<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996.
TRANSITION REPORT UNDER 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
----------------------------------------------
(Name of small business issuer in its charter)
DELAWARE 88-0160741
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
c/o Number One Corporation
50 Washington Street, Norwalk CT 06854
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (203) 854-6711
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
(Title of class) Common Stock, $0.01 Par Value
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. ( X )
State issuer's revenues for its most recent fiscal year $0. As of February 28,
1997, the aggregate market value of common stock held by non-affiliates of the
registrant, based on the average of the bid and asked prices of such stock as
reported by the National Association of Securities Dealers, Inc. on such date,
was approximately $109,055.
There were 10,905,549 shares of the Registrant's common stock outstanding as of
February 28, 1997.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format (Check one):
Yes No X
----------- ----------
<PAGE> 2
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Except for the historical information contained herein, the matters
discussed in this Annual Report are forward-looking statements which involve
risks and uncertainties, including but not limited to economic, competitive,
governmental and other factors affecting the Company's revenues and operations
and other factors discussed in the Company's various filings with the Securities
and Exchange Commission.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT
Cadema Corporation (the "Company") finances and operates business
enterprises that have the potential to generate profits and positive cash flow.
The predecessor of the Company (Nevada Resources, Inc.) was incorporated
in Nevada in 1980, at which time it acquired certain mining equipment and
interests in undeveloped mining properties. The Company has been publicly held
since 1980. In 1985, the Company decided to diversify its operations and, in
September 1986, effected a merger with Cadema, Inc., a privately held company.
Although the Company originally was engaged in mineral exploration, the 1986
acquisition of Cadema, Inc. changed the Company's primary business to the
commercialization of medical technology. All mining interests have been sold or
have been allowed to lapse. The Company was re-incorporated in Delaware in
December 1986 and changed its name to Cadema Corporation.
From 1986 until July 1992, the Company's business had been the sale of
medical products cleared by the Food and Drug Administration ("FDA") and the
development of new products for which FDA clearance was sought. In 1987, the
Company raised approximately $3,900,000 in net proceeds through the public sale
of preferred stock to finance these operations. The Company left the medical
products business with the sale of its medical product lines in 1990 and 1992.
On July 15, 1992, the Company acquired SuperCads, Inc. (known by its
business name of "Cognition") and its primary business changed to computer
software products. Cognition was sold in May 1993, and with this sale the
Company no longer engaged in the computer software business.
On December 31, 1993 the Company entered into a Joint Venture Agreement
with Global Environmental Corp. which created Global Environmental Offshore
Company ("Global") which engages in contracting for the design and installation
of air pollution control equipment and facilities in areas located outside the
United States. Global provides design, assembly and project management services
related to the construction of air pollution control systems. Cadema owns 51% of
Global.
Unless the context otherwise indicates, all references herein to Cadema or
the Company include Cadema Corporation and its subsidiary and predecessors.
1
<PAGE> 3
The Company is still exploring other possible acquisitions and mergers, 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.
The Company has also used available cash to purchase, hold and dispose of
equity interests in various high technology companies as outlined in a plan
approved by stockholders in 1988. Securities transactions in 1996 netted a gain
of $ 245,681. The Company intends to continue to invest in trading securities,
including but not limited to stocks, bonds, options and warrants. The Company
previously invested, and expects in the future to invest, primarily in stocks of
smaller, lesser known and often more speculative companies, which while
entailing above average risk, offer the potential of above average return on
investment.
NUMBER OF EMPLOYEES
The Company's Chief Executive Officer and President, Mr. Roger D. Bensen,
was the sole employee as of December 31, 1996 and was not compensated for
serving in such capacity.
ITEM 2. DESCRIPTION OF PROPERTY
The Company does not currently own or lease any real property.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings are pending to which the Company is a party
or to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no meetings of stockholders during the fourth quarter of 1996
nor were any matters submitted for vote.
2
<PAGE> 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock ("Common Stock")and the Series A 8% Cumulative
Convertible Preferred Stock ("Preferred Stock")of the Company trade on the
Nasdaq Bulletin Board under the symbols CDMA and CDMAP, respectively. Effective
May 25, 1993 these shares commenced trading on the Nasdaq Bulletin Board System.
Previously these shares had traded on the Nasdaq Small Cap Market but were
removed from this market due to failure to meet administrative requirements. The
following Table sets forth, for the respective periods indicated, the prices of
the Common Stock and Preferred Stock in the over-the-counter market, based upon
inter-dealer high and low bid prices, without retail mark-up, mark-down,
commissions or adjustments (and may not represent actual transactions), as
reported and summarized by the National Association of Securities Dealers
Automated Quotation Service.
