<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, 1998.
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
incorporation or organization) No.)
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,
1999, 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 26, 1999.
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 previously engaged in contracting for the design and
installation of air pollution control equipment and facilities in areas located
outside the United States. Global previously provided design, assembly and
project management services related to the construction of air pollution control
systems. Global's business was inactive during fiscal 1998. 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
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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 1998 netted a loss
of $ 220,969. 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. See Note 4 to Consolidated Financial Statements.
NUMBER OF EMPLOYEES
The Company's Chief Executive Officer and President, Mr. Roger D. Bensen,
was the sole employee as of December 31, 1998 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 1998
nor were any matters submitted for vote.
2
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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 1998 $.02 $.01 $.34 $.30
3rd Quarter 1998 $.03 $.01 $.34 $.30
2nd Quarter 1998 $.03 $.01 $.34 $.30
1st Quarter 1998 $.03 $.01 $.34 $.30
4th Quarter 1997 $.03 $.02 $.34 $.34
3rd Quarter 1997 $.03 $.02 $.34 $.34
2nd Quarter 1997 $.03 $.01 $.34 $.34
1st Quarter 1997 $.02 $.01 $.34 $.34
</TABLE>
The approximate number of stockholders of record of the Company's Common
Stock and Preferred Stock as of February 28, 1999, were 1,000 and 300
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 1998 were deferred and have accumulated for possible
payment at a later date.
3
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's primary focus in 1998 was to seek additional joint venture
partners since its existing Joint Venture partner, Global Environmental Offshore
Company, generated no revenues in 1998. 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. New opportunities were evaluated in 1998 but none were deemed appropriate
to enter into. 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 75% 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 1998, 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 11 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 individuals who only purchased the Preferred Stock now
have Common Stock because of dividends they received in Common Stock. Management
is working toward a solution to resolve this matter pertaining to the Preferred
Stock.
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The Company has determined that the impact, if any, of the Year 2000 issue
on the Company's operations is not significant. Cadema does not perform any
electronic data processing in-house and has no information to indicate that
because of Year 2000 compliance problems, a significant service provider may be
unable to provide services to the Company.
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
In 1998, Global generated no revenues. Therefore operating results present
Cadema's administrative expenses and marketable securities activity.
REVENUES
Global generated no orders in 1998 and so revenues were $0 the same as in
1997. The Joint Venture continues to seek revenue opportunities.
GENERAL AND ADMINISTRATIVE
General and administrative expenses, costs incurred in maintaining the
Company, were $47,470 in 1998, up slightly from 1997's $46,273.
In 1998, the Company took an additional $18,000 reserve against the note
receivable from the Joint Venture whereas in 1997 an additional $70,000 reserve
was established.
TRADING SECURITIES TRANSACTIONS
Trading securities investment activity generated a realized loss of $86,420
in 1998 compared to a realized gain of $75,339 in 1997. The securities portfolio
also generated an unrealized loss of $134,549 in 1998, compared to the 1997
unrealized loss of $211,054. The performance of individual stocks comprising the
trading securities holdings are the cause of these results.
FISCAL 1997 COMPARED TO FISCAL 1996
In 1997, Global generated no revenues. Therefore operating results present
Cadema's administrative expenses and marketable securities activity.
REVENUES
Global generated no orders in 1997 and so revenues were $0 the same as in
1996. The Joint Venture continued to seek revenue opportunities.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $46,273 in 1997, representing
expenses related to maintaining the Company and were up slightly from 1996's
expenses of $44,933.
In 1997, the company took an additional $70,000 reserve against the note
receivable from the joint venture. In 1996 a $172,250 reserve was established
against the same note receivable. These transactions were
5
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FISCAL 1997 COMPARED TO FISCAL 1996 (CONT.)
included in Loss on Joint Venture category in the accompanying Statement of
Operations.
