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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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-29049
RHOMBIC CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 86-0824125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11811 N. Tatum Blvd. #3031, Phoenix, Arizona 85028
(Address of principal executive offices (zip code)
(602) 953-7702
(Registrant's telephone number, including area code)
Indicate by check mark 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 last 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at June 30, 2001
----- ----------------------------
Common Stock, par value $0.001 28,392,242
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT
RHOMBIC CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
September 30, 2001
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 1,593
Prepaid Expenses 600
-----------
Total Current Assets 2,193
-----------
OTHER ASSETS:
Investments 41,995
Licensing Agreements and Technologies 581,257
Patents 102,095
-----------
Total Assets $ 727,540
===========
LIABILITIES
CURRENT
Accounts Payable $ 52,646
-----------
52,646
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 Par Value, 1,000,000 Shares Authorized,
None Issued
Common Stock, $.001 Par Value, 70,000,000 Shares Authorized,
28,392,242 Issued and Outstanding 28,392
Additional Paid-in Capital 8,402,969
(Deficit) Accumulated During the Development Stage (7,756,467)
-----------
Total Stockholders' Equity 674,894
-----------
Total Liabilities and Stockholders' Equity $ 727,540
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
RHOMBIC CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the 9 Months Ended For the 3 Months Ended Cummulative From
------------------------------- ------------------------------- November 21, 1994
Sept 30, 2001 Sept 30, 2000 Sept 30, 2001 Sept 30, 2000 to Sept 30,2001
------------- ------------- ------------- ------------- ---------------
ROyalty Income $ -- $ -- $ -- $ -- $ 5,729
Interest Income 80 4,832 -- 2,330 6,955
----------- ----------- ----------- ----------- -----------
80 4,832 -- 2,330 12,684
EXPENSES
Research and Development Expense 12,246 388,854 6,465 66,196 697,835
Write Down of Intellectual Property -- -- -- -- 1,487,630
Legal & Accounting 116,521 234,319 46,093 65,566 693,783
Transfer Agent Expenses 948 4,460 519 -- 26,208
Consulting, Related Party -- 60,000 -- 15,000 367,000
Consulting 37,375 328,453 36,500 276,158 3,091,255
Interest Expense 2,917 -- -- -- 2,917
Other General & Administrative 257,170 874,627 72,561 4,787 1,309,907
----------- ----------- ----------- ----------- -----------
Total Expenses 427,177 1,890,713 162,138 427,707 7,676,535
----------- ----------- ----------- ----------- -----------
Loss before other expenses 427,097 1,885,881 162,138 425,377 7,663,851
OTHER EXPENSES
Loss on Sale of Marketable Securities 92,616 -- 92,616 -- 92,616
----------- ----------- ----------- ----------- -----------
NET (LOSS) $ (519,713) $(1,885,881) $ (254,754) $ (425,377) $(7,756,467)
=========== =========== =========== =========== ===========
NET LOSS PER SHARE:
Basic $ (0.02) $ (0.06) $ (0.00) $ (0.01)
=========== =========== =========== ===========
Diluted $ (0.02) $ (0.06) $ (0.00) $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 26,772,481 34,484,813 26,772,481 34,484,813
=========== =========== =========== ===========
Diluted 26,772,481 34,384,813 26,772,481 34,484,813
=========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
RHOMBIC CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Deficit)
Accumulated
Common Stock Additional During
---------------------- Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance at December 31, 1999 24,741,100 $ 24,741 $ 4,589,750 $(2,078,855) $2,535,636
Acquisition of Intellectual Property 100,000 100 281,150 281,250
Shares Issued to Acquire Emerald Investments 200,000 200 (200)
Shares Issued for Services 75,000 75 214,350 214,425
Exercise of Stock Options 170,000 170 107,080 107,250
Net Loss for the Quarter Ended March 31, 2000 (604,944) (604,944)
----------- --------- ----------- ----------- ----------
Balance At March 31, 2000 25,286,100 25,286 5,192,130 (2,683,799) 2,533,617
Acquisition of Intellectual Property 100,000 100 194,150 194,250
Shares Issued for Services 350,000 300 661,066 661,416
Net Loss for the Quarter Ended June 30, 2000 (855,460) (855,460)
----------- --------- ----------- ----------- ----------
Balance At June 30, 2000 25,736,100 25,736 6,047,346 (3,539,259) 2,533,823
Adjustment for Shares Issued for Services (40,188) (40,188)
Shares Issued for Services 350,000 350 272,650 273,000
Exercise of Stock Options 200,000 200 199,800 200,000
Net Loss for the Quarter Ended Sepember 30, 2000 (425,377) (425,377)