<TABLE>
<CAPTION>
Common Preferred
------ ---------
High Low High Low
--------------- ------------------
<S> <C> <C> <C> <C>
4th Quarter 1996 $.02 $.01 $7/16 $11/32
3rd Quarter 1996 $.02 $.01 $6/16 $10/32
2nd Quarter 1996 $.03 $.01 $6/16 $10/32
1st Quarter 1996 $.02 $.01 $6/16 $ 5/16
4th Quarter 1995 $.03 $.01 $5/16 $ 1/8
3rd Quarter 1995 .03 .01 1/4 1/8
2nd Quarter 1995 .04 .02 1/4 1/8
1st Quarter 1995 .05 .02 1/4 1/8
</TABLE>
The approximate number of stockholders of record of the Company's Common
Stock and Preferred Stock as of February 28, 1997, were 1,027 and 312
respectively, as set forth on the books of the transfer agent/registrar of the
Company. The Company believes that a substantial number of additional
stockholders hold their shares in nominee name.
DIVIDENDS
The Company has not paid any dividends on its Common Stock since inception
and plans to retain any earnings for the future development of its business.
Future dividends on the Common Stock, if any, will be dependent upon the
Company's earnings, financial condition, and other relevant factors as
determined by its Board of Directors. Annual cumulative dividends of $0.40 per
share of Preferred Stock are payable semi-annually in cash or common stock
unless they are deferred by the Board of Directors. The dividends that were
payable during 1993 through 1996 were deferred and have accumulated for possible
payment at a later date.
3
<PAGE> 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's primary focus in 1996 was its joint venture, Global
Environmental Offshore Company. Global was set up to provide pollution control
services for international customers.
The Company continues in its principal business of seeking and financing
business enterprises with the potential to generate profits and positive cash
flow. The Company's previous entry into the pollution control business is part
of this strategy.
The Company intends to continue using its available funds to purchase,
invest in and sell securities as outlined in a plan approved by stockholders in
1988.
In the near future, the Company will need to restructure its joint
venture, Global Environmental Offshore Company. During 1996, Global
Environmental Corp., the other party to the joint venture, disposed of one of
its subsidiaries which produced products of the type the joint venture was
intending to sell internationally. Therefore, the Company is currently
reevaluating its joint venture's status and plans. In connection with the
formation of the joint venture, the joint venture loaned $345,000 to Global
Environmental Corp., which was due to be repaid on December 31, 1996. Global
Environment Corp. does not presently have available funds to make such a
repayment. Global Environmental Corp. has offered to exchange its stock for the
note. The Company has established a 50% reserve against the carrying value of
the aforementioned note in recognition of the potential costs involved in
liquidating any noncash settlement of this investment. Negotiations are
continuing, to resolve this issue.
During 1996, Cadema reviewed several potential acquisitions, as it
continues to move toward its goal to become a larger company. All negotiations
failed, however, because of a continuing problem with the existence of the
Company's Preferred Stock. Originally issued 10 years ago, the Preferred Stock
initially paid dividends in cash, and then paid them in shares of Common Stock,
as provided for in its certificate of Designation for the Preferred Stock. This
practice was continued for many years until Cadema's liquidity was impaired by
the losses brought on by the Cognition acquisition and its subsequent disposal.
Over the past several years, Preferred Stock dividends have been accrued rather
than paid, because the Company has been unable to pay dividends.
Management believes that investors understand the practical limitation on
payment of dividends by a company the size of Cadema. If the Company were to
issue more shares of Common Stock, in lieu of a cash dividend, at the past
year's price of $.01, stockholders would be substantially diluted. Management is
reviewing this situation.
In Cadema's case, all stockholders have a common interest in the value of
the Common Stock. Even people who only purchased the Preferred Stock now have
Common Stock because of dividends they received in Common Stock. Management is
working toward a solution for this Preferred Stock problem.
4
<PAGE> 6
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
In 1996, Global had no activity, hence operating results present the
administrative expenses and marketable securities activity of Cadema
Corporation.
Revenues
Global generated no orders in 1996 and so revenues were $0 as compared to
$33,687 in 1995. The managing partner of Global, Global Environmental Corp., was
reorganized in 1996 and disposed of the subsidiary that produced the products
the joint venture sold resulting in the lack of revenues for 1996. The joint
venture continues to seek additional contracts.
Operating Expenses
General and administrative expenses were $44,933 in 1996, representing
expenses related to maintaining the Company and were up slightly from 1995's
expenses of $44,759 which were also primarily for maintaining the Company but
included some expenses of the joint venture.
As referred to above, the Company recorded a reserve of 50% of the note
receivable from the joint venture. The Company also wrote off a receivable of
approximately $18,800 from the joint venture. The total of these amounts,
$191,099, has been included in "Loss from operations" in the accompanying
Statement of Operations.
Trading Securities Transactions
Trading securities investment activity generated a realized gain of $184,410
in 1996 compared to a realized loss of $208,814 in 1995. The securities
portfolio also generated an unrealized gain of $61,271 in 1996, compared to the
1995 unrealized gain of $363,353. The performance of individual stocks
comprising the trading securities holdings are the cause of these results.
FISCAL 1995 COMPARED TO FISCAL 1994
1995 operating results represent the operations of Global and the general
and administrative expenses and marketable securities activity of Cadema
Corporation.
Revenues
Revenues of $33,687 were produced by Global and were below the 1994 revenues
of $134,867 due to lower contract activity.