TRADING SECURITIES TRANSACTIONS
Trading securities investment activity generated a realized gain of $75,339
in 1997 compared to a realized gain of $184,410 in 1996. The securities
portfolio also generated an unrealized loss of $211,054 in 1997, compared to the
1996 unrealized gain of $61,271. The performance of individual stocks comprising
the trading securities holdings are the cause of these results. (See Note 4.,
Notes to Consolidated Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $269,045 at the end of 1998, down from $535,880 in
1997. Management believes this resource is sufficient for funding the Company's
anticipated needs in 1999.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
Operating Data: 1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue -- -- --
Cost of Goods Sold -- -- --
Operating Expenses $ 65,470 $ 116,273 $ 236,032
Other Income (Expense) (219,365) (132,498) 247,612
Income (Loss) Before
Income Taxes (284,835) (248,771) 11,580
Provision for Income
Taxes -- -- --
Preferred Dividends Earned (169,781) (169,781) (169,781)
Net Loss
Applicable to Common Stockholders (454,616) (418,552) (158,201)
Net Loss per Common Share -
Basic and Diluted (.04) (.04) (.01)
Weighted Average Common Shares
Outstanding 10,905,549 10,905,549 10,905,549
BALANCE SHEET DATA:
Working Capital 269,045 535,880 714,652
Total Assets 366,795 651,630 900,402
Total Current Liabilities 13,000 13,000 13,000
Stockholders' Equity (Deficiency) (672,188) (217,572) 200,980
</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 a 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 63 Chairman of the Board, Chief Executive 1983
Officer and President/Director
Richard B. Ames 60 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.
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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 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 1998, 1997 and
1996, no options were granted and no options expired. As of December 31, 1998,
no options were outstanding and options covering 600,000 shares of Common Stock
were available under the 1986 Plan.
OTHER STOCK OPTIONS
In 1998, 1997, and 1996 no options were granted, exercised or terminated.
In 1996, 250,000 options expired. As of December 31, 1998 there were no options
outstanding.
OTHER EXECUTIVE PLANS
The Company has no long term incentive or pension plans.
COMPENSATION OF DIRECTORS
In 1998, 1997 and 1996, the directors did not receive compensation for
their services. Currently there are no standard arrangements for the
compensation of directors for their services.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following Table sets forth information as of the February 26, 1999,
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 Percent Percent of
of Class of Beneficial Owner of Beneficial of Class Voting
Ownership (1) Stock
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Roger D. Bensen 2,620,352 shares 23.6 22.5
50 Washington Street (2)(3)
Norwalk, CT 06854
Common Richard B. Ames 87,406 shares .8 .7
730 7th Street (4)
Eureka, CA 95501
Common All Directors and 2,707,758 shares 24.4 23.3
Officers as a Group
(2 Persons)
Preferred Anne W. Bensen 30,000 shares 6.2 --
69 Dandy Drive (5)(6)
Cos Cob, CT 06807
</TABLE>
(1) Shares of Common Stock which a person has the right to acquire within
60 days after February 26, 1999 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.
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<PAGE> 11
(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.
10
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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
<TABLE>
<CAPTION>
Exhibit Number Description
- -----------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
(1) Filed as Exhibits to the Company's Form 10-KSB 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-KSB 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, 1998.
