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
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _________
Commission file number 333-82493
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California Molecular Electronics Corp.
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(Exact name of small business is here as specified in its charter)
Arizona
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(State or other jurisdiction of incorporation or
organization)
86-0888087
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(IRS Employer Identification No.)
50 Airport Parkway, San Jose, CA 95110
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(Address of principal executive offices)
(408) 451-8404
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(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.
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CALIFORNIA MOLECULAR ELECTRONICS CORP.
INDEX
PART I. FINANCIAL INFORMATION
Page
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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.
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BALANCE SHEET
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September 30 December 31
2000 1999
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(unaudited)
A S S E T S
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Current assets:
Cash and cash equivalents $ 216,419 $ 91,993
Grant receivable 33,334 -
Prepaid expenses 13,054 6,493
Stockholder advances 10,000 -
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Total current assets 272,807 98,486
Furniture and fixtures, net 6,590 2,099
Other 1,363 427
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$ 280,760 $ 101,012
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Current liabilities:
Accounts payable and accrued liabilities $ 22,890 $ 13,800
Deferred grant income 33,334 -
Other payable 5,000 5,000
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Total current liabilities 61,224 18,800
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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)
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219,536 82,212
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$ 280,760 $ 101,012
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See accompanying notes to financial statements.
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CALIFORNIA MOLECULAR ELECTRONICS CORP.
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STATEMENT OF OPERATIONS
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(UNAUDITED)
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Nine months ended Three months ended
September 30 September 30
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2000 1999 2000 1999
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Revenue:
Grant income $ 66,666
Interest income 8,502 $ 7,740 $ 3,246 $ 2,916
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75,168 7,740 3,246 2,916
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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
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Total expenses 561,303 531,113 169,183 154,604
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Loss before income taxes (486,135) (523,373) (165,937) (151,688)
Provision for state income taxes 1,385 50 1,335 -
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Net loss $ (487,520) $ (523,423) $ (167,272) $ (151,688)
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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
=========== =========== =========== ===========
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See accompanying notes to financial statements.
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CALIFORNIA MOLECULAR ELECTRONICS CORP.
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STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
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Common Stock
-------------------------- Treasury Accumulated
Shares Amount Stock Deficit Total
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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)
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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)
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Balance at September 30, 2000
(unaudited) 5,082,923 $1,905,086 $ (28,800) $(1,656,750) $ 219,536
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See accompanying notes to financial statements.
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CALIFORNIA MOLECULAR ELECTRONICS CORP.
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STATEMENT OF CASH FLOWS
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(UNAUDITED)
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Nine months ended September 30
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2000 1999
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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)
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Cash used for operating activities (352,547) (250,531)
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Investments:
Furniture and fixtures (4,885) (2,624)
Other investment (1,000) -
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Cash used for investing activities (5,885) (2,624)
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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)
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Cash provided by financing activities 482,858 304,355
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Increase in cash and cash equivalents 124,426 51,200
Cash and cash equivalents at beginning of period 91,993 154,626
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Cash and cash equivalents at end of period $ 216,419 $ 205,826
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Supplemental cash flow disclosures:
Taxes paid $ 1,385 $ -
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Interest paid $ 156 $ -
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See accompanying notes to financial statements.
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CALIFORNIA MOLECULAR ELECTRONICS CORP.
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NOTES TO FINANCIAL STATEMENTS
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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.
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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.
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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.
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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.
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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.
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CALIFORNIA MOLECULAR ELECTRONICS CORP.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
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27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
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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
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California Molecular Electronics Corp.
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(Registrant)
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James Marek, Jr.
President and Chief Executive Officer
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