Operating Expenses
General and administrative expenses in 1995 were $44,759, down from the 1994
total of $70,560. The decrease was due to lower expenses on the part of both
Cadema and its joint venture caused by lower contract activity.
5
<PAGE> 7
Trading Securities Transactions
Trading securities investment activity generated a realized loss of
$208,814 in 1995 compared to a gain of $13,428 in 1994. The securities portfolio
also generated an unrealized gain of $363,353 in 1995 compared to an unrealized
loss of $162,957 in 1994. The performance of individual stocks comprising the
trading securities holdings are the cause of these results.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $714,652 at the end of 1996, up from $530,821 in 1995.
Management believes this resource is sufficient for funding the Company's
anticipated needs in 1997.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
Operating Data: 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue -- $ 33,687 $ 134,867
Cost of Goods Sold -- 26,667 111,930
Operating Expenses $ 236,032 44,759 70,560
Other Income (Expense) 247,612 154,358 (151,033)
Income (Loss) Before Income
Taxes 11,580 116,619 (198,656)
Provision for Income
Taxes -- -- --
Preferred Dividends Earned (169,781) (177,981) (186,181)
Net Loss
Applicable to Common Stock (158,201) (61,362) (384,837)
Net Income (Loss) per Share (.01) (.01) (.04)
Weighted Average Shares
Outstanding 10,905,549 10,905,549 10,905,549
Balance Sheet Data:
Working Capital $ 714,652 $ 530,821 $ 420,212
Total Assets 900,402 888,821 800,177
Total Current Liabilities 13,000 13,000 34,965
Stockholders' Equity 200,980 359,181 387,245
</TABLE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the Consolidated Financial Statements
and Schedules of the Company and its Subsidiary filed with and made as part of
this report. (Also see Item 13 of this Report.)
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
6
<PAGE> 8
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Director or
Officer
Name Age Position Since
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Roger D. Bensen 61 Chairman of the Board, Chief 1983
Executive Officer and
President/Director
Richard B. Ames 58 Director 1985
</TABLE>
All directors and officers of Cadema serve for a term of one year and
until their respective successors are duly elected and qualified. There are no
family relationships among any officers and directors.
Roger D. Bensen has been Chairman of the Board of Directors of Cadema
since February 12, 1983. He is Chief Executive Officer of Cadema and was
President of the Company from September 1990 until July 1992 and became
President again in May 1993 until present. Mr. Bensen has been President of the
Number One Corporation, a privately held financial consulting firm based in
Norwalk, Connecticut, for 25 years. He is also the President of Roundel
Petroleum Exploration Company, Inc., a privately held company that is engaged in
the exploration and production of oil and gas. Mr. Bensen devotes such time as
is necessary to perform his duties as an officer and director of Cadema.
Richard B. Ames became a director of Cadema in February 1985. Mr. Ames is
President of Ames and Associates, an independent investment consulting company
in Eureka, California. From 1981 until the formation of his present company, Mr.
Ames was Associate Vice President for Dean Witter Reynolds, Inc., a member of
the New York Stock Exchange, at their Eureka office.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All necessary reports required to be filed pursuant to Section 16(a) of
the Securities Exchange Act of 1934 have been filed on a timely basis . In
making these statements, the Company has relied on representations of its
incumbent directors and officers (and its ten percent holders) and copies of the
reports that they have filed with the Securities and Exchange Commission.
ITEM 10. EXECUTIVE COMPENSATION
Roger D. Bensen received no salary or compensation in the last three
fiscal years. No officer received compensation of more than $100,000 in any of
the last three fiscal years.
STOCK OPTION PLANS:
1986 Plan
In November 1986, the Board of Directors of the Company adopted the
Company's 1986 Stock Option Plan (the "1986 Plan") and the plan was approved by
the Company's stockholders on December 15, 1986. Options intended to
7
<PAGE> 9
qualify as incentive stock options and nonqualified options may be granted under
the 1986 Plan. The aggregate number of shares which may be issued under the 1986
Plan may not exceed 600,000 shares of Common Stock. The purpose of the 1986 Plan
is to provide eligible employees, officers and directors of the Company with an
opportunity to acquire or increase their equity interest in the Company, and
thereby to induce them to remain in the Company's service. In 1995, 1994 and
1993, no options were granted and no options expired. As of December 31, 1996,
no options were outstanding and options covering 600,000 shares of Common Stock
were available under the 1986 Plan.
OTHER STOCK OPTIONS
In 1996, 1995, and 1994 no options were granted, exercised or terminated.
In 1996, 250,000 options expired. As of December 31, 1996 there were no options
outstanding.
OTHER EXECUTIVE PLANS
The Company has no long term incentive or pension plans.
COMPENSATION OF DIRECTORS
In fiscal years 1996, 1995 and 1994, the directors did not receive
compensation for their services. Currently there are no standard arrangements
for the compensation of directors for their services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following Table sets forth information as of the most March 16, 1997,
regarding the voting securities of the Company owned by each person who owns of
record, or is known by the Company to own beneficially, more than five percent
of any class of voting securities and by each director of the Company and all
directors and officers of the Company as a group. None of the directors or
officers are holders of record of Preferred Stock.
