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 June 30, 1998
[ ] 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 .. No .x.
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)
June 30,
1998
ASSETS
Current asset
Cash $ 701
Other asset
Deferred public offering costs 11,712
$12,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liability
Account payable $ --
Accrued legal fee 5,000
Stockholders' equity
Common stock, $.001 par value per
share; 100,000,000 shares
authorized; 2,470,000 shares issued
and outstanding at June 30, 2,470
Additional paid-in capital 11,281
Deficit accumulated during the
development stage -6,338
7,413
$12,413
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Operations
(UNAUDITED)
FOR THE QUARTER ENDED
JUNE 30,
1997 1998
Expenses
Stock issued for services $ -- $ --
Travel -- --
Other general and
administrative -- 20
-- 20
Net loss $ -- $ (20)
Weighted average number
of shares 2,470,000 2,470,000
Net loss per common share $ -- $ --
CALIFORNIA APPLIED RESEARCH, INC.
(A Development Stage Company)
Statements of Cash Flows
(UNAUDITED)
FOR THE PERIOD
FROM INCEPTION
FOR THE QUARTER ENDED (MARCH 25, 1992)
JUNE 30, TO JUNE 30, 1998
1997 1998
Cash flow from operating
activities:
Net loss $ -- $ (20) $(6,338)
Noncash items included in the
net loss:
Stock issued for services -- -- 5,000
Changes in assets and liabilities
(Increase) decrease in expense
advance to officer -- --
Increase (decrease) in accounts payable -- (55) --
Increase in accrued legal fee -- -- 5,000
(Increase) decrease in stock
subscription receivable -- -- --
Net cash provided (used) by
operating activities -- (75) 3,662
Cash flow from financing
activities:
Proceeds from sale of
common stock -- -- 8,750
Contribution of stock by
founder -- -- 1
Costs related to public
offering -- (2,376) (11,712)
Net cash provided by
financing activities -- (2,376) (2,961)
Increase (decrease) in cash -- (2,451) 701
Cash, beginning of period 4,668 3,152 --
Cash, end of period $ 4,668 $ 701 $ 701
The accompanying notes are an integral part of this statement.
CALIFORNIA APPLIED RESEARCH, INC.
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.
Note 1: SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies are as follows:
a. 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.
b. 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.
c. 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.
d. 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, 1997, the Company has net
operating loss carryforwards for tax purposes of approximately
$600 and $500 which will expire in 2010 and 2011, respectively.
e. 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.
f. 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.
Note 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 to carry out its planned
operations. 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, herein. There is no
assurance that the Company will be able to obtain such financing.
The financial statements, herein, do not include any adjustments
that might result from the outcome of this uncertainty.
Note 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 contingent legal fee.
Note 4: COMMITMENT - PROPOSED PUBLIC OFFERING OF COMMON STOCK
The Company intends to undertake a public offering to
sell up to 1,000,000 shares of its $.001 par value common stock
at a price of $.25 per share.
The shares will be 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. The shares will be offered by authorized officers
and directors of the Company who will receive no underwriting
discounts or commission, but only the reimbursement of their out-
of-pocket expenses relating to the offering. The Company may
also offer the shares through selected broker-dealers, as sales
agents, at a commission of 10%. No expense allowance, warrants
to purchase common stock or other remuneration except the 10%
commission will be paid. Offering expenses to be incurred by the
Company are estimated to be a maximum of $30,400 which assumes a
commission will be paid on the maximum of 1,000,000 shares to be
sold.
Proceeds from subscriptions for shares are required to be
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. If the minimum number of
shares is not sold, the sale of shares hereunder will not be
completed and the full amount paid by subscribers will be
refunded without interest.
If the public offering is successfully completed, except
for an amount up to 10% of the deposited funds ($1,750 if minimum
is sold, $22,000 if the maximum is sold) otherwise releasable,
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, the deposited
proceeds will be returned on a pro rata basis to all investors.
Officers, directors, affiliates, and principal
shareholders of the Company may purchase a percent of the shares
sold in the offering under the same terms and conditions as the
public investors. Such purchases, if made, will be for
investment purposes only and not for redistribution. Such
purchases may be made for the purpose of closing the minimum
offering.
Note 5: LEGAL FEE COMMITMENT
The Company has agreed to pay its corporate attorney, who
is also a stockholder of the Company, $5,000 cash for his legal
Services relative to the proposed public offering. This fee is
to be paid only if the registration statement for the proposed
public offering (see Note 4 above) becomes effective. Because
there is no assurance the offering will be declared effective,
this fee has been accrued in the balance sheet, herein.
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 offering was declared effective by the Securities and Exchange
Commission on May 19, 1998.
The Company's expenses to date, all of which are attributable
to its formation and proposed fund raising are approximately
$6,100.
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)
Date: May 26, 1999
By:/s/__________________________________________
J. Michael Spinali, President and Chairman