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, 2002
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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 May 7, 2002 was
5,220,836.
Transitional Small Business Disclosure Format: Yes [ ] No[X]
CALIFORNIA MOLECULAR ELECTRONICS CORP.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page
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Balance Sheets as of March 31, 2002 and December 31, 2001 2
Statements of Operations for the three months ended March 31, 2002
and 2001 3
Statements of Cash Flows for the three months ended March 31, 2002
and 2001 4
Notes to Financial Statements 5
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 11
Signatures 12
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA MOLECULAR ELECTRONICS CORP.
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BALANCE SHEET
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March 31, December 31,
2002 2001
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(unaudited)
ASSETS
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Current assets:
Cash $ 28,545 $ 94,375
Employee advance 19,655 19,655
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Total current assets 48,200 114,030
Equipment, net 4,296 4,670
Other 1,388 1,388
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$ 53,884 $ 120,088
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities:
Accounts payable and accrued liabilities $ 20,314 $ 23,634
Accrued officer's compensation 156,000 136,500
Other payable 5,000 5,000
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Total current liabilities 181,314 165,134
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Stockholders' deficit:
Preferred stock, no par value:
Authorized 10 million shares; 33,314 issued
and outstanding at March 31, 2002 and
December 31, 2001 196,381 196,381
Common stock, no par value:
Authorized 20 million shares; 5,206,386 and
5,186,886 issued and outstanding (including
4,800 treasury shares) at March 31, 2002
and December 31, 2001, respectively 2,409,901 2,341,088
Less: Treasury stock at cost; 4,800 shares at March 31,
2002 and December 31, 2001, respectively (28,800) (28,800)
Accumulated deficit (2,704,912) (2,553,715)
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(127,430) (45,046)
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$ 53,884 $ 120,088
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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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Three months ended March 31
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2002 2001
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Revenue:
Interest income $ 64 $ 796
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Expenses:
Research and development expenses 53,542 56,305
Officers' compensation donated to the Company (Note 6) 10,000 10,000
Selling, general and administrative expenses 86,869 79,486
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Total expenses 150,411 145,791
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Loss before state income taxes (150,347) (144,995)
Provision for state income taxes 850 50
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Net loss $ (151,197) $ (145,045)
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Basic and diluted loss per common share $ (0.03) $ (0.03)
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Weighted average number of common shares outstanding 5,186,719 5,102,194
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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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Three months ended March 31
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2002 2001
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Operations:
Net loss $ (151,197) $ (145,045)
Items not requiring current use of cash:
Officers' compensation, donated to the Company (Note 6) 10,000 10,000
Depreciation and amortization 374 860
Changes in other operating items:
Prepaid expenses - 8,247
Accounts payable and accrued liabilities (3,320) (4,149)
Accrued officer's compensation 19,500 13,850
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Cash used for operating activities (124,643) (116,237)
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Financing:
Issuance of common and preferred stock, net of stock issuance expense 58,813 237,730
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Cash provided by financing activities 58,813 237,730
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Change in cash (65,830) 121,493
Cash at beginning of period 94,375 120,606
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Cash at end of period $ 28,545 $ 242,099
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Supplemental cash flow disclosures:
Taxes paid $ - $ 50
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Interest paid $ 129 $ 79
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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 accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
The results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the operating results expected for the entire 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, 2001.
NOTE 2 - Use of estimates and reclassifications:
The preparation of financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Certain reclassifications have been made to the prior year financial
statements to conform with the current year financial statement presentation.
Such reclassifications had no effect on net income as previously reported.
NOTE 3 - Equipment:
Equipment is summarized as follows:
March 31, December 31,
2002 2001
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Computer equipment $ 9,469 $ 9,469
Less - accumulated depreciation 5,173 4,799
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$ 4,296 $ 4,670
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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
three months ended March 31, 2002 and 2001, dilutive loss per share excludes the
effect of unexercised options and warrants because the effect would have been
antidilutive.