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent of Percent of
of Class of Beneficial Owner Beneficial Ownership Class Voting
(1) Stock
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Roger D. Bensen 2,620,352 shares(2)(3) 23.6 22.5
50 Washington Street
Norwalk, CT 06854
Common Richard B. Ames 87,406 shares(4) .8 .7
730 7th Street
Eureka, CA 95501
Common All Directors and Officers 2,707,758 shares 24.4 23.3
as a Group (2 Persons)
Preferred Anne W. Bensen 30,000 shares(5)(6) 6.2 --
69 Dandy Drive
Cos Cob, CT 06807
</TABLE>
8
<PAGE> 10
(1) Shares of Common Stock which a person has the right to acquire within
60 days after March 31, 1997 are deemed to be outstanding in calculating the
percentage ownership of the person, but are not deemed to be outstanding as to
any other person.
(2) Includes shares owned of record by Roundel Petroleum Exploration
Company, Inc., (which is a privately held company controlled by Mr. Bensen).
Also includes warrants currently exercisable by Roundel Petroleum Exploration
Company, Inc. to purchase 180,000 shares of Common Stock.
(3) Includes 140,352 shares of Common Stock held by Anne Bensen, Mr.
Bensen's wife, as to which Mr. Bensen disclaims beneficial ownership and as to
which he has no voting or investment powers. Does not include a total of 30,000
shares of Preferred Stock held by Mr. Bensen's wife as to which he disclaims
beneficial ownership and as to which he has no voting or investment powers.
(4) Includes warrants currently exercisable by Mr. Ames to purchase 1,000
shares of Common Stock. Includes 13,713 shares of Common Stock held by Mr. Ames'
wife, as to which Mr. Ames disclaims beneficial ownership and as to which he has
no voting or investment powers.
(5) The Preferred Stock is the Series A 8% Cumulative Convertible
Preferred Stock, which has one vote per share, voting together with the Common
Stock, and is currently convertible into 1.79 shares of Common Stock for each
share of Preferred Stock.
(6) Does not include 2,300,000 shares of Common Stock held by Roger D.
Bensen, Mrs. Bensen's husband, as to which Mrs. Bensen disclaims beneficial
ownership and as to which she has no voting or investment powers. Mrs. Bensen
also owns 140,352 shares of common stock.
Anne W. Bensen is the wife of Roger D. Bensen.
By virtue of his ownership of shares of Common Stock and his service as
Chief Executive Officer and a Director, Mr. Bensen controls the management and
affairs of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Although Mr. Bensen does not receive compensation for his services to the
Company, he may receive compensation in the future as determined by the Board of
Directors.
9
<PAGE> 11
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS.
Incorporated herein by reference are Consolidated Financial Statements and
Schedules of the Company and its Subsidiary filed with and made a part of
this report
B. EXHIBITS
Exhibit Number Description
- --------------------------------------------------------------------------------
3.1 Certificate of Incorporation, as amended (2)
3.2 Bylaws of the Company (1)
3.3 Form of Certificate of Designation of Series A
Preferred Stock (2)
3.4 Form of Certificate of Designation of Series B
Preferred Stock (2)
10.1 1986 Stock Option Plan (1)
10.2 Form of Indemnity Agreement (2)
10.3 Stock Purchase Agreement SuperCads, Inc., dated as of
July 15, 1992. (3)
10.4 Securities Exchange Agreement dated as of May 27, 1993 (4)
10.5 Global Environmental Offshore Company Joint Venture
Agreement dated as of December 31, 1993 (5)
21.0 Subsidiary of Registrant (2)
27.0 Financial Data Schedule
(1) Filed as Exhibits to the Company's Form 10-K for the fiscal year ended
December 31, 1986 and incorporated herein by reference.
(2) Filed as Exhibits to the Company's Registration Statement on Form S-1
(File No. 33-14459) declared effective July 20, 1987 and incorporated
herein by reference.
(3) Filed as Exhibit to the Company's Form 8-K dated July 15, 1992 and
incorporated herein by reference.
(4) Filed as Exhibit to the Company's Form 8-K dated May 28, 1993 and
incorporated herein by reference.
(5) Filed as Exhibit to the Company's From 10-K dated December 31, 1995 and
incorporated herein by reference.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended December 31, 1996.
10
<PAGE> 12
ITEM 7 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
CADEMA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets - December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for Each of the
Three Years in the Period Ended December 31, 1996 F-4
Consolidated Statements of Changes in Stockholders'
Equity for Each of the Three Years in the Period
Ended December 31, 1996 F-5
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1996 F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 to F-14
Schedules not listed above are omitted since they are either not applicable or
the required information is presented in the financial statements or related
notes thereto.
F-1
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Cadema Corporation
Norwalk, Connecticut
We have audited the accompanying consolidated balance sheets of Cadema
Corporation and Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cadema Corporation and
Subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, The Company changed its
method of accounting for investments as of January 1, 1994.