11
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ITEM 7 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
CADEMA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets - December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for Each of the
Three Years in the Period Ended December 31, 1998 F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) for Each
of the Three Years in the Period Ended December 31, 1998 F-5
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1998 F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 to F-15
</TABLE>
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> 14
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, 1998 and 1997, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency) and cash flows for each of the three years in the period ended
December 31, 1998. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cadema Corporation
and Subsidiary as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Rudolph, Palitz LLP
Blue Bell, PA
February 28, 1999
F-2
<PAGE> 15
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,1998 DECEMBER 31,1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,829 $ 48,682
Trading securities (Cost $701,321 in 267,067 499,148
1998 and $798,853 in 1997) (Notes 2 and 4)
Other current assets 1,149 1,050
----------- -----------
TOTAL CURRENT ASSETS 282,045 548,880
NOTE RECEIVABLE less allowance for bad
debt of $260,250 in 1998 and $242,250 84,750 102,750
in 1997 (Note 3) ----------- -----------
TOTAL ASSETS $ 366,795 $ 651,630
=========== ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
CURRENT LIABILITIES:
Accrued liabilities $ 13,000 $ 13,000
----------- -----------
TOTAL CURRENT LIABILITIES 13,000 13,000
Accrued dividends on preferred stock
(Note 6) 1,018,687 848,906
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------- -----------
TOTAL LIABILITIES 1,038,983 869,202
----------- -----------
STOCKHOLDERS' DEFICIENCY (Notes 2,6 and 7)
Series A 8% Cumulative Convertible 4,851 4,851
Preferred Stock, par value $.01 per
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; 109,356 109,356
authorized 50,000,000 shares, issued
10,935,549 shares in 1998 and 1997
Additional paid-in capital 7,765,904 7,765,904
Accumulated deficit (8,455,929) (8,001,313)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------- -----------
TOTAL STOCKHOLDERS'DEFICIENCY (672,188) (217,572)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 366,795 $ 651,630
=========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-3
<PAGE> 16
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUE -- -- --
COST OF GOODS SOLD -- -- --
------------ ------------ ------------
GROSS PROFIT -- -- --
OPERATING EXPENSES: (Notes 1 and 2)
General and administrative $ 47,470 $ 46,273 44,933
Loss on Joint Venture (Note 3) 18,000 70,000 191,099
------------ ------------ ------------
Total operating expenses 65,470 116,273 236,032
------------ ------------ ------------
Loss from operations (65,470) (116,273) (236,032)
OTHER INCOME (EXPENSE):
Trading Securities Transactions
(Notes 2 and 4)
Realized gains (losses) (86,420) 75,339 184,410
Unrealized gains (losses) (134,549) (211,054) 61,271
Dividend income 1,604 3,217 1,931
------------ ------------ ------------
Total other income (expense) (219,365) (132,498) 247,612
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (284,835) (248,771) 11,580
PROVISION FOR INCOME TAXES (Note 5) -- -- --
------------ ------------ ------------
NET INCOME (LOSS) (Notes) (284,835) (248,771) 11,580
PREFERRED DIVIDENDS EARNED (NOTE 6) (169,781) (169,781) (169,781)
------------ ------------ ------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS (Notes 2 and 6) $ (454,616) $ (418,552) $ (158,201)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES 10,905,549 10,905,549 10,905,549
============ =========== ============
OUTSTANDING (Notes 2 and 6)
LOSS PER COMMON SHARE
BASIC AND DILUTED
(Notes 2 and 6): $ (0.04) $ (0.04) $ (0.01)
============ ============ ============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements
F-4
<PAGE> 17
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
Number Additional Treasury Total
Number of of Paid-in Accumulated Stock, Stockholders'
Shares Amount Shares Amount capital Deficit at Cost Equity
(Deficiency)
------- ------ ---------- -------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
(Note 6) -- -- -- -- -- (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
------- ------ ---------- -------- ---------- ----------- -------- ---------
Preferred dividend accrued
(Note 6) -- -- -- -- -- (169,781) -- (169,781)
Net Loss - 1997 -- -- -- -- -- (248,771) -- (248,771)
------- ------ ---------- -------- ---------- ----------- -------- ---------
BALANCE, December 31, 1997 485,123 $4,851 10,935,549 $109,356 $7,765,904 $(8,001,313) $(96,370) $(217,572)
------- ------ ---------- -------- ---------- ----------- -------- ---------
Preferred dividend accrued
(Note 6) -- -- -- -- -- (169,781) -- (169,781)
Net Loss - 1998 -- -- -- -- -- (284,835) -- (284,835)
------- ------ ---------- -------- ---------- ----------- -------- ---------
BALANCE, December 31, 1998 485,123 $4,851 10,935,549 $109,356 $7,765,904 $(8,455,929) $(96,370) $(672,188)
======= ====== ========== ======== ========== =========== ======== =========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements
F-5
