<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 September 30, 1998.
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
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(State or other jurisdiction of (IRS Employer I.D. Number)
incorporation or organization)
c/o Number One Corporation 50 Washington Street. Norwalk CT 06854
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 854-6711
--------------
(Former name, former address and former fiscal year, if changed
since last report. ) - N/A
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
There were 10,905,549 shares of the Registrant's common stock outstanding as of
October 30, 1998.
1
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CADEMA CORPORATION
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Balance Sheets - September 30, 1998 and
December 31, 1997
Statements of Operations - Nine months ended 4
September 30, 1998 and September 30, 1997
Statements of Operations - Three months 5
ended September 30, 1998 and September 30, 1997
Statements of Cash Flows - Nine months ended 6
September 30, 1998 and September 30, 1997
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
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, 1997. Management believes that
the disclosures are adequate to make the information presented herein not
misleading.
2
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CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1998 DECEMBER 31,1997
------ ------------------ ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 25,480 $ 48,682
Trading securities (Cost $757,934 in 270,508 499,148
1998 and $761,446 in 1997)
(Note 2)
Accounts receivable -- --
Other current assets 420 1,050
----------- -----------
TOTAL CURRENT ASSET 296,408 548,880
NOTE RECEIVABLE less allowance for bad
debt of $242,250 in 1998 and 1997 102,750 102,750
----------- -----------
TOTAL ASSETS $ 399,158 $ 651,630
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ -- --
Accrued liabilities -- 13,000
----------- -----------
TOTAL CURRENT LIABILITIES -- 13,000
Accrued dividends on preferred stock 976,242 848,906
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------- -----------
TOTAL LIABILITIES 983,538 869,202
----------- -----------
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 1998 and 1997
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 1998 and 1997
Additional paid-in capital 7,765,904 7,765,904
Accumulated deficit (8,368,121) (8,001,313)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (584,380) (217,572)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 399,158 $ 651,630
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
3
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CADEMA CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
REVENUE (NOTE 2) $ -- $ --
COST OF GOODS SOLD -- --
----------- -----------
GROSS PROFIT -- --
OPERATING EXPENSES:
General and administrative 23,863 22,594
----------- -----------
Total operating expenses 23,863 22,594
----------- -----------
Loss from operations (23,863) (22,594)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Note 2)
Realized gains (losses) (29,256) 75,339
Change in unrealized losses (187,721) (191,965)
Dividend income 1,368 2,458
----------- -----------
Total other income (expense) (215,609) (114,168)
----------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES (239,472) (136,762)
PROVISION FOR INCOME TAXES -- --
NET INCOME (LOSS) (239,472) (136,762)
PREFERRED DIVIDENDS EARNED 127,336 127,336
----------- -----------
NET (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS (Note 2) (366,808) (264,098)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON SHARE
BASIC AND DILUTED (.03) (.02)
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements
4
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CADEMA CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE MONTHS ENDED SEPTEMBER 30
---------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REVENUE (Note 2) $ -- $ --
COST OF GOODS SOLD -- --
------------ ------------
GROSS PROFIT -- --
OPERATING EXPENSES:
General and administrative 6,523 9,612
------------ ------------
Total operating expenses 6,523 9,612
------------ ------------
Loss from operations (6,523) (9,612)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Notes 2)
Realized gains (losses) (13,024) --
Change in unrealized losses (90,957) 15,587
Dividend income 408 934
------------ ------------
Total other income (expense) 103,573 16,521
============ ============
INCOME (LOSS) FROM OPERATIONS (110,096) 6,909
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET INCOME (LOSS) (110,096) 6,909
PREFERRED DIVIDENDS EARNED 42,445 42,445
------------ ------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS (Note 2) $ (152,541) $ (35,536)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON AND SHARE
BASIC AND DILUTED $ (.01) $ (.00)
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements
5
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CADEMA CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR EACH OF THE NINE MONTHS IN THE PERIOD ENDED SEPTEMBER 30, 1998
------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997
---- ----
<S> <C> <C>
Net income (loss) from operations $(239,472) $(136,762)
Adjustments to reconcile net income
(loss) to net cash provided by (used in) operating
activities
Realized loss (gain) on sale of trading
securities 29,256 (75,339)
Unrealized loss (gain) in value
of trading securities 187,721 191,965
Decrease (Increase) in other receivables and
current assets 630 768
Elimination of joint venture investment -- --
(Decrease) increase in accounts payable and
accrued liabilities (13,000) (13,000)
--------- ---------
Net cash provided by (used in) continuing
operating activities (34,865) (32,368)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (57,787) (282,652)
Proceeds from sale of marketable securities 69,450 375,256
--------- ---------
Net cash provided by (used in) investing
activities 11,663 92,604
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury Stock Purchase -- --
--------- ---------
Net cash (used in)
financing activities
-- --
--------- ---------
Net increase (decrease) in cash and
cash equivalents (23,202) 60,236
Cash and cash equivalents -
Beginning of Period 48,682 7,317
--------- ---------
Cash and cash equivalents -
End of Period $ 25,480 $ 67,553
========= =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Earned $ 127,336 $ 127,336
========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
6
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CADEMA CORPORATION
------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NINE MONTHS IN THE PERIOD ENDED SEPTEMBER 30, 1998
--------------------------------------------------
(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 1998 or 1997, 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
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(2) SIGNIFICANT ACCOUNTING POLICIES: (CONT.)
