U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended June 30, 2003
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period from to
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CALIFORNIA CLEAN AIR, INC.
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(Exact name of registrant as specified in its charter)
Commission File No. 0-23111
Nevada 23-3048624
- ------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification Number)
3790 Via de la Valle, Suite 103, Del Mar, CA 92014
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(Address of principal executive offices, including zip code)
(760)494-6497
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the
preceding 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 [_]
The number of shares of the registrant's common stock, $0.0001 par value, as of
June 30, 2003: 5,000,000.
PART 1
FINANCIAL INFORMATION
CALIFORNIA CLEAN AIR, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
See accompanying notes.
June 30, December 31,
2003 2002
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Assets
Current assets -
Cash $ 107 $ -
-------- ---------
Total current assets 107 -
Deposits 10,000 -
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$ 10,107 $ -
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LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 7,100 $ -
Accrued state taxes payable 30 20
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Total current liabilities 7,130 20
Payable to related parties 93,968 49,531
Net capital deficiency:
Preferred stock; $.0001 par value; authorized 20,000,000
shares - -
Common stock; $.0001 par value; authorized 100,000,000
shares; issued and outstanding 5,000,000 shares 5,000 5,000
Deficit accumulated during the development stage (95,991) (54,551)
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Net capital deficiency (90,991) (49,551)
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$ 10,107 $ -
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See accompanying notes.
CALIFORNIA CLEAN AIR, INC.
(A Development Stage Enterprise)
Consolidated Statements of Operations
Cumulative
activity during
development
stage
June 2, 2000
Three months Six months (inception)
ended June 30 ended June 30 through
------------------------ ------------------------
2003 2002 2003 2002 June 30, 2003
----------- ----------- ----------- ---------- ---------------
Operating expenses $ 24,460 $ 8,938 $ 41,430 $ 10,618 $ 95,961
--------- --------- --------- -------- ---------
Net loss from operations (24,460) (8,938) (41,430) (10,618) (95,961)
Provision for income taxes - State of
Oregon - - 10 10 30
-------- --------- --------- -------- ---------
Net loss $ (24,460) $ (8,938) $ (41,440) $ (10,628) $ (95,991)
========= ========= ========= ======== =========
Net loss per common share $ (.005) $ (.002) $ (.008) $ (.002) $ (.019)
======== ========= ========= ======== =========
See accompanying notes.
CALIFORNIA CLEAN AIR, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Cumulative
activity during
development
stage
June 2, 2000
Three months Six months (inception)
ended June 30 ended June 30 through
------------------------ ------------------------
2003 2002 2003 2002 June 30, 2003
----------- ----------- ----------- ---------- ------------------
Cash flows from operating activities:
Net loss $ (24,460) $ (8,938) $ (41,440) $ (10,628) $ (95,991)
Adjustments to reconcile net loss to
net cash used for operating activities:
Shares issued in exchange for services - - - - 5,000
Changes in liabilities:
Accounts payable - - 7,100 - 7,100
Accrued state income
taxes - - 10 10 30
--------- --------- --------- -------- ---------
(24,460) (8,938) (34,330) (10,618) (83,861)
Cash flows from investing activities -
Deposits paid (10,000) - (10,000) - (10,000)
Cash flows from financing activities -
Advances from, or expenses paid on
behalf of the Company directly by,
related parties 34,405 8,938 44,437 10,618 93,968
--------- --------- --------- -------- ---------
Net change in cash (55) - 107 - 107
Cash at beginning of period 162 - - - -
--------- --------- --------- -------- ---------
Net change in cash $ 107 $ - $ 107 $ - $ 107
========= ========= ========= ======== =========
Supplemental schedule of
noncash financing activities -
Common stock issued in exchange for
services $ - $ - $ - $ - $ 5,000
======== ========= ========= ======== =========
See accompanying notes.
CALIFORNIA CLEAN AIR, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 2003
1. Summary of Significant Accounting Policies
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Company: California Clean Air, Inc. (the "Company") was originally
incorporated in the State of Delaware as Breakthrough Technology
Partners I, Inc. on June 2, 2000 to serve as a vehicle to affect a
merger, exchange capital stock, participate in an asset acquisition, or
any other business combination with a domestic or foreign private
business.