<PAGE> 18
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) $(284,835) $(248,771) $ 11,580
Adjustments to reconcile net income
(loss) to net cash (used in)operating
activities
Provision for uncollectible note
receivable 18,000 70,000 172,250
Write-off of uncollectible accounts
receivable -- -- 18,807
Realized loss (gain) on sale of
trading securities 86,420 (75,339) (184,410)
Unrealized loss (gain) in value
of trading securities 134,549 211,054 (61,271)
Decrease (Increase) in other
current assets (99) (282) (56)
--------- --------- ---------
Net cash used in operating
activities (45,965) (43,338) (43,100)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (74,336) (290,553) (447,383)
Proceeds from sale of marketable
securities 85,448 375,256 484,623
Net cash provided by investing
--------- --------- ---------
activities 11,112 84,703 37,240
--------- --------- ---------
Net increase (decrease) in cash (34,853) 41,365 (5,860)
Cash - Beginning of Year 48,682 7,317 13,177
--------- --------- ---------
Cash - End of Year $ 13,829 $ 48,682 $ 7,317
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Accrued $ 169,781 $ 169,781 $ 169,781
========= ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-6
<PAGE> 19
CADEMA CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 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 1996, 1997 or 1998, and is currently pursuing
additional business opportunities.
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
TRADING SECURITIES
In accordance with Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company classifies marketable securities as trading and records them 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.
F-7
<PAGE> 20
(2) SIGNIFICANT ACCOUNTING POLICIES: (CONT.)
LOSS PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS No. 128). Earnings per Share during the year ended December 31, 1997.
SFAS No.128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share, respectively.
Unlike the previously reported primary earnings per share, basic earnings
per share excludes the dilutive effects of stock options. Diluted earnings
per share is similar to the previously reported fully diluted earnings per
share. All convertible preferred stock series, options and warrants
outstanding presently have an anti-dilutive effect and, accordingly, no
calculations of diluted loss per share have been presented. Loss per share
amounts for all periods presented have been calculated in accordance with
the requirements of SFAS No. 128 (Note 6) and determined by dividing the
net loss by the weighted average number of common shares outstanding during
the period. There were 10,905,549 weighted average number of shares
outstanding during 1998, 1997 and 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates.
STOCK-BASED COMPENSATION
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 became 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, 1997 and 1998.
F-8
<PAGE> 21
(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% of
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. 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. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The Note payable issued by Global Environmental Corp. to the Joint Venture
is carried on the Balance Sheet as a Note Receivable (the "Note") and was
due on December 31, 1996. Negotiations are in process for the refinancing
of this note receivable. Global Environmental Corp. does not have funds
available to repay the Note in full in cash and has offered to exchange its
common stock for the Note. Since collection of the Note in 1999 is not
likely, the Note has been classified as long term.
The Company has established a 75% 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 75%
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> 22
(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,
1998 were:
<TABLE>
<CAPTION>
Aggregate Unrealized Unrealized Market
Title of Issue Cost Gains Losses Value
<S> <C> <C> <C> <C>
COMMON STOCK AND EQUIVALENTS:
Children's Broadcast 75,363 -- (38,644) 36,719
Cover-All Tech 93,001 23,283 -- 116,284
Galagen 28,500 14,626 -- 43,126
Photran Corp. 39,523 -- (16,273) 23,250
Reuter Mfg 186,384 -- (164,384) 22,000
Syntech 103,737 -- (103,674) 63
Temtex 118,150 -- (92,525) 25,625
Vista Tech. Inc. 56,663 -- (56,663) --
--------- --------- --------- ---------
Total $ 701,321 $ 37,909 $(472,163) $ 267,067
========= ========= ========= =========
</TABLE>
The aggregate cost and market value of trading securities at December 31,
1997 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 $ 55,780 -- $ (4,780) $ 51,000
Children's Broadcast 175,801 -- (84,384) 91,417
Cover-All Tech 72,214 116,810 -- 189,024
Insignia Systems 15,650 -- (10,526) 5,124
Photran Corp. 14,474 11,776 -- 26,250
Reuter Mfg 186,384 -- (78,864) 107,520
Syntech 103,737 -- (103,674) 63
Temtex 118,150 -- (89,400) 28,750
Vista Tech. Inc. 56,663 -- (56,663) --
--------- --------- --------- ---------
Total $ 798,853 $ 128,586 $(428,291) $ 499,148
========= ========= ========= =========
</TABLE>
Proceeds from sales of trading securities during 1998 were $85,448. Gross
gains on those sales were $0 and gross losses were $86,420. During 1998 net
unrealized losses on trading securities of $134,549 were credited to 1998
earnings. In 1997, proceeds from sales of trading securities were $375,256.