/s/ Rudolph, Palitz LLP
Plymouth Meeting, PA
March 20, 1997
F-2
<PAGE> 14
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31,1996 December 31,1995
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,317 $ 13,177
Trading securities (Cost $808,219 in 719,567 511,125
1996 and $661,047 in 1995)
(Notes 2 and 4)
Accounts receivable -- 18,807
Other current assets 768 712
----------- -----------
TOTAL CURRENT ASSETS 727,652 543,821
NOTE RECEIVABLE less allowance for bad
debt of $172,250 in 1996 and -0- in
1995 172,750 345,000
----------- -----------
TOTAL ASSETS $ 900,402 $ 888,821
=========== ===========
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 679,126 509,344
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------- -----------
TOTAL LIABILITIES 699,422 529,640
----------- -----------
STOCKHOLDERS' EQUITY (Note 6)
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 1996 and 1995
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 1996 and 1995
Additional paid-in capital 7,765,904 7,765,904
Accumulated deficit (7,582,761) (7,424,560)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 200,980 359,181
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 900,402 $ 888,821
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-3
<PAGE> 15
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE (Notes 1 and 2) -- $ 33,687 $ 134,867
COST OF GOODS SOLD -- 26,667 111,930
------------ ------------ ------------
GROSS PROFIT -- 7,020 22,937
OPERATING EXPENSES: (Notes 1 and 2)
General and administrative 44,933 44,759 70,560
Loss on Joint Venture (Note 3) 191,099 -- --
------------ ------------ ------------
Total operating expenses 236,032 44,759 70,560
------------ ------------ ------------
Loss from operations (236,032) (37,739) (47,623)
OTHER INCOME (EXPENSE):
Trading Securities Transactions
(Notes 2 and 4)
Realized gains (losses) 184,410 (208,814) 13,428
Unrealized gains (losses) 61,271 363,353 (162,957)
Interest income -- 1,010 255
Dividend income 1,931 500 2,719
Other income (loss) -- -- 127
Minority Interest (Note 3) -- (1,691) (4,605)
------------ ------------ ------------
Total other income (expense) 247,612 154,358 (151,033)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 11,580 116,619 (198,656)
PROVISION FOR INCOME TAXES (Note 5) -- -- --
------------ ------------ ------------
NET INCOME (LOSS) (Note 5) 11,580 116,619 (198,656)
PREFERRED DIVIDENDS EARNED (NOTE 6) (169,781) (177,981) (186,181)
------------ ------------ ------------
NET LOSS APPLICABLE TO
COMMON STOCK (Note 2) $ (158,201) $ (61,362) $ (384,837)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES 10,905,549 10,905,549 10,905,549
============ ============ ============
OUTSTANDING (Note 2)
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary $ (0.01) $ (0.01) $ (0.04)
============ ============ ============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements
F-4
<PAGE> 16
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
Number Number Additional Treasury Total
of of Paid-in Accumulated Stock, Stockholders'
Shares Amount Shares Amount capital Deficit at Cost Equity
------- ------ ---------- -------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 485,123 4,851 10,935,549 109,356 7,724,904 (6,978,361) (88,668) 772,082
------- ------ ---------- -------- ---------- ----------- -------- ---------
Preferred dividend accrued -- -- -- -- -- (186,181) -- (186,181)
Net loss - 1994 -- -- -- -- -- (198,656) -- (198,656)
------- ------ ---------- -------- ---------- ----------- -------- ---------
BALANCE, December 31, 1994 485,123 4,851 10,935,549 109,356 7,724,904 (7,363,198) (88,668) 387,245
------- ------ ---------- -------- ---------- ----------- -------- ---------
Purchase of Series A
Preferred Stock (Note 6) -- -- -- -- -- -- (7,702) (7,702)
Reversal of Accrued
Preferred Stock dividends -- -- -- -- 41,000 -- -- 41,000
Preferred dividend accrued -- -- -- -- -- (177,981) -- (177,981)
Net Income - 1995 -- -- -- -- -- 116,619 -- 116,619
------- ------ ---------- -------- ---------- ----------- -------- ---------
BALANCE, December 31, 1995 485,123 $4,851 10,935,549 $109,356 $7,765,904 $(7,424,560) ($96,370) $ 359,181
------- ------ ---------- -------- ---------- ----------- -------- ---------
Preferred dividend accrued -- -- -- -- -- (169,781) -- (169,781)
Net Income - 1996 -- -- -- -- -- 11,580 -- 11,580
------- ------ ---------- -------- ---------- ----------- -------- ---------
BALANCE, December 31, 1996 485,123 $4,851 10,935,549 $109,356 $7,765,904 ($7,582,761) ($96,370) $ 200,980
======= ====== ========== ======== ========== =========== ======== =========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements
F-5
<PAGE> 17
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995 1994
--------- --------- -----------
<S> <C> <C> <C>
Net income (loss) from operations $ 11,580 $ 116,619 $ (198,656)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities
Provision for uncollectable note receivable 172,250 -- --
Write-off of uncollectable accounts receivable 18,807 -- --
Realized loss (gain) on sale of trading
securities (184,410) 208,814 (13,428)
Unrealized loss (gain) in value
of trading securities (61,271) (363,353) 162,957
(Increase) decrease in accounts receivable -- (2,986) (15,820)
Decrease (Increase) in other receivables and
current assets (56) 48 707,372
Elimination of joint venture investment -- -- 350,000
(Decrease) increase in accounts payable and
accrued liabilities -- (15,075) 13,075
