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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1997.
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 No. 0-9614
CADEMA CORPORATION
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(Exact name of small business issuer as specified in its charter)
DELAWARE 88-0160741
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(State or other jurisdiction of (IRS Employer I.D. Number)
incorporation or organization)
c/o Number One Corporation 50 Washington Street. Norwalk CT 06854
- -----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 854-6711
--------------
(Former name, former address and former fiscal year, if changed since last
report.) - N/A
Indicate by check mark whether the Registrant (1) has 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 reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 10,905,549 shares of the Registrant's common stock outstanding as of
September 30, 1997.
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CADEMA CORPORATION
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Balance Sheets - September 30, 1997 and
December 31, 1996
Statements of Operations - Nine months ended 4
September 30, 1997 and September 30, 1996
Statements of Operations - Three months ended 5
September 30, 1997 and September 30, 1996
Statements of Cash Flows - Nine months ended 6
September 30, 1997 and September 30, 1996
Notes to Financial Statements 7
Item 2 - Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Signatures 11
Exhibit 27
The accompanying condensed financial statements have been prepared by the
Company, without audit, and reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of operations,
financial position, and statements of cash flows for the interim periods. The
statements have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission, but omit certain information and
footnote disclosures necessary to present the statements in accordance with
generally accepted accounting principles.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996. Management believes that
the disclosures are adequate to make the information presented herein not
misleading.
2
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CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30,1997 December 31,1996
------ ----------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 67,553 $ 7,317
Trading securities (Cost $790,953 in 510,337 719,567
1997 and $808,219 in 1996)
(Note 2)
Accounts receivable - -
Other current assets - 768
----------- -----------
TOTAL CURRENT ASSETS 577,890 727,652
NOTE RECEIVABLE less allowance for bad
debt of $172,250 in 1997 and 1996
172,750 172,750
----------- -----------
TOTAL ASSETS $ 750,640 $ 900,402
=========== ===========
Liabilities And Stockholders' Equity
------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ - $ -
Accrued liabilities - 13,000
Contract Deposits - -
----------- -----------
TOTAL CURRENT LIABILITIES - 13,000
Accrued dividends on preferred stock 806,462 679,126
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------- -----------
TOTAL LIABILITIES 813,758 699,422
----------- -----------
STOCKHOLDERS' EQUITY
Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per 4,851 4,851
share authorized 5,000,000 shares;
issued 485,123 shares in 1997 and 1996
Series B 8% Cumulative Convertible
Preferred Stock, par value, $.01 per - -
share, authorized, 150,000 shares,
none issued
Common Stock, par value, $.01 per share;
authorized 50,000,000 shares, issued 109,356 109,356
10,935,549 shares in 1997 and 1996
Additional paid-in capital 7,765,904 7,765,904
Accumulated deficit (7,846,859) (7,582,761)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (63,118) 200,980
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 750,640 $ 900,402
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
3
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CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
1997 1996
---- ----
REVENUE (Note 2) $ - $ -
COST OF GOODS SOLD - -
----------- -----------
GROSS PROFIT - -
OPERATING EXPENSES:
General and administrative 22,594 22,636
----------- -----------
Total operating expenses 22,594 22,636
----------- -----------
Loss from operations (22,594) (22,636)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Note 2)
Realized gains (losses) 75,339 184,410
Change in unrealized losses (191,965) 89,700
Interest income - -
Interest expense - -
Dividend income 2,458 1,365
Other income - -
Minority Interest (Note 3) - -
----------- -----------
Total other income (expense) (114,168) 275,475
----------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES (136,762) 252,839
PROVISION FOR INCOME TAXES - -
----------- -----------
NET INCOME (LOSS) (136,762) 252,839
PREFERRED DIVIDENDS EARNED 127,336 127,336
----------- -----------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK (Note 2) (264,098) $ 125,503
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary (.02) $ (.01)
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these statements
4
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CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30
1997 1996
---- ----
REVENUE (Note 2) $ - $ -
COST OF GOODS SOLD - -
----------- -----------
GROSS PROFIT - -
OPERATING EXPENSES:
General and administrative 9,612 5,925
----------- -----------
Total operating expenses 9,612 5,925
----------- -----------
Loss from operations (9,612) (5,925)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Notes 2)
Realized gains (losses) - 82,700
Change in unrealized losses 15,587 49,600
Interest income - -
Interest expense - -
Dividend income 934 403
Other income - -
Minority Interest (Note 3) - -
----------- -----------
Total other income (expense) 16,521 132,703
----------- -----------
INCOME (LOSS) FROM OPERATIONS 6,909 126,778
PROVISION FOR INCOME TAXES - -
----------- -----------
NET LOSS 6,909 126,778
PREFERRED DIVIDENDS EARNED 42,445 42,445
----------- -----------