Gross gains on those sales were $75,339 and gross losses were $0. During
1997 net unrealized loss on trading securities of $211,054 were charged
against to 1997 earnings.
F-10
<PAGE> 23
(5) INCOME TAXES:
As of December 31, 1998, the Company had available net operating loss
carryforwards of approximately $4,700,000 which may be carried forward to
reduce future taxable income. These carryforwards expire in varying amounts
from 1999 to 2018. Approximately $1,200,000 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 1998, 1997 and 1996
(effective tax rates of 0% in each year) compared to income tax expense
benefit of ($91,000), ($85,000) and $4,000 and computed by applying the
statutory rate of 34.0% to income (loss) before income taxes. These
differences are accounted for as follows:
<TABLE>
<CAPTION>
1998
----
Percent of
Amount Pretax Income
(Loss)
-------- -------------
<S> <C> <C>
Computed expected tax benefit $(91,000) (34.0%)
Decrease in benefit due to 91,000 34.0%
valuation allowance provided for
deferred tax assets
-------- -----
-- 0%
======== =====
1997
----
Percent of
Amount Pretax Income
(Loss)
-------- -------------
Computed expected tax benefit $(85,000) (34.0%)
Decrease in benefit due to 85,000 34.0%
valuation allowance provided for
deferred tax assets
-------- -----
-- 0%
======== =====
1996
----
Percent of
Amount Pretax Income
-------- -------------
Computed expected tax expense $ 4,000 34.0%
Decrease in expense due to (4,000) (34.0%)
valuation allowance provided for
deferred tax assets
-------- -----
$ -- 0%
======== =====
</TABLE>
Deferred income tax assets (liabilities) result from net operating loss
carryforwards and differences in the recognition of expenses for income tax and
financial reporting purposes.
F-11
<PAGE> 24
(5) INCOME TAXES: (CONT.)
The net deferred tax asset at December 31, 1998 and 1997, includes the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax asset $ 1,832,000 $ 1,837,000
Valuation allowance for deferred
tax asset (1,832,000) (1,837,000)
----------- -----------
$ 0 $ 0
=========== ===========
</TABLE>
The Company has recorded a valuation allowance for its entire net deferred
tax asset at December 31, 1998 and 1997 since management believes that it
is more likely than not that the deferred tax asset will be not realized.
The tax effect of major temporary differences that gave rise to the
Company's net deferred tax asset at December 31, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net operating loss carryforward $1,597,000 $1,652,000
Unrealized losses on marketable
securities 148,000 102,000
Allowance for uncollectible note receivable
87,000 83,000
---------- ----------
$1,832,000 $1,837,000
========== ==========
</TABLE>
(6) NET LOSS AND STOCKHOLDERS' DEFICIENCY:
LOSS PER COMMON SHARE
The following is a reconciliation of the numerator and denominator of the
Basic and Diluted loss per share computation.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Numerator for Basic
and Diluted
Loss Per Share:
Net Income (Loss) $ (284,835) $ (248,771) $ 11,580
Less Preferred Stock
Dividends (169,781) (169,781) (169,781)
------------ ------------ ------------
------------ ------------ ------------
Net loss applicable to
common shareholders $ (454,616) $ (418,552) $ (158,201)
============ ============ ============
Denominator for Basic
And Diluted
Loss Per Share:
Weighted average shs. 10,905,549 10,905,549 10,905,549
============ ============ ============
Basic and Diluted loss per share
$ (.04) $ (.04) $ (.01)
============ ============ ============
</TABLE>
F-12
<PAGE> 25
(6) STOCKHOLDERS' EQUITY: (CONT.)
