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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
- --------- Exchange Act of 1934
For the period ended March 31, 1999.
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
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(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
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 854-6711
(Former name, former address and former fiscal year, if changed since last
report.) - N/A
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
There were 10,905,549 shares of the Registrant's common stock outstanding as of
April 29, 1999.
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CADEMA CORPORATION
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Balance Sheets - March 31, 1999 and
December 31, 1998
Statements of Operations - Three months ended 4
March 31, 1999 and March 31, 1998
Statements of Cash Flows - Three months ended 5
March 31, 1999 and March 31, 1998
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Signatures 9
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, 1998. Management believes
that the disclosures are adequate to make the information presented herein not
misleading.
2
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<TABLE>
<CAPTION>
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS March 31,1999 December 31,1998
----------------------------- ---------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 5,902 $ 13,829
Trading securities (Cost $701,321 in 313,798 267,067
1999 and $701,321 in 1998)
(Note 2)
Other current assets 500 1,149
----------------------------- ---------------------------
TOTAL CURRENT ASSETS 320,200 282,045
NOTE RECEIVABLE less allowance for bad
debt of $260,250 in 1999 and 1998
84,750 84,750
----------------------------- ---------------------------
TOTAL ASSETS $ 404,950 $ 366,795
----------------------------- ---------------------------
Liabilities And Stockholders' Equity
CURRENT LIABILITIES:
Accrued liabilities $ 13,000 $ 13,000
Accrued dividends on preferred stock 1,061,133 1,018,687
Minority Interest in Subsidiary (Note 3) 7,296 7,296
----------------------------- ---------------------------
TOTAL LIABILITIES 1,081,429 1,038,983
----------------------------- ---------------------------
STOCKHOLDERS' EQUITY
Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per share 4,851 4,851
authorized 5,000,000 shares; issued 485,123 shares in
1999 and 1998
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 1999 and 1998.
Additional paid-in capital 7,765,904 7,765,904
Accumulated deficit (8,460,220) (8,455,929)
Less: Treasury stock at cost
Common shares (75,000) (75,000)
Preferred shares (21,370) (21,370)
----------------------------- ---------------------------
TOTAL STOCKHOLDERS' EQUITY (676,479) (672,188)
----------------------------- ---------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 404,950 $ 366,795
============================= ===========================
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
3
</TABLE>
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<TABLE>
<CAPTION>
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
1999 1998
----------------------------- ---------------------------
<S> <C> <C>
REVENUE $ - $ -
COST OF GOODS SOLD - -
----------------------------- ---------------------------
----------------------------- ---------------------------
GROSS PROFIT - -
OPERATING EXPENSES:
General and administrative 8,690 8,851
----------------------------- ---------------------------
----------------------------- ---------------------------
Total operating expenses 8,690 8,851
----------------------------- ---------------------------
----------------------------- ---------------------------
Loss from operations (8,690) (8,851)
OTHER INCOME (EXPENSE):
Trading securities
Transactions (Notes 2)
Realized gains (losses) - (8,382)
Change in unrealized losses 46,731 (8,474)
Dividend income 113 518
----------------------------- ---------------------------
Total other income (expense) 46,844 (16,338)
----------------------------- ---------------------------
----------------------------- ---------------------------
INCOME (LOSS) FROM OPERATIONS 38,154 (25,189)
PROVISION FOR INCOME TAXES - -
----------------------------- ---------------------------
----------------------------- ---------------------------
NET INCOME (LOSS) 38,154 (25,189)
PREFERRED DIVIDENDS EARNED 42,445 42,445
----------------------------- ---------------------------
----------------------------- ---------------------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS (Note 2) $ (4,291) $ (67,634)
============================= ===========================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 10,905,549 10,905,549
LOSS PER COMMON AND SHARE
BASIC AND DILUTED $ (.00) $ (.01)
============================= ===========================
---------------------------
The accompanying notes to consolidated financial statements
are an integral part of these statements
</TABLE>
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<TABLE>
<CAPTION>
CADEMA CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE MONTHS IN THE PERIOD ENDED MARCH 31,
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
------------------ ------------------
<S> <C> <C>
Net income (loss) from operations $ 38,154 $ (25,189)
Adjustments to reconcile net income
(loss) to net cash provided by (used in) operating
activities
Realized loss (gain) on sale of trading
securities - 8,382
Unrealized loss (gain) in value
of trading securities (46,731) 8,476
Decrease (Increase) in other receivables and
current assets 650 210
(Decrease) increase in accounts payable and
accrued liabilities - -
------------------ ------------------
Net cash provided by (used in) continuing
operating activities (7,927) (8,121)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities - (44,170)
Proceeds from sale of marketable securities - 47,398
Net cash provided by (used in) investing
------------------ ------------------
activities - 3,228
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CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury Stock Purchase - -
------------------ ------------------
Net cash (used in)
financing activities - -
------------------ ------------------
Net increase (decrease) in cash and
cash equivalents (7,927) (4,893)
Cash and cash equivalents -
Beginning of Period 13,829 48,682
------------------ ------------------
------------------ ------------------
Cash and cash equivalents -
End of Period $ 5,902 $ 43,789
================== ==================
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Preferred Stock Dividends Earned $ 42,445 $ 42,445
================== ==================
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
</TABLE>
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CADEMA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS IN THE PERIOD ENDED MARCH 31, 1999
(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.