Increase (decrease) in contract deposits -- (6,890) 6,890
Increase in Minority Interest -- 1,691 5,605
--------- --------- -----------
Net cash provided by (used in) continuing
operating activities (43,100) (61,132) 1,017,995
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (447,383) (213,722) (916,165)
Proceeds from sale of marketable 484,623 246,556 550,088
securities
Investment in Joint Venture -- -- (350,000)
--------- --------- -----------
Net cash provided by (used in) investing
activities 37,240 32,834 (716,077)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Note Receivable -- -- (345,000)
Treasury Stock Purchase -- (7,702) --
--------- --------- -----------
Net cash (used in)
financing activities -- (7,702) (345,000)
--------- --------- -----------
Net increase (decrease) in cash and
cash equivalents (5,860) (36,000) (43,082)
Cash and cash equivalents -
Beginning of Year 13,177 49,177 92,259
--------- --------- -----------
Cash and cash equivalents -
End of Year $ 7,317 $ 13,177 $ 49,177
========= ========= ===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Earned $ 169,781 $ 177,981 $ 186,181
========= ========= ===========
Reversal of Accrued Preferred Stock Dividends
applicable to treasury stock purchase
(Note 6) $ -- $ 41,000 --
========= ========= ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-6
<PAGE> 18
CADEMA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(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. In 1995, 100% of the
Company's revenues were generated from the operations of the joint venture
(Note 3). The Company did not generate any revenues from operations in
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.
F-7
<PAGE> 19
(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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates.
Recently Issued Accounting Standards
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," ("Statement") which provides an alternative method of
accounting for stock-based compensation arrangements, based on fair value
of the stock-based compensation utilizing various assumptions regarding
the underlying attributes of the options and the Company's stock, rather
than the existing method of accounting for stock-based compensation which
is provided in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued To Employees" (APB No. 25). FASB encourages entities to adopt
the fair value-based method but does not require adoption of this method.
SFAS No. 123 is effective for fiscal years beginning after December 15,
1995. The Company is continuing its current accounting policy and has
adopted the "disclosure only" provisions of SFAS No. 123. SFAS No. 123 had
no impact on the Company's financial position or results of operations for
1996.
F-8
<PAGE> 20
(2) SIGNIFICANT ACCOUNTING POLICIES: (CONT.)
Recently Issued Accounting Standards (cont.)
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" ( the
"Statement") which specifies new computation, presentation and disclosure
requirements for earnings per share (EPS) for entities with publicly held
common stock or potential common stock. The Statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods, SFAS No. 128 is not expected to have a material
effect on the Company's computation and presentation of earnings per
share,
(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.
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.
F-9
<PAGE> 21
(4) TRADING SECURITIES:
In July, 1988, the Company received stockholder approval to establish an
investment program in marketable securities utilizing the excess funds
generated by the proceeds of the 1987 Series A 8% Cumulative Preferred
Stock offering.
The aggregate cost and market value of trading securities at December 31,
1996 were:
<TABLE>
<CAPTION>
Aggregate Unrealized Unrealized Market
Title of Issue Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
COMMON STOCK AND
EQUIVALENTS:
Chief Consol. Mining $ 32,525 $ 20,850 $ -- $ 53,375
Children's Broadcast 175,801 -- (71,739) 104,062
Cover-All Tech 29,908 92 -- 30,000
Provident Amer'n 257,247 204,753 -- 462,000
Streicher Mobil Wts 34,188 8,937 -- 43,125
Syntech Int'l 103,737 -- (103,612) 125
Temtex 118,150 -- (91,270) 26,880
Vista Tech. Inc. 56,663 -- (56,663) --
-------- -------- --------- --------
Total $808,219 $234,632 $(323,284) $719,567
======== ======== ========= ========
</TABLE>
The aggregate cost and market value of trading securities at December 31,
1995 were:
<TABLE>
<CAPTION>
Aggregate Unrealized Unrealized Market
Title of Issue Cost Gains Losses Value
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
COMMON STOCK:
Chief Consol. Mining $ 32,525 $44,475 $ -- $ 77,000
Children's Broadcast 83,075 10,675 -- 93,750
Provident Amer'n 48,147 40,353 -- 88,500
Southwall 218,750 -- (6,250) 212,500
Syntech Int'l 103,737 -- (101,862) 1,875
Temtex 118,150 -- (80,650) 37,500
Vista Tech. Inc. 56,663 -- (56,663) --
-------- ------- --------- --------
Total $661,047 $95,503 $(245,425) $511,125
======== ======= ========= ========
</TABLE>
Proceeds from sales of trading securities during 1996 were $484,623. Gross
gains on those sales were $184,410 and gross losses were $0. During 1996
net unrealized gains on trading securities of $61,271 were credited to
1996 earnings. In 1995, proceeds from sales of trading securities were
$246,623. Gross gains on those sales were $40,246 and gross losses were
$249,060. During 1995 net unrealized gains on trading securities of
$363,353 were credited to 1995 earnings.
