<PAGE> 1
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 March 31, 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
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 88-0160741
- --------------------------------------------------------------------------------
(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
April 30, 1997.
1
<PAGE> 2
CADEMA CORPORATION
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Balance Sheets - March 31, 1996 and
December 31, 1996
Statements of Operations - Three months ended 4
March 31, 1997 and March 31, 1996
Statements of Cash Flows - Three months ended 5
March 31, 1997 and March 31, 1996
Notes to Financial Statements 6-7
Item 2 - Management's Discussion and Analysis of 8-9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Signatures 10
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
<PAGE> 3
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
ASSETS March 31,1997 December 31,1996
------ ------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 71,935 $ 7,317
Trading securities (Cost $761,446 in 496,390 719,567
1997 and $808,219 in 1996)
(Note 2)
Accounts receivable -
Other current assets 480 768
----------- -----------
TOTAL CURRENT ASSETS 568,805 727,652
NOTE RECEIVABLE less allowance for bad
debt of $172,250 in 1997 and 1996
172,750 172,750
----------- -----------
TOTAL ASSETS $ 741,555 $ 900,402
=========== ===========
Liabilities And Stockholders' Equity
------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ - $ -
Accrued liabilities 13,000 13,000
Contract Deposits - -
----------- -----------
TOTAL CURRENT LIABILITIES 13,000 13,000
Accrued dividends on preferred stock 721,571 679,126
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------- -----------
TOTAL LIABILITIES 741,867 699,422
----------- -----------
STOCKHOLDERS' EQUITY
Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 4,851 4,851
per 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 (7,784,053) (7,582,761)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (312) 200,980
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 741,555 $ 900,402
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial
statements are an integral part of these statements.
3
<PAGE> 4
CADEMA CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31
-----------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
REVENUE (Note 2) $ - $ -
COST OF GOODS SOLD - -
----------- -----------
GROSS PROFIT - -
OPERATING EXPENSES:
General and administrative 5,147 11,282
----------- -----------
Total operating expenses 5,147 11,282
----------- -----------
Loss from operations (5,147) (11,282)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Note 2)
Realized gains (losses) 22,525 16,125
Change in unrealized losses (176,405) 17,317
Interest income - -
Interest expense - -
Dividend income 180 122
Other income - -
Minority Interest (Note 3) - -
----------- -----------
Total other income (expense) (153,700) 33,564
----------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES (158,847) 22,282
PROVISION FOR INCOME TAXES - -
----------- -----------
NET INCOME (LOSS) (158,847) 22,282
PREFERRED DIVIDENDS EARNED 42,445 42,445
----------- -----------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK (Note 2) (201,292) $ (20,163)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary (.02) $ (.00)
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements
4
<PAGE> 5
CADEMA CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR EACH OF THE THREE MONTHS IN THE PERIOD ENDED MARCH 31, 1997
---------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Net income (loss) from operations $(158,847) $ 22,282
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 (22,525) (16,125)
Unrealized loss (gain) in value
of trading securities 176,405 (17,317)
(Increase) decrease in accounts receivable - -
Decrease (Increase) in other receivables and
current assets 288 267
Elimination of joint venture investment - -
(Decrease) increase in accounts payable and
accrued liabilities - -
Increase (decrease) in contract deposits - -
Increase in Minority Interest - -
--------- --------
Net cash provided by (used in) continuing
operating activities (4,679) (10,893)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities - -
Proceeds from sale of marketable securities 69,297 78,000
--------- --------
Net cash provided by (used in) investing
activities 69,297 78,000
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury Stock Purchase - -
--------- --------
Net cash (used in)
financing activities - -
--------- --------
Net increase (decrease) in cash and
cash equivalents 64,618 67,107
Cash and cash equivalents -
Beginning of Period 7,317 13,177
========= ========
Cash and cash equivalents -
End of Period $ 71,935 $ 80,284
--------- --------
--------- --------
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Earned $ 42,445 $ 42,445
========= ========
</TABLE>
The accompanying notes to the consolidated financial
statements are an integral part of these statements.
5
<PAGE> 6
CADEMA CORPORATION
------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THREE MONTHS IN THE PERIOD ENDED MARCH 31, 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.
6
<PAGE> 7
(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.
7
<PAGE> 8
(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.
8
<PAGE> 9
RESULTS OF OPERATIONS
There were no revenues in the first three 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 three months of 1997 were $5,147 and
represented administrative expenses of the parent Company. These expenses
compared favorably to 1996 first quarter operating expense of $11,282.
Other income in this first quarter totaled a loss of $153,700 as compared
to a 1996 gain of $33,564. This contrast is 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 quarter, after an
accrual for a Preferred Stock dividend, was $201,292 or $.02 per share. For
the same quarter of the prior year, better performance by the Company's
securities portfolio resulted in a loss of $20,163 or $.00 per share to be
recognized.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and working capital increased by $158,847 to $555,805 in the
first quarter 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
- -------
9
<PAGE> 10
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: May 7, 1997 By: /s/ Roger D. Bensen
---------------------------------------
ROGER D. BENSEN
Chairman of the Board and
Chief Executive Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 71,935
<SECURITIES> 496,390
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 568,805
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 741,555
<CURRENT-LIABILITIES> 13,000
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> (114,519)
<TOTAL-LIABILITY-AND-EQUITY> 741,555
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,147
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (158,847)
<INCOME-TAX> 0
<INCOME-CONTINUING> (158,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 42,445
<CHANGES> 0
<NET-INCOME> (201,292)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