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.
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(2) SIGNIFICANT ACCOUNTING POLICIES: (CONT.)
Loss Per Common Share
Net income (loss) per share is calculated in accordance with SFAS No.
128. Loss per Common Share is calculated by dividing the net loss by
the weighted average number of common shares outstanding. As all Cadema
preferred stock, options and warrants outstanding have an anti-dilutive
effect, so no calculations diluted loss per share have been presented.
(3) JOINT VENTURE:
On December 31, 1993 the Company entered into a Joint Venture Agreement
with Global Environmental, Corp., a New York corporation, to create the
Joint Venture entity Global Environmental Offshore Company ("Global" or
"Joint Venture"). The Joint Venture Company engages in contracting for
the design and installation of Air Pollution Control equipment and
facilities in areas located outside the United States. Under the terms
of the Joint Venture Agreement, the Company contributed $350,000 and
received 51% control of the Joint Venture.
Under the Joint Venture Agreement, Global Environmental, Corp. has the
right to acquire the Company's interest in the Joint Venture for, at the
Company's option, 875,000 shares of Global stock or the greater of
$350,000 or the Company's existing capital account. The Company has the
option to convert its Joint Venture interest into 875,000 shares of
Global Environmental, Corp.'s common stock.
The financial statements of the Joint Venture are consolidated with the
Company's results in the accompanying financial statements of this
report. The portion of the Joint Venture's income that is not applicable
to the Company is recorded as Minority Interest on the Statement of
Operations. That income along with Global Environmental Corp.'s capital
contribution to the Joint Venture is recorded under the caption
"Minority Interest in Subsidiary" on the Balance Sheet.
Notes payable issued by Global Environmental Corp. to the Joint Venture
are carried on the Balance Sheet as Notes Receivable and were due on
December 31, 1996. Negotiations are in process for the refinancing of
the note. As collection of the note in 1999 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 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.
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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 is seeking joint
venture partners as its sole operating subsidiary, Global Environmental
Offshore Company, set up to contract for the design and installation of
Air Pollution Control equipment and facilities for international
markets, has generated no revenue in 1999. 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.
RESULTS OF OPERATIONS
There were no revenues in the first three months of 1999 or 1998, as
the Company's operating subsidiary Global Environmental Offshore
Company had no revenue activity.
Operating expenses for the first three months of 1999 were $8,690, in
line with 1998's first quarter expenses of $8,851 and represented
administrative expenses of the parent Company.
Other income in the first three months totaled a gain of $46,844 as
compared to a 1998 loss of $16,338. This contrast is due to 1999 gains
on the company's Investment Portfolio as compared the loses incurred in
the same period of 1998.
The net loss applicable to common stockholders for the first three
months, after an accrual for a Preferred Stock dividend, was $4,291 or
$.00 per share. For the same period of the prior year, a poorer
performance by the Company's Investment Portfolio resulted in a loss of
$67,634 or $.01 per share being recognized.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and working capital increased by $38,155 to $307,200 in the
first quarter of 1999 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 - Article 5 Financial Data Schedule
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8
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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: May 3, 1999 By: /s/ Roger D. Bensen
------------------------------
ROGER D. BENSEN
Chairman of the Board and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,902
<SECURITIES> 313,798
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 320,200
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 404,950
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
109,356
<COMMON> 4,851
<OTHER-SE> (790,686)
<TOTAL-LIABILITY-AND-EQUITY> 404,950
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,690
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 38,154
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,154
<DISCONTINUED> 0
<EXTRAORDINARY> 42,445
<CHANGES> 0
<NET-INCOME> (4,291)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