Effective December 20, 2002, the Company changed its state of
incorporation and legal domicile to the State of Nevada and
simultaneously changed its name to California Clean Air, Inc. The
change of legal domicile and change of name occurred pursuant to an
Agreement and Plan of Merger dated December 18, 2002 between the
Company and California Clean Air, Inc., a Nevada corporation.
Basis of consolidation: On November 21, 2002, the Company organized
Smog Centers of California, LLC ("Smog Centers"), an Oregon limited
liability company. California Clean Air, Inc. is the sole owner of Smog
Centers. Smog Centers was organized to acquire, own and operate
test-only vehicles emissions inspection facilities in the State of
California under their Smog Check II program.
The consolidated financial statements include the accounts of
California Clean Air, Inc. and Smog Centers. All intercompany accounts
and transactions have been eliminated.
Development stage enterprise: Since inception, the Company has not
commenced any formal business operations. The Company is considered to
be in the development stage and therefore has adopted the accounting
and reporting standards of Statement of Financial Accounting Standards
No. 7, "Accounting and Reporting by Development Stage Enterprises".
Interim reporting: The Company's year end for accounting and tax
purposes is December 31. In the opinion of Management, the accompanying
consolidated financial statements as of June 30, 2003 and 2002 and for
the three and six months then ended and for the cumulative period from
June 2, 2000 (inception) through June 30, 2003 contain all adjustments,
consisting of only normal recurring adjustments, except as noted
elsewhere in the notes to the consolidated financial statements,
necessary to present fairly its financial position, results of its
operations and cash flows. The results of operations for the three and
six months ended June 30, 2003 and 2002 are not necessarily indicative
of the results to be expected for the full year.
Stock based compensation: The Company accounts for stock based
compensation under Statement of Financial Accounting Standards No. 123
("SFAS 123"). SFAS 123 defines a fair value based method of accounting
for stock based compensation. However, SFAS 123 allows an entity to
continue to measure compensation cost
1. Summary of Significant Accounting Policies (continued)
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Stock based compensation (continued): related to stock and stock
options issued to employees using the intrinsic method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees". Entities electing to remain
with the accounting method of APB 25 must make pro forma disclosures of
net income and earnings per share, as if the fair value method of
accounting defined in SFAS 123 had been applied. The Company has
elected to account for its stock based compensation to employees under
APB 25.
Income taxes: The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). Under SFAS 109, income taxes are provided on the
liability method whereby deferred tax assets and liabilities are
recognized for the expected tax consequences of temporary differences
between the tax bases and reported amounts of assets and liabilities.
Deferred tax assets and liabilities are computed using enacted tax
rates expected to apply to taxable income in the periods in which
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities from a change in tax
rates is recognized in income in the period that includes the enactment
date. The Company provides a valuation allowance for certain deferred
tax assets, if it is more likely than not that the Company will not
realize tax assets through future operations.
Reporting consolidated comprehensive income (loss): The Company reports
and displays consolidated comprehensive income (loss) and its
components as separate amounts in the consolidated financial statements
with the same prominence as other financial statements. Consolidated
comprehensive income (loss) includes all changes in equity during the
year that results from recognized transactions and other economic
events other than transactions with owners. There were no components of
consolidated comprehensive income to report for the three and six
months ended June 30, 2003 and 2002 and for the cumulative period from
June 2, 2000 (inception) through June 30, 2003.
Net loss per share: Net loss per share is computed by dividing net loss
by the weighted average number of shares outstanding during the period.
The weighted average number of shares outstanding was 5,000,000 for the
three and six months ended June 30, 2003 and 2002 and for the
cumulative period from June 2, 2000 (inception) through June 30, 2003.
Segment reporting: The Company will begin to report information about
operating segments and related disclosures about products and services,
geographic areas and major customers under Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of
an Enterprise and Related Information" when
CALIFORNIA CLEAN AIR, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
June 30, 2003
1. Summary of Significant Accounting Policies (continued)
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Segment reporting (continued): operations begin. Operating segments are
defined as components of an enterprise for which separate financial
information is available that is evaluated regularly by management in
deciding how to allocate resources and in assessing performance.
Use of estimates: The preparation of consolidated financial statements
in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Deposits
--------
On June 16, 2003, Smog Centers entered into a Letter of Intent to
acquire all of the assets used in a business operating a test-only
vehicles emissions inspection facility in the State of California under
their Smog Check II program. Under the Letter of Intent, the purchase
price will be $60,000. The business combination will be accounted for
as a purchase.