----------- --------- ----------- ----------- ----------
Balance At September 30, 2000 26,286,100 $ 26,286 $ 6,479,608 $(3,964,636) $2,541,258
=========== ========= =========== =========== ==========
Balance at December 31, 2000 26,286,100 $ 26,286 $ 8,043,540 $(7,236,754) $ 833,072
Shares issued for services 290,000 290 59,710 60,000
Net loss for the quarter ended March 31, 2001 (144,255) (144,255)
----------- --------- ----------- ----------- ----------
Balance at March 31, 2001 26,576,100 26,576 8,103,250 (7,381,009) 748,817
Shares issued for services 400,000 400 91,600 92,000
Shares issued for debenture conversion 1,166,142 1,166 198,834 200,000
Costs of offering (20,831) (20,831)
Net loss for the quarter ended June 30, 2001 (120,704) (120,704)
----------- --------- ----------- ----------- ----------
Balance at June 30, 2001 28,142,242 28,142 8,372,853 (7,501,713) 899,282
Shares issued for services 250,000 250 31,250 31,500
Costs of offering (1,134) (1,134)
Net loss for the quarter Sept. 30, 2001 (254,754) (254,754)
----------- --------- ----------- ----------- ----------
Balance at September 30, 2001 28,392,242 $ 28,392 $ 8,402,969 $(7,756,467) $ 674,894
=========== ========= =========== =========== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
RHOMBIC CORPORATION
(A Devlopment Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Nine Months For the Three Months Cumulative From
Ended Sept 30, Ended Sept 30, November 21, 1994
------------------- -------------------- (Inception) to
2001 2000 2001 2000 Sept 30, 2001
---- ---- ---- ---- -------------
OPERATING ACTIVITIES
Net (Loss) Income for the Period $(519,713) $(1,885,781) $ (254,754) $ (425,377) $(7,756,467)
Adjustments to Reconcile Net Cash Used by Operations:
Write Down of Intellectual Property -- -- -- -- 1,487,630
Marketable Securities Exchanged for Services 35,820 -- 35,820 -- 35,820
Marketable Securities Exchanged for Payables 27,818 -- 27,818 -- 27,818
Loss On Sale of Marketable Securities 92,617 -- 92,617 -- 92,617
Common Stock Issued for Services 183,500 1,108,653 31,500 232,812 1,892,484
Fair Value of Options Granted -- -- -- -- 2,082,113
(Increase) Decrease in Accounts Receivable -- 15,103 291 -- --
(Increase) Decrease in Prepaid Expenses 1,900 116,855 400 38,748 (600)
Increase (Decrease) in Accounts Payable (63,909) 72,826 17,915 73,390 52,646
Increase (Decrease) in Due to Related Parties -- 3,793 -- (14,826) --
--------- ----------- ----------- ----------- -----------
Net Cash (Used) by Operating Activities (241,967) (568,551) (48,393) (95,253) (2,085,939)
--------- ----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds From Private Placements -- -- -- -- 1,266,629
Proceeds From Convertible Debenture 200,000 -- -- -- 200,000
Offering Costs (21,965) -- (1,134) -- (21,965)
Proceeds From Exercise of Stock Options -- 307,250 -- 200,000 1,006,750
Proceeds From Sale of Marketable Securities 19,506 -- 19,506 -- 19,506
--------- ----------- ----------- ----------- -----------
Cash Provided From Financing Activities 197,541 307,250 18,372 200,000 2,470,920
--------- ----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Cost of Patents (47,365) (52,257) -- (43,941) (165,632)
Investment in Marketable Securities -- -- -- -- (217,756)
--------- ----------- ----------- ----------- -----------
Cash Used in Investment Activities (47,365) (52,257) -- (43,941) (383,388)
--------- ----------- ----------- ----------- -----------
Increase in Cash (91,791) (313,558) (30,021) (60,806) 1,593
Cash at Beginning of Period 93,384 557,553 31,614 183,189 --
--------- ----------- ----------- ----------- -----------
Cash at End of Period $ 1,593 $ 243,995 $ 1,593 $ 243,995 $ 1,593
========= =========== =========== =========== ===========
Interest Expense $ 2,917 $ -- $ -- $ -- $ 2,917
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Issuance of Common Stock for Licensing Agreements
and Technologies $ -- $ 475,500 $ -- $ -- $ 2,005,530
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
RHOMBIC CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the Quarters Ended Ended June 30, 2001 and 2000
The unaudited financial statements included herein were prepared from the
records of the Company in accordance with Generally Accepted Accounting
Principles. These financial statements reflect all adjustments which are, in the
opinion of management, necessary to provide a fair statement of the results of
operations and financial position for the interim periods. Such financial
statements generally conform to the presentation reflected in the Company's
Forms 10-KSB and 10-KSB filed with the Securities and Exchange Commission for
the year ended December 31, 2000. The current interim period reported herein
should be read in conjunction with the Company's Form 10-KSB subject to
independent audit at the end of the year.
