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 March 31, 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 May 15, 2000
was 5,064,743.
<PAGE>
CALIFORNIA MOLECULAR ELECTRONICS CORP.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
----
Balance Sheets as of December 31, 1999 and March 31, 2000. 2
Statements of Operations for the three months ended March 31, 2000
and 1999 and cumulative from March 17, 1997 (date of incorporation)
to March 31, 2000. 3
Statement of Stockholders' Equity (Deficit) from December 31, 1998
Through March 31, 2000 4
Statements of Cash Flows for the three months ended March 31, 2000
and 1999 and cumulative from March 17, 1997 (date of incorporation)
to March 31, 2000. 5
Notes to Financial Statements. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 8
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES 12
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CALIFORNIA MOLECULAR ELECTRONICS CORP.
--------------------------------------
(a development stage company)
-----------------------------
BALANCE SHEET
-------------
March 31 December 31
2000 1999
------------ -------------
(unaudited)
<S> <C> <C>
A S S E T S
-----------
Current assets:
Cash $ 325,343 $ 91,993
Grant receivable 66,667 -
Employee advance 9,605 -
------------ -------------
Total current assets 401,615 91,993
Furniture and fixtures, net 1,968 2,099
Prepaid expenses - 6,493
Other 427 427
------------ -------------
$ 404,010 $ 101,012
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Deferred grant income $ 66,667
Accounts payable and accrued liabilities 15,129 $ 13,800
Other payable 5,000 5,000
------------ -------------
Total current liabilities 86,796 18,800
------------ -------------
Stockholders' equity (deficit):
Common stock, no par value:
Authorized 20 million shares; 5,041,292 and
4,994,065 issued and outstanding (including
4,800 and 4,800 Treasury shares) at March 31, 2000
and December 31, 1999, respectively 1,634,160 1,280,242
Less: Treasury stock at cost; 4,800 shares at
March 31, 2000 and December 31, 1999 (28,800) (28,800)
Deficit accumulated during development stage (1,288,146) (1,169,230)
------------ -------------
317,214 82,212
------------ -------------
------------ -------------
$ 404,010 $ 101,012
============ =============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA MOLECULAR ELECTRONICS CORP.
--------------------------------------
(a development stage company)
-----------------------------
STATEMENT OF OPERATIONS
-----------------------
(UNAUDITED)
-----------
Cumulative amounts
from March 17, 1997 Three months ended March 31
(date of incorporation) ---------------------------
to March 31, 2000 2000 1999
----------------------- ------------- ------------
<S> <C> <C> <C>
Revenue:
Grant income $ 33,333 $ 33,333
Interest income 14,036 1,896 $ 1,873
----------------------- ------------- ------------
47,369 35,229 1,873
----------------------- ------------- ------------
Expenses:
Research and development expenses 325,339 59,671 -
Officers' compensation donated to
the Company (Note 5) 735,833 47,500 67,500
Preoperating expenses 274,143 46,924 56,533
----------------------- ------------- ------------
Total expenses 1,335,315 154,095 124,033
----------------------- ------------- ------------
Loss before income taxes (1,287,946) (118,866) (122,160)
Provision for state income taxes 200 50 50
----------------------- ------------- ------------
Net loss $ (1,288,146) $ (118,916) $ (122,210)
======================= ============= ============
Basic and diluted loss per common share $ (.26) $ (.02) $ (.02)
======================= ============= ============
Weighted average number of common
shares outstanding 4,880,556 5,000,196 4,910,387
======================= ============= ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CALIFORNIA MOLECULAR ELECTRONICS CORP.
--------------------------------------
(a development stage company)
-----------------------------
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
-------------------------------------------
FOR THE PERIOD FROM DECEMBER 31, 1998 TO MARCH 31, 2000
-------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock During
----------------------------- Treasury Development
Shares Amount Stock Stage Total
------------ ------------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
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 5) - 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 52,127 312,762 - - 312,762
Stock issuance costs - (6,344) - - (6,344)
Officers' compensation donated to the
Company (Note 5) - 47,500 - - 47,500
Net loss - - - (118,916) (118,916)
------------ ------------- --------------- -------------- ---------
Balance at March 31, 2000 5,041,392 $ 1,634,160 $ (28,800) $ (1,288,146) $ 317,214
============ ============= =============== ============== =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA MOLECULAR ELECTRONICS CORP.