As of June 30, 2003, the Company has paid an aggregate of $10,000
toward the purchase of the assets. The balance of $50,000 is to be paid
upon the execution of a definitive Asset Purchase or Acquisition
agreement.
2. Transactions with related parties
---------------------------------
The Company's operating expenses since inception, consisting
principally of professional services, has been paid for by individuals
considered to be related parties. The advances are non-interest bearing
and due on demand; however, the individuals have agreed not to demand
repayment until cash is available from a merger, capital stock
exchange, asset acquisition, or other business combination, or from
operations.
3. Preferred Stock
---------------
The Company's preferred stock may be voting or have other rights and
preferences as determined from time to time by the Board of Directors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis should be read in conjunction with
the financial statements and the notes thereto.
RESULTS OF OPERATIONS
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Three months ended June 30, 2003 compared to the three months ended June 30,
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2002; six months ended June 30, 2003 compared to the six months ended June 30,
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2002; and the period from June 2, 2000 (inception) through June 30, 2003:
- ------------------------------------------------------------------------
Since inception, the Company has not commenced any formal business
operations. All activities have been devoted toward identifying business
combination opportunities and compliance with U.S. Securities and Exchange
Commission Rules and Regulations. Operating expenses of $24,460 incurred during
the three months ended June 30, 2003 increased $15,522 compared to operating
expenses for the three months ended June 30, 2002 primarily as a result of
additional legal expenses relating to the acquisition of assets of a Smog Center
in California.
Revenues:
- --------
The Company had no revenues for the three and six months ended June 30,
2003 and 2002 or for the period from June 2, 2000 (inception) through June 30,
2003.
FINANCIAL POSITION & LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
The Company's assets as of June 30, 2003 increased by $10,107 from
those as of December 31, 2002 primarily as a result of deposits paid for the
acquisition of assets of a Smog Center in California.
Liabilities as of June 30, 2003 consisted of accounts payable of $7,100
and payables to related parties of $93,968. As of December 31, 2002, liabilities
consisted only of $49,531 of payables to related parties. Payables to related
parties increased $44,437 from December 31, 2002 to June 30, 2003 due to
operating expenses incurred during that period. Related parties have been paying
the operating expenses of the Company since inception and the Board of Directors
have agreed to reimburse these individuals for the amount without interest.
These individuals have agreed not to demand repayment until cash is available
from a merger, capital stock exchange, asset acquisition, or other business
combination, or from operations.
ITEM 3. CONTROLS AND PROCEDURES
The Company's President and Chief Executive Officer is satisfied with
the effectiveness of the Company's internal controls and procedures, as defined
in Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934 based on
an evaluation of said controls and procedures.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not the subject of any legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
There have been no changes or modifications in the Company's
securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There has been no default upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders
during the quarterly period covered by this report.
ITEM 5. OTHER INFORMATION.
On June 16, 2003, the Company, through its affiliate, Smog
Centers of California, LLC, entered into a Letter of Intent
with Quang Vuong to acquire all of the assets ("Assets") used
in the business operating under the name Broadway Smog Check
located at 7310 Broadway, Lemon Grove, California. Broadway
Smog Check is engaged in the business of operating a vehicle
emissions test station licensed by the California Bureau of
Automotive Repair under the California Smog Check II program.
Under the Letter of Intent the purchase price for the Assets
will be $60,000. An initial payment of $5,000 was made at the
time of the signing of the Letter of Intent. The balance of
$55,000 is to be paid upon the execution of a definitive Asset
Purchase or Acquisition Agreement.
A copy of the Letter of Intent is attached as an Exhibit to
this Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Letter of Intent dated June 12, 2003.
(b) 8-K Reports
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CALIFORNIA CLEAN AIR, INC.
By: /s/ STEPHEN D. WILSON
-----------------------------------
Stephen D. Wilson
President
Date: August 21, 2003
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Signature Title Date
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/s/ STEPHEN D. WILSON August 21, 2003
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Stephen D. Wilson, President
FORM 10-QSB CERTIFICATION
I, Stephen D. Wilson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of California
Clean Air, Inc;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures ( as
defined in Exchange Act Rules 13a- 14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors ( or person
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial date and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there are significant changes in
internal controls or other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: August 21, 2003
/s/ STEPHEN D. WILSON
Title: President and Chief Executive Officer