The results of operations for the three months ended September 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.
CONVERTIBLE DEBENTURE
On March 8, 2001, Rhombic signed a convertible debenture for $2.5 million.
The Holder funded $200,000 on the debenture and converted the advances into
1,166,142 shares of the Company under the terms of the debenture. On July 20,
2001, the Company withdrew its registration statement for the shares issued and
to be issued under the debenture because it was no longer applicable to the
Company. A new registration statement was filed on October 2, 2001 which will
register all shares that were sold under the debenture.
STOCKHOLDERS' EQUITY
During the third quarter of 2001, the Company issued 250,000 restricted
common shares as payment in full for consulting services regarding financing for
the company. The transaction had a deemed value of $ 31,500.
The deemed value of the all shares issued was determined based upon the
trading value of the Company's common stock at the time of the issuance of the
stock.
SUBSEQUENT EVENTS
On November 5, 2001, the Company entered into a non-binding letter of
intent with Famco Holding Company, LLC to reach a definitive agreement wherein
Rhombic would acquire all the outstanding shares of six corporations for
approximately 630,000,000 common shares of Rhombic, restricted pursuant to Rule
144, and resulting in a change of control. It is anticipated that the operating
corporations will be acquired individually over a four to six month period after
due diligence and audited financial statements are completed. The unaudited
revenues from two of the operating companies last year approximated $12 million
with income before taxes of $4.4 million. Other companies are in a research and
development phase and will be sold to Rhombic upon completion of the development
phase and a readiness to commence sales. Upon the satisfactory completion of due
diligence, the directors of Rhombic will recommend the acquisitions to the
shareholders with the specific terms.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
The following discussion is intended to provide an analysis of the Company's
financial condition and Plan of Operation and should be read in conjunction with
the Company's financial statements and the notes thereto. The matters discussed
in this section that are not historical or current facts, deal with potential
future circumstances and developments. Such forward-looking statements include,
but are not limited to, the development plans for the technologies of the
Company, trends in the results of the Company's development, anticipated
development plans, operating expenses and the Company's anticipated capital
requirements and capital resources. The Company's actual results could differ
materially from the results discussed in the forward-looking statements.
The Company has not generated revenue from operations during the first nine
months of 2001 or since its inception. During the third quarter of 2001, the
Company began the quarter with $31,614 in cash. At November 1, 2001, the Company
had a working capital deficit. The Company had approximately $29,000 in cash and
trade payables of approximately $42,500 at that date.
During the third quarter of this year, the company sold 600,000 shares of its
holdings in Rockford Technology Corporation for $19,506 in cash and exchanged
900,000 shares of Rockford for services and the payment of existing payables.
The Company disbursed approximately $10,000 in cash for auditor reviews and
legal fees regarding the registration statement, quarterly filing and business
consulting, $5,000 to a scientific consultant for an opinion on current patents
and patents pending as well as $ 35,000 for salaries, travel and overhead
expenses.
Subsequent to September 30, 2001, the Company received approximately $36,700 in
cash from the sale of most of its marketable securities from which it dispersed
$ 20,646 for payables existing at September 30, 2001. The Company also satisfied
payables at September 30, 2001 of $ 22,000 by issuing common shares to the
previous President.
In early July 2001, the Company terminated its investor relation representative
and hired a scientific consultant to evaluate all of the patents and patent
applications of the Company for relevance to potential commercial applications.
The consultant first stated that all patents and provisional patents involving
Field Enhanced Diffusion by Optical Activation (FEDOA) which covered diamond
based fuel cells, diamond doping and the removal of impurities, listed inventors
that are or were faculty members of the University of Missouri at Columbia. The
University Administration asserts that all inventions created at the University
by its faculty members are its intellectual property and not Rhombic's. The
following opinions on Rhombic's provisional patents invented by faculty members
at the University of Missouri are summarized as follows:
1. Provisional patents for the System and Method for Diamond Based Fuel
Cells give substantial evidence that the described process using FEDOA
is too slow to be economically feasible.
2. Provisional patent applications covering the doping of natural and
chemically vacuum deposited (CVD) diamond using FEDOA is too slow of a
process to be economically feasible. Additional research into
electrical applications of these provisional patents could be used
with other doping processes to explore potential commercial
applications.
3. Provisional patent applications for a System and Method for Removal of
Imputities from materials such as semiconductors using FEDOA would
require significantly more research to determine commercial value.