F-10
<PAGE> 22
(5) INCOME TAXES:
As of December 31, 1996, the Company had available net operating loss
carryforwards of approximately $5,000,000 which may be carried forward to
reduce future taxable income. These carryforwards expire in varying
amounts from 1997 to 2011. Approximately $2,000,000 of these carryforwards
were generated prior to a 1986 merger ( with Cadema , Inc.) and may not be
fully utilized by the Company unless certain conditions are met.
The Company accounts for income taxes to comply with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." A requirement of SFAS No. 109 is that deferred tax assets and
liabilities be recorded for any temporary differences between the
financial statement and tax bases of assets and liabilities, using the
currently enacted tax rate expected to be in effect when the taxes are
actually paid or recovered.
Total income tax expense (benefit) amounted to $ -0- in 1996, 1995 and
1994 (effective tax rates of 0% in each year) compared to income tax
expense (benefit) of $ 4,000 and $40,000 and ($68,000) computed by
applying the statutory rate of 34.0% to income (loss) before income taxes.
These differences are accounted for as follows:
<TABLE>
<CAPTION>
1996
----
Percent of
Pretax Income
Amount (Loss)
------- -------------
<S> <C> <C>
Computed "expected" tax expense $ 4,000 34.0%
Decrease in expense due to
valuation allowance provided for
deferred tax assets (4,000) (34.0%)
------- -----
$ -- 0%
======= =====
</TABLE>
<TABLE>
<CAPTION>
1995
----
Percent of
Amount Pretax Income
-------- -------------
<S> <C> <C>
Computed "expected" tax expense $ 40,000 34.0%
Decrease in expense due to
valuation allowance provided for
deferred tax assets (40,000) (34.0)
-------- -----
$ -- 0%
======== =====
</TABLE>
<TABLE>
<CAPTION>
1994
----
Percent of
Amount Pretax Loss
-------- -----------
<S> <C> <C>
Computed "expected" tax benefit ($68,000) (34.0)
Decrease in benefit due to
valuation allowance provided for
deferred tax assets 68,000 34.0
-------- -----
$ -- 0%
======== =====
</TABLE>
Deferred income tax assets (liabilities) result from differences in the
recognition of revenues and expenses for income tax and financial
reporting purposes.
F-11
<PAGE> 23
(5) INCOME TAXES: (CONT.)
The net deferred tax assets at December 31, 1996 and 1995, include the
following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax asset $ 1,781,000 $ 1,785,000
Valuation allowance for deferred
tax asset (1,781,000) (1,785,000)
----------- -----------
$ 0 $ 0
=========== ===========
</TABLE>
The Company has recorded a valuation allowance for its entire net deferred
tax asset at December 31, 1996 and 1995 since management believes that it
is more likely than not that the deferred tax asset will not be realized.
The tax effect of major temporary differences that gave rise to the
Company's net deferred tax assets at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net operating loss carryforward $1,692,000 $1,734,000
Unrealized losses on marketable
securities 30,000 51,000
Allowance for uncollectable note
receivable 59,000 --
---------- ----------
$1,781,000 $1,785,000
========== ==========
</TABLE>
(6) STOCKHOLDERS' EQUITY:
Public offering - preferred stock
In 1987, the Company completed a public offering of 1,000,000 shares of
Series A 8% Cumulative Convertible Preferred Stock ("Series A Preferred
Stock"). The preferred stock is convertible into common stock, at any
time, at the option of the holder, beginning January 28, 1988. The
conversion ratio is based upon the original price of the preferred stock
of $5.00 in relation to the conversion price of $2.00 (initial conversion
ratio of 2.5 to 1) which increased to $2.40 on July 28, 1989 (conversion
ratio 2.08 to 1) and increased to $2.80 on July 28, 1991, (conversion
ratio of 1.79 to 1) subject to adjustment under certain conditions. Each
share of the preferred stock is entitled to one vote and an annual
cumulative dividend of $.40 per share, which is payable semiannually in
cash or common stock. The first year's dividend was paid in cash from
proceeds of the offering. Subsequent dividends through December 1992 were
paid in common stock of the Company. Dividends accrued since January 1993
remain unpaid.
The Series A Preferred Stock is redeemable at the option of the Company at
any time after July 28, 1989, in whole or in part, at a redemption price
of $5.40 per share, subject to certain conditions. In addition,
F-12
<PAGE> 24
(6) STOCKHOLDERS' EQUITY: (CONT.)
the Series A Preferred Stock is also redeemable, upon 30 days notice
beginning July 28, 1988, if during any period of 30 consecutive trading
days the market price for the Company's common stock is at least $3.00. At
December 31, 1996, 514,877 shares have been converted into common stock or
redeemed.