NET LOSS APPLICABLE TO
COMMON STOCK (Note 2) $ (35,536) $ 84,333
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary $ (.00) $ .01
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these statements
5
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CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE NINE MONTHS IN THE PERIOD ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
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<S> <C> <C>
Net income (loss) from operations $(136,762) $ 252,839
Adjustments to reconcile net income
(loss) to net cash provided by (used in) operating
activties
Provision for uncollectable note receivable - -
Write-off of uncollectable accounts receivable - -
Realized loss (gain) on sale of trading
securities (75,339) (184,410)
Unrealized loss (gain) in value
of trading securities 191,965 (89,700)
(Increase) decrease in accounts receivable - -
Decrease (Increase) in other receivables and
current assets 768 (344)
Elimination of joint venture investment - -
(Decrease) increase in accounts payable and
accrued liabilities (13,000) (13,000)
Increase (decrease) in contract deposits - -
Increase in Minority Interest - -
--------- ---------
Net cash provided by (used in) continuing
operating activities (32,368) (34,615)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (282,652) (401,387)
Proceeds from sale of marketable securities 375,256 484,623
Net cash provided by (used in) investing
--------- ---------
activities 92,604 83,236
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury Stock Purchase - -
--------- ---------
Net cash (used in)
financing activities - -
--------- ---------
Net increase (decrease) in cash and
cash equivalents 60,236 48,621
Cash and cash equivalents -
Beginning of Period 7,317 13,177
--------- ---------
Cash and cash equivalents -
End of Period $ 67,553 $ 61,798
--------- ---------
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Earned $ 127,336 $ 127,336
========= =========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
6
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CADEMA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS IN THE PERIOD ENDED SEPTEMBER 30, 1997
(1) NATURE OF BUSINESS AND CURRENT OPERATING ENVIRONMENT:
The principal business of Cadema Corporation (the "Company") is the
financing and operating of business enterprises with the potential to
generate profits and cash flow. Currently the Company is exploring possible
acquisitions and mergers throughout the United States and abroad, as it has
done in the past, seeking to enter into new operating businesses and to use
the Company's liquid assets in connection therewith. As part of this
strategy, the Company entered into a joint venture agreement with Global
Environmental, Inc. in December 1993. The Company did not generate any
revenues from operations in 1997 or 1996, and is currently pursuing
additional contracts.
While the principal business of the Company is the financing and operating
of business enterprises with the potential to generate profits and cash
flow, it still intends to invest in and sell marketable securities as
outlined in a plan approved by stockholders in 1988.
The Company intends to continue to invest in trading securities, including
but not limited to stocks, bonds, options and warrants.
The Company now holds and currently expects to invest primarily in the
stock of smaller, lesser known and often more speculative companies, which
while entailing above-average risk, offer the potential of above-average
reward.
There are significant risk factors affecting the Company, including
potential operating losses it may incur from operating ventures, the
volatility of market values of its investment securities portfolio, and the
possible need for additional capital. These and other factors may adversely
affect the Company's future operations.
(2) SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
For purposes of the Consolidated Balance Sheet and Statements of Cash
Flows, the Company considers its short-term investments purchased with a
maturity of three (3) months or less to be cash equivalents.
REVENUES
Revenues are the result of contract revenues recognized utilizing the
percentage of completion method of accounting. Contract revenues are the
total of contract costs, which include all direct material and labor costs
and those indirect costs related to contract performance, and provisions
for estimated gain or loss on the contracts. The provisions for estimated
gain or loss on the contracts are adjusted during the period in which the
Company first becomes aware of the need for a change.
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(2) SIGNIFICANT ACCOUNTING POLICIES: (CONT.)
REVENUES (CONT.)
Total estimated costs are periodically revised, if necessary, to
reflect changes to the original contracts and changes to total estimated
contract costs based on deviations of actual cost to date from original
estimates and anticipated future deviations from such original estimates.
Selling, General and Administrative costs are charged to expense as
incurred.
TRADING SECURITIES
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards (SFAS) ("Statement") No. 115, "Accounting for certain
Investments in Debt and Equity Securities." The Company's adoption of the
Statement requires its marketable securities to be classified as "trading"
and accounted for at fair market value, with unrealized gains and losses
reported as a component of net income (loss).
Realized gains and losses are determined on a first-in, first-out basis.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is based upon net income less preferred
stock dividends earned and is calculated using the weighted average number
of shares of common stock outstanding during the period. All convertible
preferred stock series, options and warrants outstanding presently have an
anti-dilutive effect and, accordingly, have been excluded from these
calculations.