Although the process appears to offer an increase yield of chips
obtainable from wafers, the commercial viability is questionable
because the FEDOA is very slow for commercial applications.
8
4. Provisional patent applications for Carbon Crystal Growth Using
Electric Emission Enhanced Showerhead Hot Filament Chemical Vapor
Deposition offers an improved process for the CVD process, but the
applications and inventors do not have enough data to determine
commercial viability.
The conclusion of the consultant and the company was not to continue the patent
process of the above listed provisional patent applications because of (1) the
limited economic viability due primarily to the process speed of FEDOA; (2) the
high costs of patent counsel and the direct costs to obtain domestic and foreign
patents; and (3) the potential exposure to royalty payments to the University of
Missouri with corresponding costs of defending ownership of the patents.
The consultant also evaluated Rhombic's intellectual property that was
unaffected by potential claims from the University of Missouri. His opinions are
as follows:
1. Provisional patent for the Method and System for Manufacturing
Disperse Composite Materials is of great economic value if the process
is fully developed for the numerous applications that are being
proposed now by industry or that will emerge shortly.
2. Provisional patent for a Method of Contact Diffusion into Diamond and
Other Crystalline Structures and Products using its thermal diffusion
method is commercially viable.
The consultant recommended proceeding with a development plan for commercial
applications involving the Manufacturing of Disperse Composite Materials. He
also recommended to proceed with Contact Diffusion into Diamond if reasonable
arrangements could be made to secure a license to receive the processed diamond
material necessary to complete the process.
Upon the recommendations of the consultant, the company met with its patent
attorneys and determined that the application deadlines to extend the patents
pending on the Manufacturing of Disperse Composite Materials had expired. As a
result, the President met with the inventors of the patents and determined a
commitment of $ 500,000 to $1,000,000 in capital would be needed to begin a
development program for any commercial applications that would provide specific
patent coverage for any process developed. Due to existing financing problems
that the Company was facing, Rhombic's President recommended a merger with a
private research and development company that had capital and scientists.
Unfortunately, Rhombic never received enough information from the company to
evaluate a merger and Rhombic's President subsequently resigned.
The Company does not have any employees and uses consultants for matters
pertaining to coordinating technology development and administration. The
Company may hire employees during the next twelve months depending upon its
success in developing prototype applications for sale and financing more
development.
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Exchange Act of 1934.
Although the Company believes that the expectations reflected in the
forward-looking statements and the assumptions upon which the forward-looking
statements are based are reasonable, it can give no assurance that such
expectations and assumptions will prove to be correct.
9
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is
unaware of any proceedings contemplated against it.
ITEM 2. CHANGES IN SECURITIES
The following information is given with respect to all unregistered
securities sold or issued by Rhombic in the period covered by this report:
(1) On August 9, 2001 25,000 restricted common shares were issued to a
consultant regarding financing for the Company. The deemed value of the shares
issued was $4,500 which was determined based upon the trading value of the
Company's common stock at the time of the issuance of the stock and the
agreement. These shares were issued by the Company pursuant to the exemption
found in Section 4(2)of the Securities Act of 1933.
(2) On September 13, 2001, the Company issued 175,000 restricted common
shares of its common stock to two financial consultants regarding financing for
the Company and 50,000 restricted common shares to a scientific consultant. The
deemed value of the shares issued was $27,000 which was determined based upon
the trading value of the Company's common stock at the time of the issuance of
the stock and the agreement. These shares were issued by the Company pursuant to
the exemption found in Section 4(2)of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On November 5, 2001, the Company entered into a non-binding letter of
intent with Famco Holding Company, LLC to reach a definitive agreement wherein
Rhombic would acquire all the outstanding shares of six corporations for
approximately 630,000,000 common shares of Rhombic, restricted pursuant to Rule
144, and resulting in a change of control. It is anticipated that the operating
corporations will be acquired individually over a four to six month period after
due diligence and audited financial statements are completed. The unaudited
revenues from two of the operating companies last year approximated $12 million
with income before taxes of $4.4 million. Other companies are in a research and
development phase and will be sold to Rhombic upon completion of the development
phase and a readiness to commence sales. Upon the satisfactory completion of due
diligence, the directors of Rhombic will recommend the acquisitions to the
shareholders with the specific terms.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
During the quarter ended September 30, 2001, the Company did not file a
Form 8-K. Subsequent to the end of the quarter, the Company filed one Form 8-K
report. The report was filed on October 12, 2001 and is incorporated herein by
reference. The report disclosed the resignation of Roger Duffield as the
President and a director of the Company.
10
SIGNATURES
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.
RHOMBIC CORPORATION
By: /s/ Albert Golusin
------------------------------------
Date: November 14, 2001 Albert Golusin
Chief Financial Officer
11