The Series B Preferred Stock has identical preferences and privileges to
the Series A Preferred Stock, except that the Series B Preferred Stock is
not subject to redemption by the Company. The Company has been authorized
to issue up to 150,000 shares of Series B Preferred Stock. At December 31,
1996 and 1995, no shares of Series B Preferred Stock were issued and
outstanding. The underwriters of the public offering in 1987 received
100,000 warrants to purchase either Series A or Series B 8% cumulative
convertible preferred stock at an exercise price of $6.00 per share. These
warrants were exercisable over five years from the date of grant and
expired in July 1992. None of these warrants were exercised.
A preferred stockholder was also entitled under certain circumstances, as
defined, to "loyalty" shares if the preferred stock purchased in the
public offering was held to January 28, 1989 or the date of redemption by
the Company. The holder received, without any additional payment, one
share of common stock for each ten shares of common stock that would be
issuable if the preferred stock was converted at the close of business on
July 20, 1987. On March 29, 1989, 45,139 shares of common stock were
issued to preferred stockholders as "Loyalty Shares" based on holders of
record as of January 28, 1989.
No dividends were declared in 1996, 1995 or 1994. However, dividends on
Series A 8% Preferred Stock of $.40 per share payable in cash or Cadema
Corporation common stock do accumulate and as such the accompanying 1996,
1995 and 1994 financial statements reflect the accrual of this dividend.
Other Options
The Company has also granted options to purchase a total of 250,000 shares
of common stock to directors, which are not part of the 1986 Option Plan
but have terms similar to the 1986 Plan. These options expired in June,
1996.
Treasury Stock
The Company held 30,000 and 60,670 shares of Common Stock and Series A
Preferred Stock, respectively in its treasury as of December 31,1996. In
1995 the company acquired 41,000 shares of Series A Preferred Stock at
market price $ 7,702. In connection with the 1995 purchase, accrued but
unpaid dividends totaling $ 41,000 were credited to additional paid-in
capital.
1986 Stock Option Plan
In 1986, the shareholders and Board of Directors adopted and approved the
1986 Stock Option Plan ("1986 Plan") which reserves 600,000 shares of the
Company's Common Stock for issuance to key employees and directors. The
options are exercisable as determined by the 1986 Plan up to a period of
10 years from date of grant at an exercise price of not less than the fair
market value at the date of grant. As of December 31, 1996, there were no
options outstanding under the 1986 plan.
F-13
<PAGE> 25
(6) STOCKHOLDERS' EQUITY: (CONT.)
1986 Stock Option Plan (cont.)
Information concerning options for the years ended December 31, 1996, 1995
and 1994 is summarized as follows:
<TABLE>
<CAPTION>
Other Price Per 1986 Price Per
Options Share Plan Share
---------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
Shares under option -- -- -- --
Shares exercisable -- -- -- --
Shares available for
future grant 600,000
FOR THE YEAR ENDED
DECEMBER 31, 1996
Exercised -- -- --
Granted -- -- -- --
Terminated 250,000 $.22 -- --
AT DECEMBER 31, 1995
Shares under option 250,000 $.22 -- --
Shares exercisable 250,000 $.22 -- --
Shares available for
future grant 600,000
FOR THE YEAR ENDED
DECEMBER 31, 1995
Exercised -- -- -- --
Granted -- -- -- --
Terminated -- --
AT DECEMBER 31, 1994
Shares under option 250,000 $.22 -- --
Shares exercisable 250,000 $.22 -- --
Shares available for
future grant 600,000
FOR THE YEAR ENDED
DECEMBER 31, 1994
Exercised -- -- -- --
Granted -- -- -- --
Terminated 1,455,000 $.39-.44 -- --
</TABLE>
Warrants - In 1983, 744,900 stock purchase warrants were issued to
stockholders of record. One warrant was issued for every five shares of
common stock held by holders of 500 or more shares and were exercisable at
the price of $5 per share. The warrants had an initial expiration date of
November, 1984 which has been extended by the Company through June 30,
1999. None of these warrants have been exercised as of December 31, 1996.
As of December 31, 1996, the Company has reserved 2,420,772 shares of
common stock for possible future issuance resulting from conversion of
preferred stock and exercise of warrants and stock options.
F-14
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed in its behalf
by the undersigned, thereto duly authorized.
CADEMA CORPORATION
Dated: March 12, 1997
By: /s/ Roger D. Bensen
-------------------
ROGER D. BENSEN
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Roger D.Bensen March 12, 1997
- ------------------ -------------------------
ROGER D. BENSEN
Chairman of the Board and Chief
Executive Officer and Director
/s/ Richard Ames March 16, 1997
- ---------------- -------------------------
RICHARD B. AMES
Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 7,317
<SECURITIES> 719,567
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 727,652
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 900,402
<CURRENT-LIABILITIES> 13,000
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> 86,773
<TOTAL-LIABILITY-AND-EQUITY> 900,402
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 236,032
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,580
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,580
<DISCONTINUED> 0
<EXTRAORDINARY> (169,781)
<CHANGES> 0
<NET-INCOME> (158,201)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