(3) JOINT VENTURE:
On December 31, 1993 the Company entered into a Joint Venture Agreement
with Global Environmental, Corp., a New York corporation, to create the
Joint Venture entity Global Environmental Offshore Company ("Global" or
"Joint Venture"). The Joint Venture Company engages in contracting for the
design and installation of Air Pollution Control equipment and facilities
in areas located outside the United States. Under the terms of the Joint
Venture Agreement, the Company contributed $350,000 and received 51%
control of the Joint Venture.
Under the Joint Venture Agreement, Global Environmental, Corp. has the
right to acquire the Company's interest in the Joint Venture for, at the
Company's option, 875,000 shares of Global stock or the greater of $350,000
or the Company's existing capital account. The Company has the option to
convert its Joint Venture interest into 875,000 shares of Global
Environmental, Corp.'s common stock.
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(3) JOINT VENTURE: (CONT.)
The financial statements of the Joint Venture are consolidated with the
Company's results in the accompanying financial statements of this report.
The portion of the Joint Venture's income that is not applicable to the
Company is recorded as Minority Interest on the Statement of Operations.
That income along with Global Environmental Corp.'s capital contribution to
the Joint Venture is recorded under the caption "Minority Interest in
Subsidiary" on the Balance Sheet.
Notes payable issued by Global Environmental Corp. to the Joint Venture are
carried on the Balance Sheet as Notes Receivable and were due on December
31, 1996. The Joint Venture anticipates refinancing the notes in 1997.
Accordingly, the Notes have been classified as long-term.
Negotiations are in process for the refinancing of this note receivable.
Global Environmental Corp. does not have funds available to repay the Note
in cash and has offered to exchange its stock for the Note. The Company has
established a 50% reserve against the carrying value of the Note in
recognition of the potential costs involved in liquidating any noncash
settlement of this Note. Although the Company believes such 50% reserve to
be adequate, the reserve is an estimate based on information presently
available. The Company's estimate could change, which would result in a
change in the reserve in the future.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The principal business of Cadema Corporation (the Company) is the financing
and operating of business enterprises with the potential to generate
profits and cash flow. Currently the Company's sole operating subsidiary,
Global Environmental Offshore Company, engages in contracting for the
design and installation of Air Pollution Control equipment and facilities
for international markets. The Company continues to explore possible
acquisitions and mergers as it has done in the past, seeking to enter into
new operating situations with it can utilize its liquid assets.
While the principal business of the Company is the financing and operating
of business enterprises with the potential to generate profits and cash
flow, it still intends to invest in and sell marketable securities as
outlined in a plan approved by stockholders in 1988.
9
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RESULTS OF OPERATIONS
There were no revenues in the first nine months of 1997, as the Company's
operating subsidiary Global Environmental Offshore Company had no revenue
activity. In 1996, the operating activity of Global Environment Offshore
Company produced no revenues in the same period.
Operating expenses for the first nine months of 1997 were $22,594 and
represented administrative expenses of the parent Company. These expenses
are similiar to 1996 first nine months operating expense of $22,636.
Other income in the first nine months totaled a loss of $114,168 as
compared to a 1996 gain of $275,475. Third quarter other income totaled
$16,531 in 1997, below 1996 third quarter gain of $132,703. This contrast
is primarily due to an unrealized loss on the company's Investment
Portfolio in 1997 as compared to a gain for the same period of 1996.
The net loss applicable to common stock for the first nine months, after an
accrual for a Preferred Stock dividend, was $264,098 or $.02 per share. For
the same period of the prior year, better performance by the Company's
securities portfolio resulted in a gain of $125,503 or $.01 per share. In
the third quarter, a loss of $35,536 or $.00 per share was recognized,
lower than the 1996 results of a $84,333 gain due to better performance of
the Company's securities portfolio.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and working capital decreased by $136,762 to $577,890 in the
first nine months of 1997 due primarily to the performance of the Company's
marketable securities portfolio.
The Company believes it has sufficient working capital to meet its
liquidity needs over the next twelve months.
PART II
ITEMS 1 THRU 5: Not Applicable
ITEM 6: Exhibits - Exhibit 27 Financial Data Schedule
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CADEMA CORPORATION
Dated: October 25, 1997 By: /s/ Roger D. Bensen
------------------------------------
ROGER D. BENSEN
Chairman of the Board and
Chief Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 67,553
<SECURITIES> 510,337
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 577,890
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 750,640
<CURRENT-LIABILITIES> 813,758
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> (177,325)
<TOTAL-LIABILITY-AND-EQUITY> 750,640
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,594
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (136,762)
<INCOME-TAX> 0
<INCOME-CONTINUING> (136,762)
<DISCONTINUED> 0
<EXTRAORDINARY> 127,336
<CHANGES> 0
<NET-INCOME> (264,098)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