REVENUES (CONT.)
Total estimated costs are periodically revised, if necessary, to reflect
changes to the original contracts and changes to total estimated contract
costs based on deviations of actual cost to date from original estimates
and anticipated future deviations from such original estimates. Selling,
General and Administrative costs are charged to expense as incurred.
TRADING SECURITIES
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards (SFAS) ("Statement") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company's adoption of the
Statement requires its marketable securities to be classified as "trading"
and accounted for at fair market value, with unrealized gains and losses
reported as a component of net income (loss).
Realized gains and losses are determined on a first-in, first-out basis.
NET INCOME (LOSS) PER SHARE BASIC AND DILUTED
Net income (loss) per share is calculated in accordance with SFAS No. 128.
Basic earnings per share is calculated using net income less preferred
stock dividend, divided by the weighted average number of shares of common
stock outstanding during the period, stock options outstanding are not
included. Diluted earning per share extends this calculation to include the
dilutive effect of preferred stock, options and warrants. Currently all
Cadema preferred stock, options and warrants have an anti-dilutive effect,
which by rule excludes them, and result in the two per share definitions
being equal for this period.
(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
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(3) JOINT VENTURE: (CONT.)
The financial statements of the Joint Venture are consolidated with the
Company's results in the accompanying financial statements of this report.
The portion of the Joint Venture's income that is not applicable to the
Company is recorded as Minority Interest on the Statement of Operations.
That income along with Global Environmental Corp.'s capital contribution to
the Joint Venture is recorded under the caption "Minority Interest in
Subsidiary" on the Balance Sheet.
Notes payable issued by Global Environmental Corp. to the Joint Venture are
carried on the Balance Sheet as Notes Receivable and were due on December
31, 1996. Negotiations are in process for the refinancing of the note. As
collection of the note in 1998 is not likely, the note has 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 70% 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 70% 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 nine months of 1998, as the Company's
operating subsidiary Global Environmental Offshore Company had no revenue
activity. In 1997, the operating activity of Global Environment Offshore Company
produced no revenues in the same period.
Operating expenses for the first nine months of 1998 were $23,863 and
represented administrative expenses of the parent Company. These expenses
exceeded 1997 first half operating expense of $22,594.
Other income in the first nine months totaled a loss of $215,609 as compared to
a 1997 loss of $114,168. This contrast is due to a larger losses on the
company's Investment Portfolio in 1997 as compared to the same period of 1998.
The net loss applicable to common stock for the first nine months, after an
accrual for a Preferred Stock dividend, was $366,808 or $.03 per share. For the
same period of the prior year, a better performance by the Company's Investment
Portfolio resulted loss of $264,098 or $.02 per share was recognized.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and working capital decreased by $239,472 to $296,408 in the first
half of 1998 due primarily to the performance of the Company's marketable
securities portfolio.
The Company believes it has sufficient working capital to meet its liquidity
needs over the next twelve months.
PART II
ITEMS 1 THRU 5: Not Applicable
ITEM 6: Exhibits - Exhibit 27 Financial Data Schedule
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CADEMA CORPORATION
Dated: October 30, 1998 By: By: /s/ Roger D. Bensen
--------------------------------
ROGER D. BENSEN
Chairman of the Board and
Chief Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 25,480
<SECURITIES> 270,508
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 296,908
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 399,158
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> (698,587)
<TOTAL-LIABILITY-AND-EQUITY> 399,158
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (239,472)
<INCOME-TAX> 0
<INCOME-CONTINUING> (239,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 127,336
<CHANGES> 0
<NET-INCOME> (366,808)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