--------------------------------------
(a development stage company)
-----------------------------
STATEMENT OF CASH FLOWS
-----------------------
(UNAUDITED)
-----------
Cumulative amounts
from March 17, 1997 Three months ended March 31
(date of incorporation) ---------------------------
to March 31, 2000 2000 1999
----------------------- -------------- -----------
<S> <C> <C> <C>
Operations:
Net loss $ (1,288,146) $ (118,916) $(122,210)
Items not requiring current use of cash:
Officers' compensation, donated to the
Company (Note 5) 735,833 47,500 67,500
License fees 75,025 - -
Depreciation 656 131 -
Changes in other operating items:
Payable to related party - - (14,500)
Employee advances (34,752) (9,605) (5,000)
Accounts payable and accrued
liabilities 15,129 1,329 2,128
Other payable 5,000 - -
Prepaid expenses - 6,493 -
Other (427) - (7,408)
----------------------- -------------- -----------
Cash used for operating activities (491,682) (73,068) (79,490)
----------------------- -------------- -----------
Investments:
Furniture and fixtures (2,624) - -
----------------------- -------------- -----------
Cash used for investing activities (2,624) - -
----------------------- -------------- -----------
Financing:
Issuance of common stock, after stock
issuance expense 823,302 306,418 155,761
Purchase of Treasury stock (3,653) - -
----------------------- -------------- -----------
Cash provided by financing
activities 819,649 306,418 155,761
----------------------- -------------- -----------
Increase in cash 325,343 233,350 76,271
Cash at beginning of period - 91,993 154,626
----------------------- -------------- -----------
Cash at end of period $ 325,343 $ 325,343 $ 230,897
======================= ============== ===========
Supplemental cash flow disclosures:
Taxes paid $ 150 $ - $ -
======================= ============== ===========
Acquisition of Treasury stock $ (25,147) $ - $ -
For cancellation of employee advances 25,147 - -
----------------------- -------------- -----------
$ - $ - $ -
======================= ============== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
CALIFORNIA MOLECULAR ELECTRONICS CORP.
--------------------------------------
(a development stage company)
-----------------------------
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 three months ended March 31, 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.
NOTE 2 - Reclassifications:
Certain prior period amounts have been reclassified in order to conform to
the current period presentation.
NOTE 3 - 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
three months ended March 31, 2000 and 1999, dilutive loss per share excludes the
effect of options, because the effect would have been antidilutive.
NOTE 4 - Leases:
The Company has entered into a cost reimbursable contract with San Jose
State University Foundation ("Foundation") for the period from April 1, 1999
through March 31, 2000. The contract includes advisory services to be provided
by the San Jose State University Department of Chemistry, facilities, supplies
and equipment use. The Company is negotiating with the Foundation to extend the
lease until March 31, 2001.
NOTE 5 - Related party transactions:
CALMEC's three officers have devoted 100% of their time to the business of
the Company since their hire in 1997. The officers have elected to forego their
salaries until such time after the Company has completed its startup phase and
6
<PAGE>
upon determination by the Board of Directors that sufficient capital is
available for operations. 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. As
required by the Securities and Exchange Commission accounting rules, in the
accompanying financial statements the officers' unpaid salaries totaling $47,500
and $67,500 for the quarters ended March 31, 2000 and 1999 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.
NOTE 6 - 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 grant will be recognized in earnings in the period in
which the related expenditures are incurred by the Company. The grant
receivable of $66,667 is included in other current assets, and deferred grant
income of $66,667 is included in current liabilities at March 31, 2000.
NOTE 7 - 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.
7
<PAGE>
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. 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.
8
<PAGE>
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 is negotiating 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 May 15,
2000, CALMEC has sold 75,578 shares of its common stock, for a total of
$453,468.
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 shareholders.
9
<PAGE>
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 will begin
receiving pay. Regardless of when that time occurs, as mentioned above, the
Company has already hired and is supporting the lab work of two chemists, and is
paying one of the executive officers.
10
<PAGE>
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.
11
<PAGE>
SIGNATURES
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: May 18, 2000
- ---------------------
California Molecular Electronics Corp.
- -----------------------------------------
(Registrant)
/s/ James Marek, Jr.
- -----------------------
James Marek, Jr.
President and Chief Executive Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 325343
<SECURITIES> 0
<RECEIVABLES> 76272
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 401615
<PP&E> 2624
<DEPRECIATION> (656)
<TOTAL-ASSETS> 404010
<CURRENT-LIABILITIES> 86796
<BONDS> 0
0
0
<COMMON> 1634160
<OTHER-SE> (1316946)
<TOTAL-LIABILITY-AND-EQUITY> 404010
<SALES> 0
<TOTAL-REVENUES> 35229
<CGS> 0
<TOTAL-COSTS> 154095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (118866)
<INCOME-TAX> 50
<INCOME-CONTINUING> (118916)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (118916)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
