<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 June 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
- --------------------------------------------------------------------------------
(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
June 30, 1997.
1
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CADEMA CORPORATION
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Balance Sheets - June 30, 1997 and
December 31, 1996
Statements of Operations - Six months ended 4
June 30, 1997 and June 30, 1996
Statements of Operations - Three months ended 5
June 30, 1997 and June 30, 1996
Statements of Cash Flows - Six months ended 6
June 30, 1997 and June 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
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS JUNE 30,1997 DECEMBER 31,1996
------ ------------ ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 76,039 $ 7,317
Trading securities (Cost $761,446 in 494,750 719,567
1997 and $808,219 in 1996)
(Note 2)
Accounts receivable -
Other current assets 192 768
----------- -----------
TOTAL CURRENT ASSETS 570,981 727,652
NOTE RECEIVABLE less allowance for bad
debt of $172,250 in 1997 and 1996
172,750 172,750
----------- -----------
TOTAL ASSETS $ 743,731 $ 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 764,017 679,126
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------- -----------
TOTAL LIABILITIES 771,313 699,422
----------- -----------
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 (7,811,323) (7,582,761)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (27,582) 200,980
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 743,731 $ 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
---------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30
--------------------------------
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUE (Note 2) $ - $ -
COST OF GOODS SOLD - -
----------- -----------
GROSS PROFIT - -
OPERATING EXPENSES:
General and administrative 12,982 16,711
----------- -----------
Total operating expenses 12,982 16,711
----------- -----------
Loss from operations (12,982) (16,711)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Note 2)
Realized gains (losses) 75,339 101,710
Change in unrealized losses (207,552) 40,100
Interest income - -
Interest expense - -
Dividend income 1,524 962
Other income - -
Minority Interest (Note 3) - -
----------- -----------
Total other income (expense) (130,689) 142,772
----------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES (143,671) 126,061
PROVISION FOR INCOME TAXES - -
----------- -----------
NET INCOME (LOSS) (143,671) 126,061
PREFERRED DIVIDENDS EARNED 84,981 84,981
----------- -----------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK (Note 2) (228,562) $ 41,170
=========== ===========
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
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CADEMA CORPORATION AND SUBSIDIARY
---------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED JUNE 30
----------------------------------
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUE (Note 2) $ - $ -
COST OF GOODS SOLD - -
----------- -----------
GROSS PROFIT - -
OPERATING EXPENSES:
General and administrative 7,835 5,429
----------- -----------
Total operating expenses 7,835 5,429
----------- -----------
Loss from operations (7,835) (5,429)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Notes 2)
Realized gains (losses) 52,814 85,585
Change in unrealized losses (31,147) 22,783
Interest income - -
Interest expense - -
Dividend income 1,344 962
Other income - (122)
Minority Interest (Note 3) - -
----------- -----------
Total other income (expense) 23,011 109,208
----------- -----------
INCOME (LOSS) FROM OPERATIONS 15,176 103,779
PROVISION FOR INCOME TAXES - -
----------- -----------
NET LOSS 15,176 103,779
PREFERRED DIVIDENDS EARNED 42,446 42,446
----------- -----------
NET LOSS APPLICABLE TO
COMMON STOCK (Note 2) $ (27,270) $ 61,333
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary $ (.00) $ (.01)
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements
5
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CADEMA CORPORATION AND SUBSIDIARY
<TABLE>
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR EACH OF THE SIX MONTHS IN THE PERIOD ENDED JUNE 30
--------------------------------------------------------
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
--------- ---------
<S> <C> <C>
Net income (loss) from operations $(143,671) $ 126,061
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) (101,710)
Unrealized loss (gain) in value
of trading securities 207,552 (40,100)
(Increase) decrease in accounts receivable -- (52,884)
Decrease (Increase) in other receivables and
current assets 576 534
Elimination of joint venture investment - -
(Decrease) increase in accounts payable and
accrued liabilities (13,000) 21,725
Increase (decrease) in contract deposits - -
Increase in Minority Interest - -
--------- ---------
Net cash provided by (used in) continuing
operating activities (23,882) (46,374)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (282,652) (170,525)
Proceeds from sale of marketable securities 375,256 260,335
--------- ---------
Net cash provided by (used in) investing
activities 92,604 89,810
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury Stock Purchase - -
--------- ---------
Net cash (used in)
financing activities - -
--------- ---------
Net increase (decrease) in cash and
cash equivalents 68,722 43,436
Cash and cash equivalents -
Beginning of Period 7,317 13,177
--------- ---------
Cash and cash equivalents -
End of Period $ 76,039 $ 56,613
========= =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Earned $ 84,891 $ 84,891
========= =========
</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
------------------------------------------
THREE MONTHS IN THE PERIOD ENDED JUNE 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.
7
<PAGE> 8
(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.
8
<PAGE> 9
(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
<PAGE> 10
RESULTS OF OPERATIONS
There were no revenues in the first six 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 half of 1997 were $12,982 and
represented administrative expenses of the parent Company. These
expenses compared favorably to 1996 first half operating expense of
$16,711.
Other income in the first half totaled a loss of $130,689 as compared
to a 1996 gain of $142,772. Second quarter other income totaled $23,011
in 1997, below 1996 second quarter gain of $109,208. 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 half, after an
accrual for a Preferred Stock dividend, was $228,562 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 $41,170 or $.00
per share to be recognized. In the second quarter, a loss of $27,270 or
$.00 per share was recognized, lower than the 1996 results of a $61,333
gain due to better performance of the Company's securities portfolio.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and working capital increased by $143,671 to $570,981 in the
first half 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
<PAGE> 11
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: August 6, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 76,039
<SECURITIES> 494,750
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 570,981
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 734,731
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> (114,519)
<TOTAL-LIABILITY-AND-EQUITY> 743,731
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,982
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (143,671)
<INCOME-TAX> 0
<INCOME-CONTINUING> (143,671)
<DISCONTINUED> 0
<EXTRAORDINARY> 84,891
<CHANGES> 0
<NET-INCOME> (228,562)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
