancelled
on its stock ledger.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
None
(b) Reports on Form 8K
None
<PAGE>
SIGNATURES
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.
RHOMBIC CORPORATION
By: /s/ Albert Golusin
Chief Financial Officer
Dated: November 14, 2000