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, 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, 1998,
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,
1998 and 1997, no shares of Series B Preferred Stock were issued and
outstanding.
No dividends were declared in 1998, 1997 or 1996. 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 1998,
1997 and 1996 financial statements reflect the accrual of this dividend.
OTHER OPTIONS
The Company had 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 31,1998. In
1995 the company acquired 41,000 shares of Series A Preferred Stock at the
market price of $ 7,702. In connection with the 1995 purchase, accrued but
unpaid dividends totaling $ 41,000 were credited to additional paid-in
capital.
F-13
<PAGE> 26
(6) STOCKHOLDERS' EQUITY: (CONT.)
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, 1998, there were no
options outstanding under the 1986 plan.
Information concerning options for the years ended December 31, 1998, 1997
and 1996 is summarized as follows:
<TABLE>
<CAPTION>
Other Price Per 1986 Price Per
Options Share Plan Share
---------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998
Shares under option -- -- -- --
Shares exercisable -- -- -- --
Shares available for
future grant 600,000
FOR THE YEAR ENDED
DECEMBER 31, 1998
Exercised -- -- --
Granted -- -- -- --
Terminated -- -- -- --
AT DECEMBER 31, 1997
Shares under option -- -- -- --
Shares exercisable -- -- -- --
Shares available for
future grant 600,000
FOR THE YEAR ENDED
DECEMBER 31, 1997
Exercised -- -- --
Granted -- -- -- --
Terminated 250,000 $.22 -- --
AT DECEMBER 31, 1996
Shares under option 250,000 $.22 -- --
Shares exercisable 250,000 $.22 -- --
Shares available for
future grant 600,000
FOR THE YEAR ENDED
DECEMBER 31, 1996
Exercised -- -- -- --
Granted -- -- -- --
Terminated -- --
</TABLE>
F-14
<PAGE> 27
(6) STOCKHOLDERS' EQUITY: (CONT.)
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, 1998.
As of December 31, 1998, 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.
(7) OPERATIONS AND MANAGEMENT'S PLANS
The Company did not earn any revenue for the year, incurred a net loss of
approximately $285,000 and had a stockholders' deficiency of approximately
$672,000 at year end. The Company's primary activities for 1998 related to
trading of its investment portfolio, which generated a loss (both realized
and unrealized) totaling approximately $220,000.
The Company continues in its principal business of seeking and financing
business enterprises with the potential to generate profits and positive
cash flow. New opportunities are evaluated on an ongoing basis. None were
deemed appropriate to enter into during 1998. The Company's previous entry
into the pollution control business is part of this strategy.
There is approximately $270,000 of working capital at year-end. Annual
required cash outlays include only the payment of administrative expenses
of approximately $47,000. The Company is also attempting to restructure its
payment of dividends arrearages, a long-term liability, in light of its
future plans.
The Company believes in its long-term prospects for revenue growth.
However, the realization of this revenue growth cannot be assured.
F-15
<PAGE> 28
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 9, 1999
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 9, 1999
- ------------------------------- ---------------
Roger D. Bensen
Chairman of the Board and Chief
Executive Officer and Director
/S/ RICHARD AMES MARCH 9, 1999
- ---------------- ---------------
Richard B. Ames
Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 13,829
<SECURITIES> 267,067
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 282,045
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 366,795
<CURRENT-LIABILITIES> 13,000
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> (786,395)
<TOTAL-LIABILITY-AND-EQUITY> 366,796
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 65,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (284,835)
<INCOME-TAX> 0
<INCOME-CONTINUING> (284,835)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (454,616)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