NOTE 5 - Leases:
The Company had entered into a cost reimbursable contract with San Jose
State University Foundation ("Foundation") which expired March 31, 2002. The
lease has been extended through March 31, 2003. The contract includes advisory
services to be provided by the San Jose State University Department of
Chemistry, facilities, supplies and equipment use. The Foundation shall be
reimbursed for costs incurred in providing the aforementioned items not to
exceed a maximum amount of $90,659 over the period of the contract. The
contract may be cancelled by either party, with thirty days written notice. The
Company also leases office space in Arizona and Alabama on a month to month
basis.
NOTE 6 - Related party transactions:
CALMEC's three officers have devoted 100% of their time to the business of
the Company when they were hired 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. One officer has continued to forego all his salary in 2001 and
2002. As required by the Securities and Exchange Commission accounting rules, in
the accompanying financial statements the officer's unpaid salary totaling
$10,000 for the quarters ended March 31, 2002 and 2001, is 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 ("CEO")
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 ("Rolling Option").
When the Board of Directors determines at some point in the future that the
Company is able to pay full cash compensation to the CEO, the CEO will no longer
receive 250 stock options per week. At such time, the officer can require the
Company to issue him shares of common stock or pay him $6.00 per share, or a
combination of the two, based on the number of unexercised shares under the
Rolling Option.
On September 1, 2001, CALMEC entered into a long-term employment agreement
("Agreement") with its CEO. Under the Agreement, once the Company enters the
operational phase, the Company will pay the CEO a salary of $132,000 per year.
The Company will enter into the operational phase once the Board of Directors
has determined sufficient capital has been accumulated to do so. The Agreement
has a term of five years ending on August 31, 2006. Prior to the Company
entering the operational phase, the CEO will continue to perform his duties for
compensation as described in the preceding paragraph. As additional
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compensation, upon the first anniversary of the Agreement, the CEO will receive
a seven year stock option to purchase 400,000 shares of CALMEC common stock at
an exercise price of $6.00 per share, vesting at 100,000 shares per year
thereafter of completed employment.
NOTE 7 - Stockholders' deficit:
During the first quarter of 2002, warrant holders converted 19,500 warrants
to shares of common stock for net proceeds after stock issuance expenses of
$58,813. Of these 19,500 warrants converted to shares, 17,500 were converted at
$3.00 per share and 2,000 were converted at $3.50 per share.
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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 out
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
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 initial 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 initial 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
runs through March 31, 2003.
On January 31, 2000, CALMEC filed a Form SB-2, Registration Statement under the
Securities Act of 1933, with the Securities and Exchange Commission ("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 planned to raise $6 million with this offering, before payment of
estimated offering expenses of $50,000. Subsequent to the effective date of the
Registration Statement through February 28, 2001, CALMEC sold 120,239 shares of
its common stock, for a total aggregate price of $721,434. The Company
terminated the sale of its common stock under the Registration Statement on
February 28, 2001.
Operations
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Research and development ("R&D") costs were $53,542 and $56,305 for the
quarters ended March 31, 2002 and 2001, respectively, a decrease of $2,763 or
5%. The decrease was primarily related to a decrease in R&D related salary and
wage expense.
Officers' compensation donated to the Company was $10,000 for the quarters
ended March 31, 2002 and 2001.
Selling, general and administrative costs consist primarily of rent,
travel, salaries and wages and other administrative expenses, and were $86,869
and $79,486 for the quarters ended March 31, 2002 and 2001, respectively, an
increase of $7,383 or 9%, primarily related to increases in salary and wage
expense and travel expense.
Liquidity and Capital Resources
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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. After terminating its sale of common stock effective February 28, 2001
under its public offering relating to its February 7, 2000 Registration
Statement filed with the SEC, the Company has undertaken additional and new
activities to develop certain products using the Company's technology. The
Company is aggressively pursuing industrial and venture capital funds in order
to develop this technology.
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 existing 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.
Hiring of employees
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CALMEC will transition from its initial 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, the Company has already hired and is supporting the lab work
of a chemist, 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
None.
(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: May 7, 2002
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California Molecular Electronics Corp.
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(Registrant)
/s/ James Marek, Jr.
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James Marek, Jr.
President and Chief Executive Officer
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